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Monday, 12 September 2022

e-Finance to buy back 5% of its shares

e-Finance announces big share buyback program: EGX-listed fintech operator e-Finance will buy back 5% of its shares over the next nine months in a bid to support its share price and boost investor confidence, the company said in an EGX disclosure (pdf) posted on trading screens yesterday. The program could see the company purchase as many as 92.4 mn shares, costing it some EGP 1.46 bn at the current share price, according to our math.

e-Finance’s shares have slid this year even as it delivers solid operational results: The company’s share price has fallen 23.7% YTD, and has shed 14.2% over the past five weeks. The company’s net income doubled y-o-y to EGP 279.3 mn in 2Q 2022 while its revenues rose 59% in the same period.

Traders cheered the buyback program: Shares rose as much as 3.4% during trading yesterday, before paring some gains to close at EGP 15.41, up 2.8% for the day.

The rationale: “The company’s shares are currently trading at a level that does not reflect its real value, after the market suffered hits from the EGP devaluation and other global economic crises,” a company official told Enterprise.

e-Finance could use the buyback program to bring in another long-term shareholder: The company will likely resell the shares in a block transaction to an investor within a year of completing the buyback program to avoid any negative impact on its share price, the official said.

The move comes a month after the Saudi wealth fund became the company’s largest shareholder: The Public Investment Fund purchased last month a 25% stake in the state-owned company in an EGP 7.5 bn transaction, becoming its single-biggest shareholder. State-owned enterprises collectively own 49.1% of the company’s shares while the remainder are freefloat.

The EGX has seen tough times since the company made its EGP 5.8 bn market debut in November 2021: Inflationary pressure, rising interest rates in western economies, and a downturn in global markets have all contributed to a steep decline in the EGX 30 this year as investors have exited stage right in a risk-off. The benchmark index fell to its lowest level since November 2016 earlier this year, before paring losses in a recent rally. It is currently down 14.1% YTD.

e-Finance isn’t the only company to repurchase shares: Edita also last month announced plans to repurchase 5% of its shares in August and September to shore up its share price, which is now up 14% YTD and 19.7% since the buyback announcement.

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