Egypt's Domty Bets IPO Discount Will Draw in Investors

  • Domty planning to sell 49 percent of its stake in offering
  • Share sale price is at discount to local rival Juhayna

Arabian Food Industries Co. is courting investors in the Gulf and Europe for Egypt’s first initial public offering in eight months, betting on discounted shares to outweigh a foreign currency shortage that has curbed appetite for the nation’s assets.

The family-owned maker of juices and cheeses known as Domty is visiting the United Kingdom, United Arab Emirates and potentially the U.S. and South Africa to drum up interest for the sale of as much as a 49 percent stake. The indicative price range per share is between 8.8 and 9.2 Egyptian pounds, the company said in an e-mailed statement Wednesday, which values the company at about 2.3 billion Egyptian pounds ($294 million).

The Giza, Egypt-based dairy producer is the first company to seek an IPO since Emaar Misr for Development SAE, whose shares fell more in the first week of trading in July than in any Egyptian debut stock since 2008. The property developer subsequently bought back some of the newly issued equity. Domty’s offering will test investor sentiment as the government considers selling shares in as many as four state-owned companies on the Cairo Stock Exchange this year to boost the bourse’s profile after the benchmark EGX 30 Index fell 36 percent in the past 12 months.

"It isn’t rocket science to tell anyone that the company is exposed to a high growth industry," said Allen Sandeep, Cairo-based director of research at Naeem Brokerage. “The size is not that large to draw in huge amounts of money but at the same time this could be the beginning of people taking new positions depending on the pricing."

Domty’s IPO comes at a time when the EGX 30 Index is trading near the lowest forward P/E ratio in almost four years.

Stock’s Value

Given the share price range, the stock’s value will be between 17- and 18-times estimated annualized earnings for 2015. That compares with about 21-times for the company’s biggest publicly traded rival Juhayna Food Industries.

Domty, which has more than 2,600 employees, will begin the 1 billion pound share sale on March 6 till March 17, said Moustafa Elchiati, managing director of investment banking at EFG-Hermes Holding Co., which is managing the IPO. It plans to sell up to 122.5 million shares and use the proceeds to finance growth and add new products.

Non-Arab foreign investors have been net sellers of about 770 million pounds of securities since the start of the year, according to bourse data compiled by Bloomberg. Arab investors, meanwhile, have been net buyers of about 680 million pounds of shares.

EFG Hermes is the sole global coordinator and bookrunner for the combined offering. Baker & McKenzie LLP is international counsel to the issuer, while Matouk Bassiouny is serving as local counsel.

Domty has “compelling corporate and market fundamentals that have allowed us to become a household name with a number-one position in Egypt’s cheese market," Chairman and Managing Director Omar El Damaty said in the company’s statement. He added that they plan to penetrate African markets after the IPO.

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