Egypt's Beltone Financial aims to invest around 300 million Egyptian pounds ($42 million) to expand its domestic operations next year because it believes the worst of the country's economic instability has passed, its chairman told Reuters.
"The entire world is open to us. I see that the transition period in Egypt has ended. The investment opportunities that exist domestically are the best that can be found in the region," Aladdin Saba said.
"We will propose our expansion plan for 2015 to the board of directors. I envision us investing in the non-bank financial sector by setting up new firms, or by buying existing businesses if they would enable us to achieve our goal and save us time.”
The optimism of Saba, who founded Beltone in 2002, is echoed by many Egyptian financiers, who think the government is getting a grip on Egypt's economic problems after a three-year slump following the revolution of 2011.
With over 200 staff, Beltone has brokerage, asset management, investment banking and private equity operations. Foreign operations include offices in Dubai and London.
Earnings have slumped since last year, when they were inflated by one-off gains such as a property sale. Consolidated net income tumbled 84 percent from a year earlier to 11.0 million
Egyptian pounds in the first half of 2014; revenues sank 26 percent to 31.6 million pounds because of lower fee income.
But the company has been one of the most aggressive Egyptian financial firms in seeking to get ahead of the expected rise in asset values in the event of an economic recovery over the next several years.
It originally announced that it would distribute a dividend of 7 pounds per share for the 2013 financial year, but then suspended that decision as it sought with billionaire Naguib Sawiris to buy a 20 percent stake in Egyptian investment bank EFG Hermes for about $257 million.
The purchase did not go through as the bid consortium attracted offers of just under half of the EFG Hermes shares which it sought. However, that setback does not appear to have dimmed Beltone's ambitions.
The company's board decided this month not to distribute cash dividends and to use the company’s liquidity instead to fund its future expansion plans.
"The decision to distribute dividends for 2013 was made under certain circumstances that have changed entirely, and our policy too has changed,” Saba said in an interview at the Reuters Middle East Investment Summit.
"The first sign of change was the company heading toward acquiring a stake in Hermes. Therefore we decided, whereas our policy was to be conservative and distribute cash dividends, to look into expansion and investment opportunities.”
He added, "We have liquidity of 120 million pounds and this covers a portion of the expansion that we are working on. There may be a new stage of external funding for the remainder of our investments, either through a capital increase or through obtaining bank loans.”
Authorities are working to revive listing activity on Egypt's stock market, which should benefit firms such as Beltone.
Arabian Cement Co (ARCC.CA) listed in Cairo in May after raising $110 million in its initial public offer, the first major one on the bourse for about three years; Egyptian Exchange chairman
Mohamed Omran told Reuters this month that the exchange expected to approve 10 listings this year.
“We are working on four new primary offerings, but all of them will occur in 2015," Saba said without naming the companies.
"We have an offering with a value above 1 billion pounds, and another with a value of around 750 million pounds. We can say that the aggregate value of the four offers will exceed 2 billion pounds.”
In April, the exchange granted Beltone the country's first license for exchange traded funds (ETFs), a step toward deepening trade in the stock market. Omran said he had expected ETF certificates to be offered earlier this year, and now believed they would be introduced by the end of 2014.
Asked when Beltone might proceed with ETFs, Saba said: “At the earliest. Beltone is not waiting for anything. There are still a few minor changes being made to the offering circular.”