Iraq's Asiacell seeks to raise $1.35 bln from IPO

[FXStockpiling]

UPDATE 1-Iraq's Asiacell seeks to raise USD1.35bn from IPO

* IPO will be largest in Iraqi bourse

* Test of investor faith in economy's recovery

* To offer 67.503 bln shares at minimum of 22 dinars/shr

* Founding shareholders to offer existing shares

* Offer starts on Jan. 3; shares to trade on Feb. 3

(Adds details, background, analysis)

DUBAI, Dec 25 (Reuters) - Iraq's Asiacell, a unit of Qatar Telecom , said it planned to raise at least $1.35 billion by floating 25 percent of its share capital on the Baghdad stock market, in what would be the country's largest initial public offer of equity.

The offer, the first major IPO in Iraq since a U.S.-led invasion toppled Saddam Hussein in 2003, will test investor confidence in an economy that is struggling to recover from years of war, political instability and financial sanctions.

Mobile telephone operator Asiacell, in which Qtel owns 54 percent, will sell 67.503 billion shares at a price of at least 22 Iraqi dinars ($0.02) per share in the offer, which starts on Jan. 3, it said in a statement on Tuesday.

Asiacell and its two rivals in Iraq, Zain Iraq and Korek, must raise funds through IPOs as a condition of receiving their $1.25 billion operating licences from the government.

All three companies missed an earlier deadline of August 2011 to do so, and Asiacell is now set to be the first to float on the Iraqi bourse.

Asiacell, which claims to have a 43 percent share of revenues in the mobile phone market and 9.9 million subscribers, said founding shareholders of the company would offer their shares for sale in the IPO, but did not specify if parent Qtel would sell part of its stake.

The offer may be difficult to absorb for the stock market, which has a total capitalisation of only slightly more than $4 billion, and which trades around $3.3 million daily.

Questions have been raised over Asiacell's ability to sell the entire 25 percent stake after two international banks, Morgan Stanley and HSBC , cancelled plans to help arrange the IPO. That leaves Baghdad-based broker Rabee Securities as sole distributor and selling agent.

The absence of international banks may limit any foreign buying of Asiacell's shares, and although Iraq's economy is now growing rapidly and some local investors are flush with cash, it is unclear whether their buying will be enough to support the offer.

The minimum offer price announced by Asiacell is in line with market expectations. In June Qtel agreed to pay $1.47 billion to raise its stake in Asiacell to 54 percent from 30 percent, with a further increase to 60 percent pending Iraqi government approval; that deal valued all of Asiacell at about $5 billion.

Asiacell shares are expected to start trading on the Iraq Stock Exchange on Feb. 3, the company said. ($1 = 1163.0000 Iraqi dinars)

http://www.zawya.com/story/TR20121225nL5E8NP0WL2/

[rightsonword]

Ouch. 22 dinar/share. Too rich for my blood considering how much other companies on the ISX have fallen from the original highs. Tempting, however, considering that each share is only $.02 and that price will surely go higher inthe future and I don't foresee a big company like AsiaCell going out of business. I'll have to think on it.

[matthew6:19-21]

Since when did 1 dinar = 1163 dollars??????? I though the exchange rate was 1 = 1166.

[rightsonword]

Since when did 1 dinar = 1163 dollars??????? I though the exchange rate was 1 = 1166.

I think you may have switch the numbers around.

Asiacell shares are expected to start trading on the Iraq Stock Exchange on Feb. 3, the company said. ($1 = 1163.0000 Iraqi dinars)

[moneysoon]

Ouch. 22 dinar/share. Too rich for my blood considering how much other companies on the ISX have fallen from the original highs. Tempting, however, considering that each share is only $.02 and that price will surely go higher inthe future and I don't foresee a big company like AsiaCell going out of business. I'll have to think on it.

In my mind, 22/share had to be a calculated move and not some arbitrary shot in the dark. Knowing that Morgan Stan. and HSBC would not be helping, all of this must be intentional. If this was supposed to be designed to seek "local" investors, 22/share perhaps would not do so if one were thinking of common everyday citizens. My bet is that the "local" investors are MENA investors, well prepared to meet the $.02 demand. For Rabee to go at this alone, they must have said, "we don't need what outside investors have to offer" at least during this 'initial' period. If there is a statutory requirement of offering/reaching 25% this implies to me that there is a calculated price point and a calculated plan to reach it. I could be way off in my thinking, if so, this is my Christmas Gift to myself.

Blessings,

[matthew6:19-21]

I think you may have switch the numbers around.

Asiacell shares are expected to start trading on the Iraq Stock Exchange on Feb. 3, the company said. ($1 = 1163.0000 Iraqi dinars)

Yes I did thanks for the correction.

In my mind, 22/share had to be a calculated move and not some arbitrary shot in the dark. Knowing that Morgan Stan. and HSBC would not be helping, all of this must be intentional. If this was supposed to be designed to seek "local" investors, 22/share perhaps would not do so if one were thinking of common everyday citizens. My bet is that the "local" investors are MENA investors, well prepared to meet the $.02 demand. For Rabee to go at this alone, they must have said, "we don't need what outside investors have to offer" at least during this 'initial' period. If there is a statutory requirement of offering/reaching 25% this implies to me that there is a calculated price point and a calculated plan to reach it. I could be way off in my thinking, if so, this is my Christmas Gift to myself.

Blessings,

Ok my brain isn't working right can you explain what you have said a little better? I am still trying to decide how much if any to buy. Thanks.

Edited December 25, 2012 by matthew6:19-21

[unirod]

at 22 Dinar per share.

4,400,000 Dinar will buy you 200,000 shares of Asiacell.

Or 4,4000,000 Dinar x .00087 = $3,828.00 usd + 1% broker fee

Now this is a serious Buy

I am still unsure if there will be a minimum lower than say 100,000 shares. Al-Jazera is 100K and Warka is 200K minimums typically.

[unirod]

I am leaning toward waiting on Zain and Korek to go public. There may be a better price point entry. It's all a gamble but patience has always served me well with investing. I will probably look to buy on a dip with Asiacell.

[moneysoon]

Matthew,

All I am saying is 22/share may be a price point well researched for the IPO. For several reasons I believe it will fly. I am thinking the "big dogs" will get in early and this thing could lead the way for the ISX. One thought is to sample this one conservatively and know how to better play the next telecoms. Another thought is to go "all in" and play this one LONG. With all things considered I got to get in on this one now. I suspect that this stock may go the way of a helicopter instead of a Jumbo Jet. For me, I know all things happen for a reason! In this particular case, I am particularly intrigued that the Western Companies pulled out or were asked out. Either way, I have a suspicion that this may be an 'act of self-dermination' which suggests to me that this is my type of buy. Just my thoughts Brother.

Blessings,

[matthew6:19-21]

Matthew,

All I am saying is 22/share may be a price point well researched for the IPO. For several reasons I believe it will fly. I am thinking the "big dogs" will get in early and this thing could lead the way for the ISX. One thought is to sample this one conservatively and know how to better play the next telecoms. Another thought is to go "all in" and play this one LONG. With all things considered I got to get in on this one now. I suspect that this stock may go the way of a helicopter instead of a Jumbo Jet. For me, I know all things happen for a reason! In this particular case, I am particularly intrigued that the Western Companies pulled out or were asked out. Either way, I have a suspicion that this may be an 'act of self-dermination' which suggests to me that this is my type of buy. Just my thoughts Brother.

Blessings,

I understand. Thanks.

[asad]

Wow that works to be 3773.00 for 200000 shares of asiacell

[Dinar_o'saurs]

MIDEAST MONEY

-Iraq seeks to boost bourse with big telecom listing.

Wed Jan 2, 2013 9:00am EST

* Asiacell's $1.35 bln IPO is country's biggest

* Success could energise stock market, lure foreign funds

* But valuation of offer does not look particularly cheap

* Questions over small market's ability to absorb shares

* Absence of foreign banks may limit interest abroad

By Aseel Kami

BAGHDAD, Jan 2 (Reuters) - An advertisement for Iraq's stock exchange, running in local newspapers over recent weeks, poses the question: "How can I invest in shares?" It then assures readers that the process is easy, advising them to contact brokerages for details.

Another ad, by Iraqi mobile telephone operator Asiacell, warns readers: "Be ready, because we are ready."

Investors will get a chance to buy into the country's oil-fuelled economic boom this month as Asiacell seeks to raise at least $1.35 billion by floating 25 percent of its share capital on the Baghdad stock market.

It will be the country's largest-ever initial public offer of equity, and one of the Middle East's biggest share offers in the last several years - the first major IPO in Iraq since a U.S.-led invasion toppled Saddam Hussein in 2003.

So it will be seen as a test of investor confidence in an economy that is recovering from years of war, political instability and financial sanctions.

Officials hope a successful IPO will galvanise the stock market, luring foreign money into the country and helping make the market a useful tool for Iraqi companies to raise funds for expansion.

But the country's small and undeveloped financial system is lagging its economic growth, and this could hinder Asiacell's IPO, preventing some of the shares on offer from being sold. The stock market may have trouble absorbing the new supply, and interested foreign investors may find it difficult to move their money into the country.

Saad al-Bayati, an economist based in Baghdad, said a weak investment environment because of political instability, unreliable physical security and capital flight from the country would jeopardise such a large IPO.

"All these are issues which affect the share market and do not allow for rational economic predictions," he said.

FIRST OF SERIES

Asiacell, in which Qatar Telecom owns 54 percent, will sell 67.503 billion shares at a price of at least 22 Iraqi dinars ($0.02) per share in the IPO, which starts on Jan. 3, the company said in a statement last week.

It is expected to be the first of three big telecommunications IPOs in Iraq; Asiacell and its two domestic rivals, Zain Iraq, a subsidiary of Kuwait's Zain , and France Telecom affiliate Korek must raise funds through IPOs as a condition of receiving their $1.25 billion operating licences from the government.

All three companies missed an earlier deadline of August 2011 to do so, arguing the stock market was not sufficiently prepared at the time, and have been fined for the delay.

The IPO requirement is a way for authorities to try to encourage private ownership in an economy still dominated by state-owned companies, and to spread more of the wealth created by Iraq's recovery around the population.

Taha Abdulsalam, chief executive of the Iraq Stock Exchange, told Reuters that the listing of Asiacell's shares on Feb. 3 would be a boon to the market by adding the telecommunications sector to investors' options.

Currently the market, where the main equity index fell about 8 percent in 2012, has about 85 listed firms with capitalisation heavily focused on the banking sector, though there are also stocks in industry, insurance, hotels and agriculture.

Abdulsalam predicted the market's trading volume, which was around $3 million per day this year, would rise about 10 percent because of the listing.

In the long term, telecommunications could be a great bet in Iraq; the International Monetary Fund predicts Iraq's economy will grow more than 10 percent this year and at least 9 percent annually over the next five years, aided by rising oil output. That should boost demand for higher-end data services.

Asicaell, which claims to have a 43 percent share of revenues in the mobile phone market and 9.9 million subscribers, posted net income of 474 billion dinars in the first nine months of last year, against 505 billion dinars in all of 2011, according to a company statement.

Based on a 22 dinar IPO price, Asiacell shares are likely to be valued at about 9.6 times expected 2012 earnings, according to Reuters calculations. That may not be seen by investors as generous - the valuation is similar to that of Qatar Telecom in Qatar's better developed, less risky stock market - but it could be justified by Iraq's long-term growth prospects.

TINY

Asicell's IPO may not go as smoothly as the long-term economic outlook suggests, however. The Iraqi stock market's current capitalisation is only about 5.6 trillion dinars ($4.8 billion), so Asiacell's float may not be easy to absorb in one gulp. All three telecommunications firms combined are expected to roughly double the market's capitalisation.

Furthermore, a mass share-owning culture has yet to develop in Iraq, where many people - mindful of the country's troubled political history - prefer to keep their money in liquid cash or bank deposits.

"I do not invest my money in the bourse because there is no profit expected. Most of the companies registered are not profitable companies," said Akram Mohammed, a 30 year-old engineer in Baghdad. He keeps his savings in a bank.

Foreign investors, whose ownership of listed shares rose to 19 percent at the end of 2011 from 3 percent in 2008, might be expected to buy shares in Asiacell.

But this hope has been complicated after two international banks, Morgan Stanley and HSBC, late last year cancelled plans to help manage the IPO. The banks declined to comment on their reasons.

Baghdad-based broker Rabee Securities has been left as sole distributor and selling agent for the shares. Without the involvement of foreign banks, it may be harder to drum up international interest and to arrange share purchases in a currency which is not internationally traded.

Abdulsalam insisted that Asiacell's IPO would attract substantial foreign interest, however, and that it would help to encourage more foreign equity funds to enter Iraq. Five foreign funds currently operate on the Baghdad exchange.

"A lot of investors, whether Iraqis or non-Iraqis, send us messages saying 'we are a portfolio or a fund company and we want new shares, we want new companies'," he said.

"Can you imagine how much passion there will be? There is a passion and a thirst" for shares in the Iraqi telecommunications companies, he added.

[unirod]

"without the involvement in foreign banks, it may be harder to drum up international interest and to arrange share purchases in a currency which is not internationally traded"

This is just one of the reasons why I'm going to take a wait and see position, and not buy shares too quick out of the gate.

[sandyf]

"without the involvement in foreign banks, it may be harder to drum up international interest and to arrange share purchases in a currency which is not internationally traded"

This is just one of the reasons why I'm going to take a wait and see position, and not buy shares too quick out of the gate.

That is a sound policy. The IPO can be extremely risky. Despite what many may think, you do not buy shares in an IPO, you make an application to buy. When the offer closes you get an allocation subject to subscription. For example if the offer is twice over subscribed, then you would get 50 percent of your application plus a refund on the balance.

When trading starts, if the offer has been over subscribed, the price is likely to rise and the big boys will probably off load and take the profits causing the price to tumble. It is unlikely the small investor can react quick enough to avoid negative equity. The chances of having received a notice of allocation prior to trading is very slim, and you are not really in a position to sell without it.

If the offer is under subscribed, then you will get full allocation and the price will probably be low.

What you might call a lose/lose situation.

[moneysoon]

In my opinion, this opportunity should not be played like a traditional stock because it is not. Depending on who you are working with in Iraq along with ones own due diligence, this opportunity might look more like a no brainier than being a shot in the dark. The big dogs of MENA have already prepared for this. We are fortunate to even get in at this level. Usually we are left with crumbs, not this time.

[unirod]

In my opinion this is exactly why you should play this as a traditional IPO. There are 2 other companies who as of yet are not listing, Zain and Korek. Zain is a Kuwaiti owned co. and Korek is French owned. So with no other competition in the market who knows the real worth of Asiacell? Yes they can make allot of claims regarding market penetration. But then again so did Facebook! What are the real earnings of Asiacell?What are the real earnings of the Tele sector in Iraq? I am more inclined to wait and see how the Kuwaiti owned company enters the ISX as this may be a better gauge on how to invest in this sector.....