AMOC stock up more than 10 percent since NBE announcement
CAIRO: More than two months after the conclusion of due-diligence procedures by five potential buyers of the National Bank of Egypt s (NBE) 50 percent stake in Alexandria Mineral Oils Company (AMOC) and almost one month after NBE sent out the call for bids, not one offer has been submitted.
The developments may have surprised some, considering company shares were oversubscribed by as much as 35 percent at its initial public placement in October 2005. But sector analysts say while company profits have climbed on the back of rising international oil prices, its current market share price of LE 81 remains too high for strategic investors looking to buy a large stake such as the one put up for sale by NBE.
The lack of interest in AMOC has also raised fears of the market entering a privatization fatigue phase, as pointed to by one analyst, following another failed attempt by the government to float an additional 17 percent of Misr for Aluminum.
In May, NBE announced its intention to sell its 50 percent stake in AMOC as part of the Central Bank s plan to reduce the involvement of the public banking sector in non-financial sectors. Thirteen companies initially showed interest, but just five conducted due-diligence exercises, including Citadel Capital and Waleed Bin Talaal s Aziziya.
Yasser Ibrahim, senior oil and gas analyst at HC Brokerage says price has been the main deterrent, especially considering the quantity of shares being offered: 43,050,000.
I think it s the price, says Ibrahim. Last year AMOC shares entered the market at LE 45. Today they re over LE 80.
AMOC shares have gained as much as 20 percent since NBE s announcement, rising from LE 72 in mid-May to near LE 90 by the end of September before leveling off near their current LE 80 level. In June, AMOC reported year end results showing a 52 percent increase in 2005/2006 revenues to LE 4 billion from LE 2.7 billion in the previous year. Net income jumped in 2006 to LE 796 million from LE 518 million in 2005.
Wael Enaba of Suez Canal Bank says despite the lack of activity on the AMOC deal, Cairo and Alexandria Stock Exchange investors are closely anticipating a possible deal, since it could potentially pump more than LE 4 billion into the market.
This deal has the potential to bring back investor confidence, says Enaba. I think there s strong potential for this deal to become fiercely competitive as was the case in the Egyptian Fertilizer Company (EFC), but it just has not happened yet.
A strong marketing campaign by the government in 2005 led to the development of strong competition between several multi-nationals over a majority stake in the formerly government-owned EFC causing the company s share value to jump from $301 to $501, Enaba says.
This sector is unlike any other, says Enaba. The government has done its part to open the door for local and international investors in the middle part of [2005] and investors have responded. I think this was a turning point in the privatization program.
In February 2006, the Ministry of Investment was forced to abandon its attempt to float 18.6 million shares of Misr for Aluminum, representing a 17 percent stake in the company after public demand reached just 180,000 shares.
The ministry blamed inappropriate market conditions at the time, referring to the correction witnessed by the case from February to May, while most analysts pointed to the inflated asking price of LE 54 relative to the LE 46 already floated shares traded at.
