Banque du Caire on track to IPO in 1H2020

Will we know the fate of the capital gains tax this week? A committee made up of the Egyptian Tax Authority, the Finance Ministry, and the Egyptian Capital Market Association will meet this week to discuss tax on stock market transactions, sources told the local press. The Finance Ministry is close to finalizing draft amendments that will settle whether capital gains tax will indeed be making a comeback. The fate of the 10% capital gains tax, which was shelved for three years in 2017 in favor of a provisional stamp tax, is still unclear. You can get a refresher on the proposals for its reintroduction here.

The final round of GERD talks get underway in Washington tomorrow. Egyptian, Ethiopian and Sudanese officials will gather in the US capital to hammer out a final agreement following last week’s technical meetings in Khartoum, which the Sudanese Irrigation Minister has said produced a draft agreement with some “convergence” between the three sides.

Gov’t to announce winner of Sixth of October dry port tender next week? A source in the Transport Ministry told the local press yesterday that the ministry will hold a meeting at the beginning of February to announce the winning coalition in the tender to construct and operate the Sixth of October dry port. Two consortia are competing for the tender: one comprising India’s Concord, Malaysia’s PSA, and Hassan Allam, and another made up of Schenker Egypt, 3A International, and Elsewedy Electric.

Egypt’s Fawaterk is among ten startups to have been selected for the third edition of the Startupbootcamp FinTech Dubai accelerator, which provides support from a global network of entrepreneurs, investors and industry corporations, as well as USD 17k in funding, Disrupt Africa reports. The Dubai accelerator has the backing of several large financial institutions and will conclude with a demo day in April. Fawaterk, an online invoicing and payments service, is a graduate of Pharos’ Pride Capital / Startupbootcamp’s Fintech Cairo accelerator program.

Stuff you can go to this week:

• AmCham will host US Ambassador Jonathan Cohen for its monthly luncheon tomorrow. Cohen will discuss prospects for commercial ties between Egypt and the US. Members can register for the event here.
• CI Capital’s annual three-day MENA Investors Conference gets underway tomorrow at the Four Seasons Nile Plaza.
• The British Embassy and IFC’s StartEgypt Forum 2020 will pit 45 startups against each other in a pitch competition on Wednesday, 29 January at the Greek Campus.
• This year’s Cairo International Book Fair runs through to Tuesday, 4 February at the New Cairo International Exhibition and Convention Center.

News triggers to keep your eye on with the new month approaching:

• The purchasing managers’ index for Egypt, Saudi Arabia and the UAE is due out on Tuesday, 4 February at 6:15am CLT.
• Foreign reserves figures for January will be released on Tuesday, 4 February.
• Inflation figures for January are out Monday, 10 February.

EGP WATCH- The EGP resumed its surge against the greenback yesterday, reaching new 35-month highs of EGP 15.71/USD. The currency has now gained 29 piasters since it began appreciating on 8 January when it was trading at exactly EGP 16.00/USD.

Coronavirus fears snuff out EM rally: The seven-week rally in emerging-market equities, bonds and currencies came to an end last week as concerns grew among investors that the coronavirus outbreak in China may develop into a SARS-esque pandemic, Bloomberg says. The MSCI EM equities and currency indices both fell back during last week, while the JPMorgan EM bonds ETF also lost ground. “The Wuhan coronavirus outbreak has the potential to whipsaw Chinese equities and, indeed, all global risk assets,” said Seema Shah, chief strategist at Principal Global Investors. “With valuations elevated, asset classes are already vulnerable to shifts in sentiment, and memories of the meaningful economic impact of SARS has the potential to play havoc with market confidence.”

Middle East equities caught in the crossfire: Stock markets in the Middle East fell at the start of the trading week as worries grew about the spread of the virus, with Saudi taking the biggest hit among GCC countries, closing down 0.7%.

Meanwhile, in China…: The Chinese government has banned all wildlife trade nationwide and all outgoing overseas group tours in a bid to curb the spread of the coronavirus, which has so far left 56 dead, according to Reuters. Yet, Chinese officials are urging people to calm down, according to the Wall Street Journal. Over five million people have already fled Wuhan, the province where the deadly virus was traced to, particularly a seafood market that was illegally selling wildlife. Egypt’s Health Ministry distributed guidelines on handling the virus on Saturday to prevent it from spreading in the country, according to Al Masry Al Youm.

From 30 January to 6 February, Miss Germany returns to Somabay for the official Miss Germany Camp 2020. The candidates will enjoy all that Somabay has to offer – sea & beach, water sports, spa, golf and delicious culinary treats. The Miss Germany Camp is hosted at The Lodge by The Cascades Golf Resort, Spa & Thalasso introducing the candidates at a glittering evening event on 31 January.

Hedge funds deliver best returns in a decade but still fail to match equities: Investors withdrew USD 43 bn from hedge funds last year even though the industry delivered its best annual performance for a decade, the Financial Times reports. Hedge funds returned 10.4% after fees in 2019, well below the 31.5% return posted by the S&P 500 and the 16.6% return delivered by 50/50 global equity bond index. Years of underperformance by hedge funds since the 2007-08 financial crisis have prompted institutional investors to pull capital from the industry, the FT says.

Is the Fed winding down its repo intervention? The Federal Reserve Bank of New York injected another USD 74.2 bn of temporary liquidity into the money markets on Thursday, reports the Wall Street Journal. Despite this, the amount of liquidity dropped by USD 10 bn to USD 176.1 bn as past operations expired. The Fed was expected to bring its repo intervention to a halt at the end of January but recently extended the program until the middle of February. The bank began supplying cash last September after surging short-term borrowing costs threatened to paralyse the interbank lending market. Need more info on the repo rate? Read our primer.

Goldman sets diverse board representation as requirement to advise on IPOs: US investment bank Goldman Sachs said on Thursday it won’t take on IPOs of European and North American companies without at least one board director who is not a straight, white male, according to Axios. Some 60 companies have gone public in the past two years with entirely non-diverse boards, despite studies showing that more diverse leadership leads to better company performance, according to the bank’s CEO David Solomon.

US basketball legend Kobe Bryant dies, 41, in helicopter crash: Bryant and his 11 year-old daughter were among five people killed yesterday when their private helicopter crashed in Calabasas, California. The retired star was widely recognized as one of the greatest players of all time, having won the NBA five times and the Olympic gold twice over his 20-year career. The New York Times has live updates here.

Libya ceasefire all but over as clashes erupt in Misrata: Officials from Libya’s rival factions yesterday reported renewed clashes in Misrata, a strategic city to the east of Tripoli, according to the Associated Press. The fighting came hours after the UN accused a number of countries of breaking the arms embargo agreed at last week’s conference in Berlin.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: We reveal how the Higher Education Ministry plans to implement a central UCAS-style admissions system for private and nonprofit universities.

It was a mixed bag of nuts on the airwaves last night, with the virus outbreak in China taking center stage: Al Hayah Al Youm’s Lobna Assal called Egypt’s Ambassador to Beijing, Mohamed El-Badry, who confirmed that Egyptian expats in China have not yet reported any infected cases, noting that 350 Egyptians live in Wuhan (watch, runtime: 13:52). Al Kahera Alaan’s Lamees El Hadidi dug a bit deeper and called a couple of Egyptians who live in China and have sought evacuation. She then phoned Foreign Minister Spokesman Ahmed Hafez who confirmed that the embassy communicated with the Chinese authorities in Wuhan and the capital Beijing to help the Egyptian community in light of the restrictions imposed on the city (watch, runtime: 12:50).

This week’s GERD talks in Washington also got a mention: Assal highlighted Foreign Minister Sameh Shoukry's visit to Washington to participate in the crunch GERD talks with Sudan and Ethiopia (watch, runtime: 0:55).

Al Hayah Al Youm is keeping an eye on the EGP: Fakhry El Feky, professor of economics at Cairo University, told Al Hayah Al Youm’s Lobna Assal that the appreciation of the EGP against the greenback is due to the government’s economic reform program. The supply of foreign currency has increased as a result of the rebound in the tourism sector and increasing exports, which has allowed the government to relax FX restrictions, he said (watch, runtime: 6:04).

PRIVATIZATION WATCH- BdC on track for 1H2020 IPO following successful inaugural roadshow: The first leg of the government’s roadshow for Banque du Caire’s (BdC) upcoming IPO saw “large” investor appetite for the bank’s EGX debut from major investment funds in London, Dubai and Abu Dhabi, Hapi Journal reports, citing informed sources. Officials are currently gearing up for the second leg of the roadshow, which will gauge investor demand in New York and Boston next month.

The state-owned bank’s IPO could go to market by the end of 1Q2020 or the beginning of 2Q2020, the sources say. This is in line with previous statements from Central Bank of Egypt Governor Tarek Amer and Banque du Caire Chairman Tarek Fayed, who said last month that BdC plans to IPO in 1Q2020 (market conditions permitting).

Background: BdC appears to be ready to be the first state-owned company to IPO under the state privatization program, and will likely be followed by payments platform e-Finance. The program, which the government first announced back in 2018, includes eight companies expected to IPO. BdC’s IPO is expected to include a primary offering and to see the state simultaneously offload part of its equity stake in a secondary sale.

PRIVATIZATION WATCH- Sovereign fund to tap HSBC as advisor on combined-cycle plant stake sale? HSBC is reportedly the frontrunner to advise the Sovereign Fund of Egypt on the sale of a 70% stake in the first of three Siemens / Elsewedy Electric / Orascom Construction combined-cycle power plants, Hapi Journal reports. Previous domestic press reports had indicated that Citibank was also in the running, but it was unclear at the time whether any other banks had been vying for the job. Fund CEO Ayman Soliman had said the financial advisor would be tapped in early December. Six investors have already expressed interest in the acquisition, which is expected to be finalized this year, including Actis, Blackstone Group’s Zarou, France’s Engie, China Datang Overseas, and Edra Holding.

M&A WATCH- FAB wants to start formal evaluation of Bank Audi’s Egypt arm: First Abu Dhabi Bank (FAB) has sent a request to the Central Bank of Egypt (CBE) to begin a formal evaluation of Bank Audi as FAB moves closer to acquiring the Lebanese bank’s Egypt unit, CBE Deputy Governor Gamal Negm tells Hapi Journal. Bank Audi has given the all-clear, and the CBE’s board of directors will look into the request at its next meeting, Negm says.

Bank Audi has tapped EFG Hermes as its financial advisor for the transaction, reports Al Mal.

First Abu Dhabi began courting the bank last week when several potential buyers entered talks with Bank Audi to acquire its operations in Egypt amid the ongoing banking crisis in Lebanon. Audi had initially shut down reports that it was looking to exit Egypt, but CFO Tamer Ghazaleh later confirmed that the bank was considering pulling out of the country due to financial pressure in Lebanon.

M&A WATCH- Telecom Egypt not exiting Vodafone Egypt: State-owned Telecom Egypt has no plans to sell its 45% stake in Vodafone Egypt, the company said yesterday (pdf), a day after press reports claimed that Saudi Telecom (STC) was in talks to acquire Vodafone International’s 55% stake in the company. Sources in the telecoms sector told Youm7 that Vodafone International and STC were in talks on the sale, but a senior Vodafone official was tight-lipped on the reports. Telecom Egypt had entered the mobile market with Egypt’s fourth mobile network operator, We, in September 2017, prompting Beltone Financial to predict the landline monopoly would offload its stake in Vodafone Egypt.

M&A WATCH- Market regulator extends Titan Group’s MTO deadline for Alexandria Cement shares by another month: The Financial Regulatory Authority (FRA) granted Greek cement company Titan Group another one-month grace period to present its mandatory tender offer (MTO) to acquire Alexandria Portland Cement, the regulator said in a statement (pdf). The extension is effective upon completion of the first one month extension which expired yesterday.

Background: Titan launched its MTO for 100% of Alexandria Portland Cement at EGP 6 per share, which made it an indirect majority owner through a related party and therefore triggered an MTO requirement. The FRA had ordered the Greek company last month to present an MTO, including a fair value assessment of Alexandria cement’s shares.

M&A WATCH– Cairo Cotton wants Dice stake as part of takeover: Cairo Cotton Center is looking to purchase a share of Dice Sport and Casual Wear as part of ongoing talks for Dice to acquire Cairo Cotton, Chairman Magdy Tolba tells Al Mal. Tolba did not provide any details on the size or value of the stake his company is eyeing.

Dice, on the other hand, rejected reports that it was intending to merge or sell a stake of the company in the coming period.

Background: We reported in October that Dice was aiming to acquire Cairo Cotton by the end of last year. The firm is completing due diligence on the EGP 140 mn acquisition. Dice had said in April of last year that it was considering an EGP 100 mn medium-term loan from CIB to partially fund the acquisition with the remaining amount coming from its cash reserves.

STARTUP WATCH- Vezeeta eyeing expansion beyond MENA in early February, says founder: Vezeeta, an app that helps connect patients with physicians, is looking to enter Africa and south-east Asia for the first time in early February, founder Amir Barsoum says in an interview with the National. Although the company is most comfortable operating in EM, it is also looking at interesting global prospects, Barsoum says: “Globally, we can be operating as north and south as it gets. As long as there’s fragmentation in the healthcare market, that’s where we can add value to our consumers or patients.”

And it is seeking new funding to pay for it: Funding would go towards market expansion, research and development, and new products, according to Barsoum, who did not disclose the amount or timing for any new funding round. The International Finance Corporation invested USD 1 mn in Vezeeta in December 2018 as a follow-on investment to a September series C funding round in which the online platform raised USD 12 mn. The startup has reportedly raised USD 22.6 mn altogether since it was founded eight years ago. Egypt and Saudi Arabia are its biggest markets, having seen a “strong pick up” in demand over the last 18 months, Barsoum says.

STARTUP WATCH- Ride-hailing app Halan has raised USD 15 mn in its series B funding round, according to estimations made by Menabytes. The tech news site came to this conclusion after CEO Mounir Nakhla told Wired that the company has raised USD 20 mn to date. Given that we know that the ride-hailing app raised USD 4.3 mn in its series A round in December 2018 and USD 525k in a pre-series A round, that leaves around USD 15 mn of unannounced funding, which Menabytes reasons was raised in the company’s series B round. Sources told the site last year that Halan was aiming to raise USD 10-15 mn in its series B round. Halan would be the third best-funded Egyptian startup (behind Swvl and Vezeeta) if this information is correct.

LEGISLATION WATCH- House approves Tax Dispute Act in principle: The House of Representatives yesterday approved in principle the government’s temporary tax dispute legislation, according to Al Shorouk. The Tax Dispute Act, which gained cabinet approval in December, would extend the recently expired Tax Dispute Resolution Act, mandating newly-established dispute settlement committees to handle tax disputes until 30 June this year. It would also introduce two new sections to Article 110 of the Income Tax Act, which legislates late tax payment fees. The date for the final vote has yet to be announced.

The House gave a preliminary nod to the Consumer Credit Act. Under the legislation, new consumer finance companies would pay EGP 100k to the Financial Regulatory Authority (FRA) to obtain a license provided they have at least EGP 10 mn in issued capital. Companies must also be at least 25% owned by a financial institution, and founded by legal persons that hold at least 50% of the company. Consumer finance companies established before the passage of the legislation would be exempt, unless they are acquired or a third of their issued capital is restructured. Again, there is not yet word on when the bill will return to the House for a final vote.

The House also gave final approval to the Organic Farming Act gets final approval, which would impose stricter control over organic produce, Al Shorouk reported.

House demands the government to submit its Real Estate Registry Act: House Speaker Ali Abdel Aal again called on the government to introduce its bill regulating the real estate registry offices to the House, according to Al Shorouk. Abdel Aal had given the government a 15-day deadline to introduce the legislation back in December but this was postponed by the the cabinet reshuffle. The speaker yesterday warned that if the government fails to submit a new version of the bill, the House will bring back the draft it currently has.

Row over steel import tariffs flares up again: Twenty-two steel rolling mills will suspend production in protest at the government’s decision to place import tariffs on steel rebar and iron billets, according to the local press. The Trade Ministry last year introduced a 25% duty on steel rebar imports and a 16% tariff on iron billets in a bid to protect local producers. The decision has angered steel rolling mills who claim that they are unable to compete due to the high prices of raw materials.

The mills, having failed so far to overturn the ministry’s decision through the courts, will now shut down production, Gamal El Garhy, head of El Garhy Steel and the Metallurgical Chamber at the Federation of Egyptian Industries, said yesterday. Some of the mills have already stopped production while more will halt operations after using their remaining billet stocks in the next 20 days.

What comes next: A commissioners' report should be out on Saturday, on which the Administrative Court will base its decision on whether to back the tariffs, or side with the lower administrative court which reversed the ministry’s decision. As it currently stands, the ministry will gradually taper the tariffs over the next three years. The duties are set to fall to 21% for steel rebar and 13% for iron billets on 11 April 2020.

Egypt targets USD 15 bn in tourism revenues this year: The Tourism and Antiquities Ministry is looking to bring in a record USD 15 bn in tourism revenues in 2020, according to Al Shorouk. This would be a substantial increase on the USD 12.6 bn in revenues made last year. The ministry aims to achieve this by increasing the total number of nights stayed by tourists to 260 mn and up the average daily spending to USD 100. The ministry has not said what actions it will take to reach these targets, but experts say ramping up international tourism campaigns, upgrading transport infrastructure, and completing hotel developments should be top priorities.

Egyptian businesses are lagging behind the rest of the world when it comes to gender diversity in the boardroom, according to research by the International Finance Corporation (IFC). Across 2,139 companies surveyed in the study, 25% only have one woman on their boards, a mere 3% have four or more, and more than half have no female representation at all. The issue begins largely with the cultural context, which encourages women to prioritize their role as homemakers and puts men in leadership roles from a young age. “Such gender stratification feeds on itself, contributing to a lack of self-confidence among women and a hesitation to pursue career tracks leading to executive-level responsibilities,” the IFC says.

What women bring to the table: Both quantitative and qualitative studies of private and public Egyptian companies suggest that bringing women into the boardroom can have a positive effect on a company’s financial performance. Gender-diverse boardrooms tend to be better at managing risk and strategic thinking, with women generally being better than men at problem solving, identifying profitabile openings, and economic and strategic thinking.

The numbers speak for themselves: Privately-held companies with female board members perform better across all profitability metrics than companies with no female board representation. Companies with female board members enjoy 8% higher profit growth than their all-male counterparts, and their returns on equity, assets, and sales also outperform. The correlation between female board representation and profitability is not quite as strong in public companies but the trend remains.

What’s the solution? Egypt needs to create and enforce corporate governance practices that are specifically designed to remove barriers for women to enter the workforce and climb the professional ladder, the IFC says. The study’s respondents unanimously agreed that voluntary diversity targets would work better than an enforced quota, and recommended that companies are encouraged to publicly share diversity-related information. This would raise awareness among businesses and provide incentives to improve workforce composition.

Egypt has been ranked #106 out of 180 countries in Transparency International’s 2019 Corruption Perception Index (pdf), dropping one spot from last year. Egypt’s score remained stagnant year-on-year at 35, indicating a moderate level of corruption. The index measures public sector corruption as perceived by experts and businesspeople, giving scores between 0 (highly corrupt) and 100 (very clean). Denmark is the cleanest country on the index with a score of 87, while Somalia came dead last with a score of 9.

EARNINGS WATCH- Rameda pre-tax profits fall 12% in 2019: Rameda Pharma made pre-tax profits of EGP 225 mn in FY2019, down 12% y-o-y from EGP 289 mn the year prior, according to a bourse disclosure (pdf). This is despite the company’s revenues rising 10.5% during the year to hit EGP 890 mn, from EGP 805 mn in FY2018. Rameda’s pre-tax profits came in at EGP 96 mn during 4Q2019, down 2% y-o-y. The company recorded revenues of EGP 271 mn in the fourth quarter, up 16.3% y-o-y.

Cheesemaker Obour Land recorded a net profit of EGP 54.2 mn in 4Q2019, down 0.5% y-o-y from EGP 57.6 mn during the same period the year prior, according to its earnings release (pdf). Revenues for the quarter rose 6.7% y-o-y to EGP 667.1 mn. The company’s full-year profits increased 24% y-o-y to EGP 295.3 mn, up from EGP 238.0 mn in 2018, while full-year revenues rose 8% y-o-y to EGP 2.59 bn.

MOVES- Eastern Company has appointed Mostafa Ahmed El Mahdi as CFO, according to a bourse disclosure (pdf). El Mahdi was formerly a group-level financial strategist with over 30 years of experience in the sector.

When Lina Mowafy, the founder of TAM Gallery, saw a Matisse painting at the age of nine, she knew she was meant to be an artist. But fast forward over a decade and a bachelor’s degree in art later, she couldn’t find an entryway into the Egyptian art scene. It was her own experience as a struggling artist that inspired the idea to open TAM Gallery, which was formerly known as The Arts Mart. Along with her childhood friend, Dina Shaaban, TAM came to life in 2011 and now has an online gallery, a physical gallery, and a corporate company to its name.

You can listen to the episode (runtime: 29:21) on: Our Website | Apple Podcast | Google Podcast.

It’s a very quiet morning in the foreign press: The Associated Press reports that authorities at Cairo Airport arrested a Dutch passenger for possessing illicit substances, while Xinhua has a piece on the Cairo International Book Fair.