Economic boom fuels IPO flames |
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The Middle East's IPO market roared back to life this year with more than 63 initial public offerings raising $13.5 billion (Dh49.5bn) until December 1. That is a 73 per cent improvement over the IPO market of last year, which saw 43 initial public offerings raise $7.79bn (Dh28.6bn) in capital.
It looks like the markets are just warming up as continued economic prosperity, privatisation and international investor interest fuels the IPO fire for next year.
No fewer than 118 IPOs are tentatively slated to be launched over the next two years in the Middle East and North Africa region, according to Zawya IPO Monitor. Of these, 85 are likely to be raised from the Gulf, led by Saudi Arabia and the UAE. Clearly, not all IPOs will come to the market, but it does indicate the strong pipeline of offerings in store.
"Over the medium and long-term we remain bullish since we believe in 2008 the UAE will be among the better performing markets," said Pamela Chikhani, investment analyst at Damac Capital, which published a bullish report on the UAE markets last week.
"We built our advice primarily on the attractive valuations of equities, the strong economic picture, the robust corporate earnings, and the enhanced investor sentiments," said Chikhani.
In the UAE, family businesses will be the key IPO drivers. "We will see a few privatisations - may be half a dozen - but they will be very large in size," said Fahd Iqbal, GCC equity strategist at investment bank EFG-HermesEFG-Hermes
. "But family businesses will be key drivers coming to the IPO market," he said, adding the new IPO law, which allows family businesses to offload only 30 per cent of shares rather than 55 per cent, will be the key catalyst.
Saudi Arabia will likely emerge as the biggest IPO juggernaut next year with nearly 48 public offerings. Ongoing structural and financial sector reforms are expected to increase capital flows to the stock market, said a Jeddah-based National Commercial Bank analyst.
"Saudi Arabian companies are opening up and they are taking the IPO route to raise capital," said Chikhani. "There is also a lot of international interest in the market and the authorities have realised that if they want to be major players in the region, they need to open up. It is not a question of 'if' but 'when'." The common Gulf market will, no doubt, accelerate that trend.
Financial services were a key sector for the IPO market this year, accounting for more than half of all IPOs in the Mena region - a trend that will continue as more Saudi insurance firms head to the market in the new year. Investment banks were the biggest beneficiaries as they shrugged off last year's dismal performance to rake in fee-related revenues.
Shuaa CapitalShuaa Capital
has emerged as the biggest lead manager in the year to date, edging out global stalwarts Deutsche BankDeutsche Bank and Merrill LynchMerrill Lynch. The Dubai-based investment bank helped raise $2.8bn (Dh10.2bn) in the year, co-managing three hot-ticket IPOs such as Dubai Ports WorldDubai Ports World, Deyaar Real EstateDeyaar Real Estate and Air ArabiaAir Arabia. It is a great turnaround for the bank, as last year it did not even feature in Zawya's top 10 lead managers' list. Saudi-based Samba Financial GroupSamba Financial Group
is the second best lead manager in the year for the region, raising $2.76bn (Dh10.13bn). Samba also took top honours as the leading financial adviser in the region, beating Shuaa CapitalShuaa Capital to secure pole position. With the common Gulf market kicking-off next year, and oil sailing in the $90s, the IPO tsunami is set to drench the region again. (The writer is Managing Editor, Zawya.com)
IPO Monitor Homepage
by Yadullah Ijtehadi
© Emirates Business 24/7 2007
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This is analysis is sound and we should equally acknowledge those parties that have brought more companies to the public domain. More public entites means more transparency, better corporate governance, more developed financial markets and ultimately a better business enviroment. [Report Abuse | Email to a Friend | Reply to this Comment]
We are always interested in the "top ten" in everything life brings us. But in this case (IPOs in the Middle East) the majority of companies coming to market are not going to be using the services of the "top ten" Lead Banks or Financial Advisors.
Most of the "Mom and Pop" companies are not of the size of a DP World or an Emaar or any of the names easily recognized by all of us as being big players in this space. These Mom and Pop companies will be recognized as household names and will do well with their public offering but will be represented by many companies not in your lising of top tens.
My point is that we should give credit to all of the companies out there that are making the markets of the Middle East a truly wonderful place to put your long term monies.
The Capital Group was not a Merrill Lynch when it brought 7 issues to the public. Its recent aligment with Morgan Stanley will help its situation even more so.
BM Financial Advisors is no where near the biggest and yet it brought 6 issues to the public this year.
Many companies are working to make this happen. I think we should not just give credit to the ones at the top (for the one or two IPOs they have participated in) by ranking them only by IPO value [Report Abuse | Email to a Friend | Reply to this Comment]
The most common rule to rank Lead Managers is by issue size. This rule is in line with the objective of identifying the total amount raised by each bank.
Additionally we use the number of issues as a secondary rule to complete the league tables when two lead managers have the same size offered.
[Report Abuse | Email to a Friend | Reply to this Comment]
Good point.
The full IPO lead managers table can be found here:
http://www.zawya.com/ipomonitor/searchresult.cfm?newlinks=ltytd
National Commercial Bank (with 8 issues) led the lead managers' list in issuances.
The full list of Financial Advisors can be viewed here:
http://www.zawya.com/ipomonitor/searchresult.cfm?newlinks=ltytd
The Capital Group led the financial advisor's list with 7 issues. [Report Abuse | Email to a Friend | Reply to this Comment]
You are doing a disservice to the Lead Managers (although they may not have had control over the largest IPOs) that have managed a large number of IPOs.
One should keep in mind that it is the diversity of the listings on an exchange that make it successful over time and as such the Lead Managers that bring many issues to the market are showing that they are more in tune with working along the lines of the strategic visions of a secondary market.
Another table should be provided to show the Lead Managers in the Middle East by the number of issues they have brought to market.
There is one company (Bank) in the GCC that has managed more than twice the issues you show listed for any of the companies in your report for the same period, i.e. 2007 year-to-date.
Let's give recognition where it is due. [Report Abuse | Email to a Friend | Reply to this Comment]