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MENA's IPO roller-coaster steadies

By Nadine Sharrouf of Zawya Recovery in the drought-hit IPO market in the Middle East and North Africa appears to be well under way, with capital raised in the first half of 2012 increasing by about 200% compared to the same period in 2011. The number of share issues remained constant at eight.

The regional IPO sector has had a roller-coaster time since the global financial crisis exploded. Capital raised decreased sharply from USD 1,203.56 million in 1H10 to USD 395.78 million in 1H11, only to recover to USD 1,190.74 million in 1H12. Although eight IPOs is still a far cry from the numbers witnessed in the first halves of 2007 and 2008 (42 and 39 issues, respectively), it presents a relatively stable outlook amidst the political turmoil in the region.

Source: IPO Quarterly Bulletin

Issuance in 2012 came from three main countries. Saudi Arabia witnessed five issues that raised USD 1,023.98 million, Tunisia had two raising USD 7.81 million and Oman witnessed the highly anticipated offering of the Shariah-compliant Bank Nizwa, which raised USD 158.96 million. Nizwa issued 600,000,000 new shares that were oversubscribed 11.35 times, and listed them on the Muscat Securities Market in June 2012.

Size Matters

The largest offering was that of Al Tayyar Travel Group managed by Sambacapital, which raised USD 364.75 million, followed by Saudi Airlines Catering Company' s USD 354.19 million IPO. Investor appetite returned, especially in the Bank Nizwa and Saudi IPOs, resulting in an average oversubscription of GCC IPOs by 5.43 times.

Though Saudi Arabian and Omani activity in the IPO sector made up for the absence of other Gulf countries, there is still a big question around when some of these countries, especially Bahrain, Qatar and the UAE, will return to the market. Abu Dhabi alone witnessed three IPOs last year.

Political instability and the small size of the Levant markets justifies the lack of activity in that part of the MENA region, while North Africa managed to stay in the game with the IPO and listing of Hexabyte Internet Group on the Tunis main exchange and Ateliers Mécanique du Sahel on the secondary exchange in 1H12. Egypt is expected to take some time to pick up and resume IPO activity while Morocco, which witnessed four IPOs in 2011 and the listing of Afric Industries in January this year, has yet to enter the market.

Sector View

The industrial manufacturing sector took the lead in terms of number of issues, with three IPOs that raised USD 295.54 million, followed by financial services with two IPOs raising USD 174.96 million. Leisure and tourism, transport and telecommunications witnessed one IPO each.

However, the leisure and tourism sector raised the maximum funds through Al Tayyar Travel's IPO, which was oversubscribed six times.
All companies that have issued an IPO this year have listed on their respective stock exchanges, with the exception of Saudi Airlines Catering. The listed stocks are currently trading at prices higher than the IPO price. Saudi takaful company Alinma Tokio Marine's stock price shows a return of around 600%, while the lowest return is that of Bank Nizwa, which opened with a relatively low price change of around 12% on the first day of listing. Other stock price changes have ranged between 14% and 120% as of June 30. (Source: IPO Quarterly Bulletin)

There is more to come in the second half of the year, with several companies having announced their intentions to go public. Some Saudi, Omani and Iraqi companies are currently undergoing preparations for their public offers expected to happen before the end of 2012.

Nadine Sharrouf is an IPO analyst at Zawya

© Zawya 2012

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