The long awaited initial public offering of Egypt's first private petrochemical company began yesterday. Sherine Abdel-Razek reports The offering that is expected to revive the market via the introduction of a new blue chip and bringing the petroleum sector for the first time to the local bourse is finally here. Over the last month, market observers have expected the IPO of Sidi Krir Petrochemicals (SIDPEC) to be snatched up in no time. The bourse transactions have been subdued recently as investors are liquidating their holdings of other shares in anticipation of the coming SIDPEC IPO. According to the company's prospectus, the floated 20 per cent of SIDPEC represents 21 million shares valued at LE70 a share with a total value of around LE1.5 billion. The offering is divided into two trenches. The first represents 60 per cent of the offering and is publicly offered with a maximum subscription lot of 1,000 shares per investor. The second trench is comprised of 8.4 million shares and is offered through a private placement among a closed group of investors which the prospectus calls investors with experience and financial adequacy. Offers made by investors subscribing through the private placement must be at least 100, 000 shares with a bidding price range of LE70-76. "The IPO is Egypt's first in five years since the Orascom Telecom (OT) offering in 2005. Also, belonging to Egypt's promising and fast growing oil and petrochemicals sector the share is one of the must -haves in any diversified investment portfolio." stated a senior analyst from Sigma Securities. SIDPEC is Egypt's largest producer of ethylene and polyethylene, essential components in the manufacture of petrochemical products. Net profits of SIDPEC rose by a dramatic 155 per cent to LE734.4 million in FY 2004- 05, up from LE288.1 million in FY 2003-04. Its turnover was LE1.6 billion last year and it exports to more than 20 countries. The first quarter of 2005 witnessed a 58 per cent increase in the company's profits compared to the corresponding period of the previous year. However, a report issued by HC securities produced adjusted figures for the company financials. "We have chosen to undertake a number of adjustments to disclosed figures. These adjustments relate to interest expense and customs. For the former, an amount of LE58 million in interest payments are under contest with the National Bank of Egypt. The latter, represents FY04 customs of LE24 million which were paid after the closing of the financial year but have not yet been accounted for." the report noted. Nashwa Saleh, head of research at HC added that the company's last quarterly financial results included only LE12 million as renovation provisions compared to the LE20 million it usually takes aside every quarter. Nevertheless, market observers unanimously agree that the offering is expected to be at least five to 10 times oversubscribed. "Investors are thirsty for shares with high growth potentials," said Sigma's analyst. The oil sector attracted a lot of attention recently with more foreign companies investing in drilling and exploration activities. In recent statements, minister of petroleum, Sameh Fahmi said that the gas and petrochemicals sector is expected to attract $16 billion in investment over the next five years. During the past five years, the level of foreign direct investment (FDI) pumped into Egypt's oil, gas and petrochemical industry has reached $9.5 billion. State-run banking and insurance firms are due to sell 18 per cent of their shares in the company, while the state- controlled oil and gas sector is to sell two per cent of its shares. SIDPEC was established in 1997 under the investment law. Currently SIDPEC is 97 per cent state-owned with the two majority shareholders being the Egyptian General Petroleum Corporation (EGPC) and Banque Misr holding 20 per cent respectively. Also, the Banque du Caire, the Bank of Alexandria and the National Bank of Egypt each own 10 per cent. Following an LE30 million capital increase in March of 2005, the company's capital increased to LE1.05 billion distributed over 10.5 million shares. In March, the committee at the Cairo and Alexandria Stock Exchange (CASE) approved listing SIDPEC shares on their unofficial schedule. Two other state-owned heavyweights from the oil sector are expected to be floated soon. These are Alexandria Mineral Oils Company and Middle East Oil Refinery (MIDOR).
