Cairo - Mubasher: Act Financial plans to float 360 million shares, representing 47% of its share capital, on the Egyptian Exchange (EGX) after obtaining the authority’s approval last April.
The company will increase its capital by issuing 360 million shares, of which 300 million shares will be allocated to institutional and qualified investors, while the remaining 60 million shares will be directed to the public offering.
The price for the company's initial public offering (IPO) was set at EGP 2.90 per share, implying a market cap of EGP 3.30 billion at listing.
Act Financial plans to use the proceeds of its IPO to expand its investment portfolio in public equities and inject investments in key sectors.
The main shareholders are subject to a two-year lockup period, starting when trading on EGX commences in late July, while all other shareholders are subject to a one-year voluntary lock-up.
Zilla Capital, the underwriter for the IPO, will create a price stabilisation fund using all public offering’s tranche amount, equivalent to 17% of the IPO proceeds. This fund will ensure a full guarantee for the public tranche and will be active for 30 days, commencing from the first trading day.
Fair Value (FV) Sensitivity to TGR and Terminal COE
MubasherTrade Research carried out an analysis of the expected terminal growth rate (TGR) and cost of equity (COE) due to the fair value (FV) sensitivity to any changes in TGR and COE. It found that the FV ranges from EGP 3.44 per share to EGP 6.69 per share.
FV Sensitivity to ROI
After conducting a sensitivity analysis for the changes in the expected return on invested funds (ROI) and the margin as a percentage of Act Financial’s equity portion, it produced an FV ranging from EGP 2.39 per share to EGP 8.30 per share.
While analyzing the changes in both sustainable ROE and the consortium's portfolio size relative to the company’s portfolio size, the fair values ranged from EGP 3.76 to EGP 5.33 per share.
Hence, MubasherTrade outlined three different scenarios due to the fair value’s sensitivity to the expected ROI, the margin the company takes relative to its equity portion, and the consortium's portfolio size relative to Act’s portfolio size during the 2024–2027 period.
Base-case Scenario (FV- EGP 4.53/share)
The company is expected to achieve an ROI of 40% annually during the 2024–2027 period, whereas the margin the company takes relative to its equity portion is 80%.
The consortium's portfolio size relative to Act Financial’s portfolio size is 3 times in 2024 and 2.50 times thereafter.
Best-case Scenario (FV- EGP 6.73/share)
This FV can be achieved if Act Financial registered an ROI of 45% annually during the forecasted period and the margin relative to its equity portion is 100%.
The consortium's portfolio size relative to the company's portfolio size should be 3 times.
Worst-case Scenario (FV- EGP 3.06/share)
The company is expected to post an ROI of 35% annually during the four-year period and the margins projected to hit is 60%, while the consortium's portfolio size relative to Act Finacial’s portfolio size would stand at 3.
FV by RIM
The IFA determined the fair value of EGP 4.54 per share by weighing residual income model (RIM) and P/E multiple valuations at 70% and 30%, respectively.
The FV dropped to EGP 3.63 after applying a 10% minority discount and a 10% illiquidity discount.
Later on, the company provided an extra 20% discount to stimulate the market, which resulted in an IPO price of EGP 2.90 per share.
Finally, Act Financial was valued at EGP 4.14 per share, which implies an expected upside potential of 42.70% versus the offering price of EGP 2.90 per share.
In an interview with Mubahser, Mostafa Abdelaziz, Managing Partner at Act Financial unveiled plans to acquire stakes in four companies that intend to list their shares on EGX.
