Middle East and North Africa IPOs raise $6.8 billion in Q1 2010: Al Masah Capital

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Regional IPOs in the first quarter of the fiscal raised $6.8 billion through 62 issues compared to $3.7 billion in Q1 2009 through 29 issues, signaling a strong recovery in the IPO market, Al Masah Capital said in its Q1 2010 IPO update yesterday.

"As the global economic recovery strengthens, MENA region is likely to witness larger issues driving the future IPO market activity in the region," said Shailesh Dash, founder of Al Masah Capital.

The main driver of growth in the MENA IPO market, however, would be government initiatives aimed at diversification to reduce dependence on the oil sector.

The United Arab Emirates leads in value terms with $25.3 billion worth of IPOs planned in 2010 followed by Bahrain with $3.8 billion and Saudi Arabia with $1.03 billion. Egypt unveiled plans to come up with two IPOs in the financial services and transportation sectors, for a total of $1 billion. "These four countries will account for the majority of MENA IPO activity in 2010."

Saudi Arabia has the highest number of announced IPOs from the 2010 pipeline accounting for 47 out of the total 106 announced issues in the region. Planned IPOs span various sectors such as telecommunications, construction and real estate. The UAE follows with 25 IPOs, mostly from the real estate sector, whereas Bahrain and Kuwait announced six and five IPOs, respectively.

Of the top ten IPOs planned in the MENA region in 2010, the UAE-based NakheelNakheel has the largest in the list with the state-owned entity planning to raise $15 billion followed by Bahrain-based Istikhlaf Bank's $3.5 billion IPO for 35 per cent of its equity.

UAE-based transportation company, Emirates PostEmirates Post was planning to raise $272.3 million whereas Kuwait-based transportation company, Sahaab Leasing has a planned $206.1 million offering in the pipeline. Saudi food and beverage company, Aujan GroupAujan Group has also planned to dilute 30 per cent of its equity and raise $159.9-$213.2 million through a secondary offering.

A staggering $16.6 billion worth of IPOs might emanate from the real estate sector alone and $9.9 billion from the transportation sector in 2010, as reflected from the MENA IPO pipelines, both announced and rumored. While the real estate sector is expected to come up with 27 IPOs during the year, 19 IPOs are expected from the transportation sector. "Apart from these, the financial services sector is also expected to come up with 23 IPOs worth $3.8 billion in 2010."

"Plummeting oil prices slowed down overall economic activity in the MENA region in 2009, impeding the diversification strategies of many oil-dependent economies in the Middle East. Slower growth in public spending dented business activity, forcing many investors to pull money out of stock markets. Consequently, stock markets in the MENA region plunged, reducing investor interest in IPOs and forcing many companies to either postpone or cancel their IPOs."

"All this has been put behind as the IPO market braces up for a strong comeback in 2010," Dash concluded.

Strong global IPO market in Q1 sets tone for 2010

Global IPO activity in the first quarter of 2010 showed substantial improvement over Q1 2009 driven by an ongoing robust Asian market led by China and India.

Exhibiting strong growth trends, Chinese exchanges attracted 218 IPOs worth $55.3 billion during Q1 2010 as the recovery in global financial markets strengthened the domestic economy. "As global financial markets regain strength, many more listings are expected in the Chinese IPO market and the recent strong activity suggests continued strength going forward."

The newly announced IPO of Agricultural Bank of China Ltd., China's largest bank by customers, is expected to raise $20.1 billion with a provision to increase it by 15 per cent to $23.1 billion, which will make it the world's largest IPO.

Attracted by a reasonable valuation of the bank relative to its peers, a number of institutional investors and GCC sovereign wealth funds announced plans to subscribe to more than 15 per cent of the IPO, Al Masah Capital said.

Similarly, the Indian IPO markets revealed strong growth during the quarter with Indian bourses raising $14.1 billion through 149 IPOs compared to $1.2 billion (63 IPOs) in Q1 2009.

The Indian government has set out new rules for listing of companies on Indian stock Exchanges announcing that all listed companies are required to have a public float of at least 25 per cent. "This move by Indian government could prompt tens of billions of dollars in share sales and further crowd the pipeline for new issues in Indian IPO market. The government also said that listed companies with a free float of less than 25 per cent must increase it by a minimum of five per cent a year."

According to Prime database, an Indian capital markets information provider, the new rule is expected to force companies to raise as much as $60 billion by selling stakes over the next few years.

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© Press Release 2010