Orascom Hotels Holding Company, Egypt's largest private hotel company, is to raise LE200 million ($50 million) in a bond and share issue (US$1=LE3.5).
According to reports in the Egyptian press, the plan replaces the company's earlier intention to raise between $80 million and $100 million by issuing global depository receipts in London. That proposal was shelved in March due to poor market conditions.
OHH's second-quarter earnings are expected to show a net profit of between LE500,000 and LE600,000, compared with LE268,000 in the first quarter. The company will issue new shares, to raise around LE100 million, between LE8.0 and LE8.5 each.
The bonds, also worth about LE100 million ($40 million) will be non-convertible, with a seven-year maturity and an interest rate of 14.25 percent Orascom Hotel Holdings is up from its record low of LE5.73 on 26 June, and looks healthy on the technical scales.
Trading below its par of LE10, the company has been forced to undergo its capital increase at a price of LE8, and will use its reserves to cover the residual. With tourism continuing to reach historic highs, OHH is set to benefit first hand from these inflows.
Furthermore, the company has an advantage over other sectors in the market since a significant portion of their revenues are based in dollars, while companies in the edible oil industry, pharmaceuticals, and some construction companies will continue to suffer from tight domestic liquidity.
In addition, Orascom Construction Industries (OCI) has also made a good recovery from the summer slump, its shares rising from LE 31.69 on 8th August to LE 47.10 on the 7th September," reported Al Ahram Newspaper. The paper said this 50 percent rise reflects its robust performance during a difficult period for the industry.
Revenues grew by 8.4 percent, though a major contributor to the improved bottom line was the sale of OCI's stake in the City Gas Company for LE 20.4 million ($5 million). OCI's stated aim of becoming a building materials company with construction and infrastructure arms seems to be becoming a reality - the building materials group's now contributes 36 percent of revenues and 42% of profits.
OCI's management believes that by diversifying its sources of income the company can avoid the worst effects of recession, and it has established a number of building materials companies, many in partnership with foreign companies.
Egyptian Cement (ECC) is the most important of these building materials companies: it is the most producer in a highly competitive industry, and is due to open two more production lines in the next two years. ECC is a joint venture with major cement producer Holderbank.
OCI's regional expansion will give it protection against Egypt's macroeconomic risk, as does its Contrack International subsidiary, which executes US Government contracts.
OCI is currently building cement plants in Algeria and the Palestinian Authority. OCI's financial structure - its building materials subsidiaries are owned by a holding company - takes advantage of Egypt's tax exemptions for new companies, improving shareholder value. – (Albawaba-MEBG)
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