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Read our exclusive interview
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 INTERCAPITAL SECURITIES
"Innovative and High Quality Brokerage Techniques"
Manager:
Ahmed El-Helw & Mohamed Abdallah,
Executive Managers
Contact:
10 Kamel Mohamed St.
Suite #1 – Zamalek
Cairo
Egypt
Tel. (20) 2 341.4690/1/2/3/4
Tel. (20) 2 332.0371/2/3/4
Fax: (20) 2 341.5217
E-mail: ahmed@icseg.com
Web site : http://www.intercapitals.com |
Strategy
 Mission Statement
"Promoting opportunities for investment in The Egyptian market to a wide and discerning clientele, offering innovative and high quality brokerage techniques, maintaining truth of information and transparency".
InterCapital Securities recognizes the crucial need for a service-oriented strategy in the Egyptian brokerage industry. Using the combined expertise of its shareholders in the fields of finance, business and investment, InterCapital aims to become the most innovative brokerage house in Egypt, catering to a wide and discerning clientele for whom personal service and professional account management are among the most important assets a company can offer.
The Company
It offers a wide variety of services in securities investment and risk management through the Cairo Stock Exchange to both local and international investors.
InterCapital Securities provides a wide range of tools for accessing company research, market analysis, news and other information to help its clients make informed and accurate investment decisions. It also offers streamlined, and economical ways to invest and manage money.
Since InterCapital Securities began operating in February 1997, it has played a significant role in the development of the Egyptian Stock Exchange by maintaining an average of 10% of the market share. The company has a comprehensive track record, which is supported by the confidence of its clients. InterCapital's record attests to the skills and ethical standards of the company's brokers and the ability of its clients to prosper in the Egyptian stock market.
Our Services
Research
At InterCapital Securities we provide our client with prompt and accurate information necessary to invest wisely in an emerging market. Trained, professional analysts who service our clients with comprehensive, up-to-date, readable research, and in-depth analyses on the potential of local companies staff our research department.
Our analysts visit local, public and private sector companies on a regular basis to meet with general managers and CFOs to discuss their financial statements, growth potential and managerial changes in their enterprises. We also accompany our foreign clients on local company visits to ensure that they receive an accurate impression of the domestic situation. Our research department provides updated, accurate information to investors on demand about numerous aspects of the Egyptian capital market, including companies, the market and macro-economic information. In their quest for accurate projections our analysts maintain an extensive research datbase and survey local and international media sources for news affecting the Egyptian market.
We recognize the lack of transparency in emerging markets and the challenge this presents to investors. Our goal is to facilitate the transfer of information to our client through a comprehensive network of services, thereby improving transparency and the ability to make sound investment decisions:
Weekly News of the Egyptian Market
Latest Developments Reports
Company Reports
Call Reports (from company visits)
AGM Reports
Macroeconomic Reports
Sales
The sales team at InterCapital is trained to identify client investment needs and keep them at the forefront of any transaction. The sales force is divided into two division-institutional and retail. To maintain and enhance our services, the brokers are carefully selected and trained so that they may capitalize on the experience of their predecessors.
Execution
Execution is the core of any brokerage firm and due to the efforts of the management, we have successfully developed extremely high standards in this area by implementing same-day execution. Our clients are assured that their orders will be executed at the best price of the day, as efficiently as possible. Our traders have been trained to determine the timing of execution accurately. To achieve such high standards of execution, the company has implemented the following:
Execution Desks
Unlike most brokerage firm in Egypt, InterCapital Securities has two execution desks. Traders also communicate the supply and demand of the market to the sales team who, in return, relay the information to our clients.
Customer Service
At InterCapital Securities we provide all our clients with accurate, timely and comprehensive information and services. We were the first brokerage firm in Egypt to create a department devoted exclusively to this goal. Our customer service department is available to answer account inquires, supply research products and report transaction (execution) status at anytime during the day. To make the transfer of information more efficient, the department is accessible by telephone.
For a detailed company profile please visit our Website : http://www.intercapitals.com
Top of page.
INTERVIEW WITH
Mr. AHMED EL HELW,
MANAGING DIRECTOR OF INTERCAPITAL SECURITIES
On Thursday 18th February 1999
1/Q: Could you give our readers a brief historical background of Intercapital Securities?
Intercapital Securities began trading on February 19th 1997. We are a brokerage firm. We are involved only in brokerage operations. The company was established in early 1997 and started trading in February. Our shareholding structure is as follows: 51% is owned by Commercial International Investments Company (CIIC), 29% by ING Barings (the Dutch/British bank) and 20% by the management of the company. Our market share grew very rapidly to reach 15-17% as soon as we started trading. Then it stabilized at 12% by June or July 1997. Since then, it has fluctuated between 11% and 14% on a regular basis. We were the placing arm of 60-70% of the private placements that came to the market since that time. We ranked the first in terms of the volume of trading in 1997. We were elected the best providers of service quality as a brokerage firm by El Ahram El Ektesady (EL Ahram Economic Review), which is one of the leading business magazine in Egypt. We base our quality of service on three axis: First, the quality of information and we claim that we have the strongest research department available in Egyptian brokerage firms. We have 5 professionals that get first hand information. This simulation of information is quite efficient. Second, the quality of execution. We set new standards in the Egyptian market since we came to work. The reason behind it is that we try to read the market early market on both levels, micro and macro. We try to predict how the market will move on a daily and weekly basis within the same session. Third, the customer services or reporting and for that we created a new department, the customer services department. This department has a single task and that is to keep the client informed of the changes in his/her portfolio or according to his orders. We realized that we grew very fast and at a certain stage we decided to set a lot of infrastructure in the company. So, all of our IT compliance and we tried to copy some systems for ING Barings for our back office operations. Another element of our rapid growth is that the Egyptian market is real emerging market. This is a market in which the industry is very young as well as the investment banking activity. I would say that the time zero for the industry was somewhere between 1993 and 1994. So, it is very young and people do not quite appreciate the quality of services yet. This gave us a lot of room to grow and a lot of market share to capture.
2/Q: What is your strategy to maintain or increase your market share in
1999?
We believe that by now we have enough infrastructure to go on a retail basis. Until now, corporate clients make up 72% of our client base and 28% retail clients. However, 80% of that 28% is not actually retail, bur rather high net worth individuals. I think that our systems, back office operations and IT systems make us ready to go on and open retail outlets. One of the dimensions of the development and growth is that we are opening two retail operations, which is a new operation for us. Recently, we set a bond-trading desk. This is very new to Egypt. We send some of our people to receive training in London. We are reinforcing the department and we believe that this will be a completely separate business by the end of 1999. On the level of market share, I am more inclined to focus on its components rather than its size. I would rather have our market share well distributed among our retail and institutions. At present, we are more of a corporate broker. Probably by the end of 1999 we would consider increasing the market share further. At the moment I think that it is more important to get more wide spread.
3/Q: Could you give us some more figures about the company?
We started in February 1997 with 19 employees. At present we are 55. We are moving our headquarters because we had to double our space and there is not sufficient space in this building and so, we are moving to another premises by May 1999. At that time we may reach 65 employees. We will be saturated at that point. Our turnover was LE 2.8 billion in 1997 and LE 3.75 billion. Our authorized capital is LE 1 million.
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Regarding operational performances, we were involved in a lot of private placements in several industries. We handled Dr. Saad Sallam’s group, OGFI, private placement. We were also involved in the private placement of KABO, the textile company called EL Nasr Garments, Dr. Ahmed Bahgat International Electronics private placement and Dr. Talaat Mostafa’s Alexandria Real Estate and Investment private placement. We are very well diversified among the various industrial sectors. In the pipeline, we have, along with our corporate finance arm CIIC, some good amount of yields. We are waiting because 1998 was not exactly the best year to have new issues in the market. But, we got over that and some of our new issues will be in the market by next month.
4/Q: How do you foresee the future of the Stock Exchange?
Let me start by saying that, historically, the real problems of the Cairo Stock Exchanged were related to inadequate infrastructure, including trading systems, settlement systems, materialization of shares. These details could waste your energy and kill the new born privatization program. The best thing that took place starting 1994 until now is that a lot of infrastructure has been installed, including electronic trading systems, settlement systems, the establishment of Misr Clearing House, the dematerialization of a lot of shares. This has actually been achieved over long periods but one of the periods that we owe a lot to is Sherif Raafat’s term in office. He was very concerned about the stock exchange’s infrastructure and he invested a lot of time and effort in infrastructure. He imported off –the- shelf programs that were installed. I believe that this helped the stock exchange infrastructure to get to the point where we can move one step ahead. From the privatization point of view, I think that the first phase of profitable companies owned by holding companies or by the government for sale is already done. The third phase of utilities is getting ready to move. Culturally, it has been very difficult for those you work, for example, in electricity to be told that such sectors are being privatized. I think that this will take some time. Right now, we are in phase II and it is the period of the floatation of the private sector equity in the market. I think that this period will last for six more months. This period will overlap with the privatization of utilities because electricity is being partially privatized at present. The overlap will probably begin in the second quarter of 1999 but the private sector will be the dominant player affecting the floatation of equity in 1999. I think that we will see a lot of mergers and acquisitions in 1999 basically because the market is maturing. We look at the balance sheets and income statements of several companies and we become more convinced that this will happen. The amount of corporate financiers and investment bankers that are available in Cairo at present is sufficient to create the ideas and support the sufficient approach. The fourth dimension will be volumes rather than prices and how they will change in 1999. I think that volumes are increasing and they will continue to do so until the end of the year. This will support an up trend of prices but I would not say that we are looking at an up trend but that it is most likely to happen. High volume is not a function of institutional investors only but also of the retail and individual investors penetrating the market. Those who left the market in 1997 are now seizing the current opportunities. So, I think that there is a balance that is being created at present.
5/Q: What are the main challenges that the financial sector or the stock market is facing right now?
The first challenge is to get over the idea of the decline that took place in emerging markets in 1998, be it investors, individuals but especially institutional investors, to get over the idea of that crisis. The specific challenge that will face the Cairo Stock Exchange or the Cairo financial sector is providing equity and investment vehicles to investors. Local investors are very rich on cash in Cairo. They are waiting for good opportunities. The challenge is to put the criteria of what is a good investment because we are still on a learning curve when it comes to investors. They are not quite sure how to evaluate their investments. I think that we had a good year as far as foreign investors are concerned. The cash liquidity is available. International investors are looking at opportunities and as soon as they identify one they seize it. I see that they seize a lot of opportunities in Egypt. A challenge that will be facing companies primarily is the growth of earnings. The financial figures of 1999 need to show good and convincing growth of earnings so that investors will come to Egypt and invest in an emerging market and to put their money in Egypt for foreign investors and in securities for local investors. The bond market will definitely be a challenge for Egypt. The debt market is getting in the picture but it is moving at a very slow pace. Personally, I expected that the pace in the debt market with be a lot faster that it actually is. The delay reasons might be the emerging markets and the crisis that took place in 1997-98. But, I think that it is a great challenge. The professionals in Egypt are not yet absorbing the idea. This is also why it is taking so long. Another challenge is the development of the ideas of transparency and flow of information. We did see a lot of improvement in the market since 1994 until now. I think that we still one further step in
1999 but overall, we have reached a good level. I would also say that the pace of change from 1994 until now is definitely very good. We still need one more step. We reached a level where a plateau is set and people’s minds have absorbed and digested the ideology. Now, we can take it one step further.
6/Q: What is your opinion of the saying "one should not put the eggs in one basket"?
I could not agree with you more. But, we do not plan to enter into more financial services. We will remain brokers only. One of our principles is to never compete with our clients. In Egypt, we are not allowed to take positions as brokers. If taking positions in market making is allowed I think that it will be a good area of growth for Intercapital Securities. If it is allowed by late 1999 it will be convenient.
7/Q: ING Barings provides you with good international contacts. What are you doing to get international investors?
First of all, there is the quality of research that we produce. We have the daily fax and the weekly fax that go out to all our clients and to prospective clients. This is our first step. We never move on before providing the information and research. We do our marking trips and road shows whenever we have a product that we want to market. There are also marketing trips to London, New York or the Gulf whenever such trips are needed, even if we do not have a product to market. These are our means to approach new clients or prospective investors.
8/Q: In your opinion, what makes a good broker?
This is neither an easy question nor would it have a straightforward answer. But, I think that a number of elements make a good broker. First of which is honesty because honesty might appear to be a luxury when in fact it is not. Rather, it is a reason for long term existence. Second is the backbone of information that is available to the broker whether form a data base point of view or the support of information network of good quality information in him as a person or as a company or the research that is there to back the brokerage. I think that being smart and other personal attributes come at the end of the list. I think other reasons would also include having good systems within the company, good infrastructure to support you and the quality of people who work in the company, which is one of the most important elements. In our line of work, our raw material is the quality of people who work in the company. That is why, at Intercapital, we try to balance between psychological, moral and financial rewards. We believe in moral rewards, which in itself is balanced in training and upgrading the capabilities of people and between the continuous assessment that takes place. Regarding the financial rewards, we are on the high end of the market and we hope to keep.
9/Q: Regarding the financial sector, what further measures should the government take in its reform program?
First, there must be a well-identified program for privatization. There must be a long-term program and a short term one. If you ask me what is on the 1999 list of privatization I would not know. As far as I am concerned, this is an important issue. Second, the government must identify the criteria for pricing in privatization and to make it as transparent and public as possible. Third, to put some speed, not excessively though, in the pace of privatization. We have learned the lessons from the emerging markets that were hit because they excessively speeded up their privatization processes. Still, we need to have something moving on a relatively faster pace than what we have right now. The government is dynamic on that front. It is sufficient on their end but not from mine. There is a conflict of interest here and I am not completely objective about it. Getting to the privatization of utilities was essential but I see more of a private sector role as well in this period. Between 70 and 80% of GDP is generated by the private sector. The role of the private sector is increasing. We have a lot of huge projects like the Toshka Canal project, the East Port Said and the Sinai projects. There are also some infrastructure projects that will amount to a lot of real development. The government’s project of having the Egyptian population living on 26% of the land in
10 years rather than the current 6% is definitely a very good project. It will create a lot of new jobs, more resources will be utilized, real GDP will increase. I am happy with the long-term government plan.
10/Q: What is your personal background?
I am a mechanical engineer. I used to work in the petroleum industry with Schlumberger until 1994. Then I joined Hermes Financial. Then, I became the vice president and later a partner, of Hermes Financial. Egyptian Fund Management Group (EFMG) and Hermes merged into one company. I decided to quit 6 months after the merger and I established this company.
11/Q: What is your final message to our readers?
My personal opinion, and especially after 1998, is that I no longer like the term ‘emerging markets’. I am more inclined to segment markets according to other criteria in emerging markets. For that, I would call Egypt, if we still call it an emerging market, a fast, growing and stable emerging economy.
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© World INvestment NEws, 1998.
This is the electronic edition of the special country report on Egypt published in FORBES Magazine,
May 31st issue.
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EGYPT
