Saudi Arabia leads region's IPO drive

MENA IPO announced deal value reached $236.7 million in the third quarter of 2017

11/12/2017 13:50 AST

Economies picking up the pace, particularly in Saudi Arabia, are helping initial public offerings (IPO) come online, according to the latest sector report from Ernst and Young (EY).

The third quarter of the year yielded five IPOs, an increase of four over last year. Capital raised amounted to $236.7 million, an increase of 20 percent from the same quarter last year.

The figure also represents a reversal of a trend earlier in the year where a growth in the number of IPOs from 2016 was contrasted by a fall in the amount of capital raised.

Sixteen IPOs came on to the market in the first half of the year, double the number in the first six months of 2016, despite capital raised amounting to $788 million, a 20 percent fall from the same period last year.

The quarter saw Oman end its IPO draught this quarter with its first IPOs after a gap of two years on the Muscat Securities Market raised a collective $29.9 million.

Saudi Arabia continues to be the driving economy in the region; the three IPOs on the Saudi Stock Exchange, Tadawul, add to the nine that have public in the country since January.

However, all of the latter were listed on the NOMU, an exchange parallel to Tadawul with lighter requirements for listing and which are only open to qualified investors. No new listings were recorded on the Saudi NOMU this quarter.

“The MENA IPO market outlook is positive against the backdrop of increasing stability in oil prices, improving investor confidence in the global markets and a strong desire to raise funds through privatisation, resulting in a large pipeline of companies potentially preparing to come to market,” said Gregory Hughes, EY’s MENA IPO Leader.

“Based on the pipeline of IPOs, we expect to see a number of premium government or partially government owned assets being floated over the next two years, particularly in the energy-related sector.”

GCC markets have also seen an increase in activity in the region’s relatively new real estate investment trust (REIT) market. After opening its stock market to REIT funds in 2016, Saudi Arabia has seen six REIT listings with two REIT funds in the third quarter of 2017 raising $144.8 million.

“Saudi Arabia continues to lead the way for IPO activity in the region, with an increasing trend of REITs being listed on the exchange underlining investor interest in real estate assets in the country,” said Mayur Pau, EY MENA Financial Services IPO Leader.

“Many private equity backed and family groups continue to assess the IPO market and are working on readiness for attractive IPO opportunities. In particular, the UAE, Saudi Arabia, and Egypt have a strong pipeline of announced and rumoured IPOs, with a strong backlog of IPOs potentially preparing to come to market in the last quarter of 2017 and early 2018,” he added.

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