Muscat: Muscat Securities Market (MSM) recorded the highest number of listings with three initial public offering (IPO) deals during the fourth quarter of 2017, raising a combined capital of $81.9 million, according to E&Ys latest report.
In the fourth quarter of 2017, Middle East and North Africa (MENA) initial public offering (IPO) activity witnessed eight deals, representing a 60 per cent increase in volume over the same period in 2016. The MENA IPO value, or capital raised, amounted to $2.5 billion in the fourth quarter of 2017, over ten times the capital raised last year and the highest since 2014.
The UAE led the MENA IPO market in value, having raised a cumulative $2.2 billion in capital, primarily contributed by the Emaar Development IPO ($1.3 billion), which was the largest IPO in the region since 2014. The UAE also saw another successful issuance, in the form of the Abu Dhabi National Oil Co. (Adnoc) IPO, which raised capital of $850.9 million.
The MENA IPO activity is expected to gain momentum in 2018, bolstered by economic reforms and the privatization drive by countries such as Saudi Arabia and Egypt. This, coupled with improved oil prices, favorable government initiatives and strong investor appetites, is likely to spur more listings in MENA, especially from leading regional government-entities.
“The IPO activity is poised for further growth in 2018, especially with government and quasi-government owned assets preparing to go public in Kuwait, Egypt, Saudi Arabia and the UAE. The IPO activity in the region is likely to see a mix of local and international floating,” said Gregory Hughes, MENA IPO Leader, EY.
“In addition, family owned, owner managed, and private equity-backed businesses are also signaling their intention to go to the market during 2018; this again could include a combination of local and international offerings of different sizes,” he added.
The IPO market in Saudi looks buoyant, with major regulatory reforms underway, and the impending public listing of Saudi Aramco, Saudi Exchange, and other large government-related entities. Tadawul is also on course to join MSCI’s emerging market index, and has been swift in improving the regulatory environment and allowing foreign investments to remain in line with global standards.
In the last quarter of 2017, Tadawul raised an announced value of $110 million, while Saudi’s parallel market, NOMU, saw a decrease by 48 per cent in 2017, with no IPOs in the third quarter of 2017 or fourth quarter of 2017. However, effective January 1, 2018, the Saudi Capital Market Authority (CMA) has allowed direct investments by non-resident foreign investors on the NOMU.
“The CMA’s recent updates could encourage more small and mid-cap companies to go public in 2018, leading to a rebound in IPO listings just on the NOMU. The IPO activity pipeline for the UAE, Kuwait, and Egypt also looks promising, with major government-owned firms announcing their plans to go public within the next two years,” Mayur Pau, MENA Financial Services IPO Leader, EY, said.
“The ADNOC IPO is one of the most successful regional issuances in recent times and it is likely to pave the way for more public listings from the MENA energy sector,” he added.
GCC IPO value
Collectively, the GCC markets witnessed six IPO deals in the fourth quarter of 2017, recording a substantial volume increase of 200 per cent from the same period last year, while the deal value rose by over 10 times the capital raised in the previous year, reaching $2.4 billion in the fourth quarter of 2017.The real estate sector raised the highest capital with $1.3 billion, closely followed by the energy sector with $850.9 million. The REIT fund came in third with capital of $110 million being raised.
Activity in the global IPO market surged in 2017 with the listing of 1,624 deals, raising an aggregate capital of $188.8 billion. This is a significant growth trajectory in the number of deals listed (up 49 per cent) and capital raised (up 40 per cent), in comparison to 2016. This made 2017 the most active year for IPOs since 2007, and the global IPO market is projected to grow even further in 2018. This will positively impact the regional IPO landscape.
“With a large number of companies already preparing to go public in the next couple of years, while one of the world’s largest IPOs may come from MENA, itself, the outlook for regional IPO activity remains robust,” noted Gregory.