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New Egypt bourse offers hope for small firms

Businesses small to medium-sized sectors are targeted by new Nilex stock exchange.

June 4, 2010 10:02 by

Egypt’s small and medium-sized enterprise sector got a boost Thursday as an exchange targeting such firms kicked off its first day of operation, a move aimed at opening the door for new investments in an often undervalued sector.

While only 10 companies are listed so far on the Nilex Stock Exchange, the launch of the bourse is seen as a key to providing such firms with greater access to capital and boosting a sector described by officials as crucial to growth in the Arab world’s most populous nation.

“For the first time, small and medium enterprises are being acknowledged,” said Nora Helmy, managing director of Naeem Funds, an investment firm which was the first to secure a license to sponsor companies listed on the Nilex.

“Having a stock market is a channel for them … to attract any strategic investor, even a foreign investor.”

“They are now on the map of the financial sector,” Helmy said.

Officials at the Egyptian Exchange — the country’s main stock market through which the Nilex operates — could not be reached for comment on trading volumes, but Helmy said she was surprised by the interest in the first day of trade.

El Badr Plastic, one of the first listed companies to trade for example, was more than twice-oversubscribed, she said, with the value of shares traded topping 2.6 million Egyptian pounds ($460,000). The company has 1.7 million shares, at a par value of one Egyptian pound each.

Analysts, however, caution that the road ahead is still far from certain.

“The success of the Nilex is a matter of whether the registration and sponsorship procedures for an SME company are conducive,” said Reham El-Desoki, senior economist at Mideast investment bank Beltone Financial. El-Desoki said that not all small companies want to go public.

The companies listed span a range of sectors, including industrial, retail and mining.

The launch was delayed for more than a year because of the global financial meltdown.

As a precursor to the companies being listed, they needed sponsorship from investment firms which were charged with restructuring the firms and ensuring they complied with all regulatory requirements. Helmy said this had been an obstacle for many such firms seeking additional financing in the past.

The exchange functions the same way as the main stock exchange, allowing investors to place bids through existing brokerage firms.

There were no price limitations on the first trading session but the following sessions will have a 20 percent price limit.

While Helmy said she expects more companies to list on the Nilex in the coming period, and that investors were eager for new investment avenues, analysts say the pace of listing is still far from certain.

“The trading following the first IPO or offering that a company does on the Nilex would be a bit of a litmus test to see how successful the whole thing will be, so until a company goes through the whole experience things could will be dormant for a while,” said El-Desoki.


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