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Tuesday, 30 March 2021

IDH eyes April listing on the EGX

Consumer healthcare giant Integrated Diagnostics Holdings (IDH) aims to go ahead with its listing on the EGX in April, a source with direct knowledge of the matter told Enterprise, noting that the timeline is subject to customary regulatory approvals. The London-listed company received approval last week from the Financial Regulatory Authority to proceed with the transaction, which will see the company list 5% of its shares on the EGX in the bourse’s first “technical listing.”

Hold up. What’s a technical listing? That’s when a company lists its shares on an exchange, but doesn’t offer new or existing equity for sale. Instead, what IDH has done is convince enough shareholders in London to come over to the EGX and transfer their shares here. Others could follow suit in the future at their convenience — the shares on both exchanges are what the finance nerds call “fungible.”

IDH will kick off this afternoon its roadshow in support of the listing, CEO Dr. Hend El Sherbini tells us. The roadshow will see El Sherbini and top IDH execs meet potential institutional investors from across the region and beyond.

The roadshow will include meetings in Egypt with local institutions, El Sherbini says, a fact that underscores one of the challenges IDH is looking to address with the EGX listing: “We don’t have Egyptian institutions in our shareholder registry,” she explains. “Our shareholders are very much concentrated right now in Europe and the United Kingdom. We would really like to see Egyptian as well as GCC- and MENA-based funds in the shareholder base, and we’d love some US representation as well.”

IDH listed in London back in 2015 in a very well-received offering that was more than 11x oversubscribed, but the firm is very tightly held: The investors who have bought in like the story and haven’t been big sellers. That’s made it hard for new investors to buy in, and it’s one reason IDH is moving ahead the transaction.

At least 5% of current shareholders will transfer their shares from the LSE to the Egyptian Exchange to satisfy regulatory requirements here, El Sherbini says.

“We want to give institutions and individuals who want to invest in healthcare the chance to be part of IDH,” El Sherbini explains. “The goal is to widen our base of investors at the same time as we give a boost to both the liquidity of the share and, ultimately, the share price. Egypt is our largest market. Our brands — Al Borg and Al Mokhtabar — are trusted, and the Al Mokhtabar brand has been in this market for more than 40 years. It just makes sense.”

How will the local listing crack the liquidity problem? “The benefits to shareholders, including myself, is that we’re giving much more visibility to the shares. Whether you’re a foreign, regional or local investor — institutional or high net worth — investors in the EGX know the market. So we’re automatically limiting the pool of potential investors to people who are looking for shares like ours. And when we list in Egypt, we’ll be an important company just by virtue of our revenues, our profitability and our market cap. We’re going to stand out when it comes to people who want to buy shares like ours. We’re simply less visible in London.”

So if shareholders with at least 5% have already agreed to transfer their holdings to the EGX, why the roadshow? It’s all about education, El Sherbini says: “We need fund and portfolio managers to understand us, to ensure there’s knowledge of our story among both potential buyers and sellers going forward.”

What’s El Sherbini’s pitch to investors? “We’re the biggest consumer healthcare player in our part of the world, offering medical diagnostics and radiology services through a portfolio of leading brands in Egypt, Jordan, Sudan and Nigeria. For the past decade, we’ve been and remain the only lab in Egypt accredited by the College of American Pathologists. Our market is growing fast: As we said in our recent trading update, we grew the top line by c. 19% last year to about EGP 2.6 bn and our EBITDA margin has consistently been around 40% for years and years. We’re profitable and cash generative, so we have traditionally paid dividends on a yearly basis,” El Sheribini said.

The company is also well-governed, she said, with a world-class board led by chairman Lord St John of Bletso and including industry veterans from Europe and beyond. “The quality of the board — which is majority independent non-execs — and the fact that we have and will continue to abide by the very strict governance rules of the London Stock Exchange should give investors a lot of comfort.”

IDH IN NUMBERS:

  • The group offers 2k medical tests and diagnostics at 480 branches across Egypt, Jodan, Sudan and Nigeria.
  • It ran more than 30 mn tests for 7 mn patients in 2019, the last year for which full financials have been released.
  • The company’s MegaLab in Egypt can run 20k tests per hour on global-standard equipment.
  • Consistent top-line growth delivered revenues of EGP 2.2 bn in 2019 with a 2015-2019 CAGR of 17%.
  • It’s a cash-generative business, with an EBITDA CAGR of 25% in the same period and an EBITDA margin consistently at c. 40%
  • It has paid dividends even after the float of the EGP and during covid, a move appreciated last year in particular by fund managers struggling with redemptions.

ADVISORS: EFG Hermes and Renaissance Capital are quarterbacking the transaction, while White & Case, Clifford Chance and Ogier are counsel. Inktank is IDH’s investor relations advisor.

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