04 August 2008
The initial public offerings (IPOs) in the UAE and Gulf countries are expected to have a steady flow in 2008, despite the stock markets passing through a bearish phase, analysts say.
They say that the strong pipeline of IPOs comes because many promoters are looking at unlocking the value of their investments.
"The trend in the market is fewer, but larger IPOs, which continue to be oversubscribed in most instances, which reflects the continued appetite for initial public offerings in the market, for now," one analyst said.
Imad Ghandour, Executive Director - Private Equity, Gulf Capital, says that 45 IPOs have assigned a manager and another 77 have announced the IPOs between the third quarter of 2008 and 2010. This will raise an estimated $19 billion (Dh69.79bn) in the GCC, with the number of IPOs during the 2008-2010 period likely to exceed 140, he adds.
He maintains that the flow of IPOs will continue in the UAE since the economy is doing very well.
"In the past, there were lot of IPOs, but now people are becoming selective and will not go for any IPO. They will go for IPOs that are well-placed," adds Ghandour.
With the Gulf economies doing well in terms of growth, the demand for IPOs will be there. "Since the interest rates are low, people are taking money from their banks to invest in the stock market," he adds.
According to Gulf Capital figures, the number of IPOs rose during recent years in GCC with 18 IPOs have closed during the first half of 2008 as compared to 22 during the first half of 2007.
Ghandour says the number of IPOs rose during recent years in GCC with 18 IPOs have closed during the first half of 2008 as compared to 22 during the first half of 2007.
"During 2007 and the first half of 2008, IPOs were sold, on average, at a discount to book value and to earnings relative to the GCC stock markets. Average IPO size increased by 108 per cent during the first half of 2008 relative to the first half of 2007," said Ghandour. Based on available data, average IPO size is estimated to increase by 15 per cent during 2008 relative to 2007, while the total amount raised from IPOs has increased by 70 per cent during the first half of 2008 relative to first half of 2007.
As Ghandour says previous IPOs were mainly concentrated in a limited number of sectors, but upcoming IPOs are relatively expanding to new sectors.
Saudi top
Saudi Arabia attracted 10 of the 18 IPOs in the GCC during the first half of 2008 for a total of $6.8bn.
The UAE attracted six IPOs for $685m; Qatar one IPO for $511m and Oman one IPO for $35m. Saudi Arabia's Al Inma Bank was the largest IPO in the Middle East in the second quarter of 2008 raising $2.8bn, which amounted to 60 per cent of the total funds raised.
Saudi Arabia's Rabigh Refining and Petrochemical Company and Mobile Telecommunications Company Saudi Arabia combined accounted for 75 per cent of the capital raised in the first quarter of 2008.
Other large IPOs in the region included Mohammad Al Mojil Group with $559.94m. The UAE's Depa United Group raised $432.3m and was followed by two Egyptian companies - Palm Hills Developments with $348.22m and Maridive and Oil Services with $272.93m.
Phil Gandier, Head of Transaction Advisory Services for Ernst & Young Middle East, said: "Although the drop in number and amount of capital raised in IPOs has been more severe in mature global markets, the region has shown some resilience as a result of liquidity created on the back of continuously increasing oil prices .
Gandier is optimistic about the flow of "IPOs for the rest of the year due to the large number of announced and to-be-announced IPOs. Companies that have either withdrawn or postponed their IPOs would revisit going public once they realise that market conditions in the Middle East are less fraught with the uncertainty that is persisting in other regions."
In a recent report, Ernst & Young Middle East said there were 52 IPOs during 2007 and in the first half of 2008, there have been 26. The total capital raised in the first half of 2008 amounted to $8.69bn compared to $4.83bn from 33 IPOs during the same period last year.
The Middle East markets raised $4.72bn from 13 IPOs in the second quarter of 2008 compared to $3.9bn in the same period in 2007. The capital raised was 20 per cent higher than amounts raised in the first quarter of 2008.
Faisal Hasan, Head of Research, Global Investment House, believes that the IPOs in the GCC region were having good investors' response despite the fact whether the secondary market are in bull or bear phase.
"The return in terms of first day and first month are very good and investors are looking for the IPO in order to diversify their holding and we believe that quality IPO will continue to evoke good subscription levels," said Hasan.
Commenting on the thriving Saudi Arabian IPO market, which has seen a steady stream of issues, Hasan said most of the IPO have come at SR10 and have given multiple times return so investors' have been thronging to the IPO.
"However, only the nationals are allowed to participate in the IPO. Given the size of Saudi economies, there is still room for more listed companies as it is still nowhere comparable to the other emerging market in terms of market depth. Still, the major portion of the economy, energy and family business are not much represented in the capital market but the situation is changing and the family businesses as well as government is looking at IPO route.
"There should be a regular flow of IPO as primary and secondary market complement each other and will provide investor with alternate investment avenues," said Hasan.
Huge demand
The GCC stock markets have increased by an average of 24 per cent during 2006-08, while IPOs launched during the period did better than the overall stock performance, appreciating by an average of 180 per cent, said a report by Gulf Capital .
Over-subscription levels during the first half of 2008 have increased as compared to first half of 2007 figures. The average demand per IPO stood at $ 2.7bn in first half of 2008 compared to $3.4bn by 2007-end and $15.3bn 2006-end. During 2007 and the first half of 2008, IPOs were sold, on average, at a discount to book value and to earnings relative to the GCC stock markets.
The initial public offerings (IPOs) in the UAE and Gulf countries are expected to have a steady flow in 2008, despite the stock markets passing through a bearish phase, analysts say.
They say that the strong pipeline of IPOs comes because many promoters are looking at unlocking the value of their investments.
"The trend in the market is fewer, but larger IPOs, which continue to be oversubscribed in most instances, which reflects the continued appetite for initial public offerings in the market, for now," one analyst said.
Imad Ghandour, Executive Director - Private Equity, Gulf Capital, says that 45 IPOs have assigned a manager and another 77 have announced the IPOs between the third quarter of 2008 and 2010. This will raise an estimated $19 billion (Dh69.79bn) in the GCC, with the number of IPOs during the 2008-2010 period likely to exceed 140, he adds.
He maintains that the flow of IPOs will continue in the UAE since the economy is doing very well.
"In the past, there were lot of IPOs, but now people are becoming selective and will not go for any IPO. They will go for IPOs that are well-placed," adds Ghandour.
With the Gulf economies doing well in terms of growth, the demand for IPOs will be there. "Since the interest rates are low, people are taking money from their banks to invest in the stock market," he adds.
According to Gulf Capital figures, the number of IPOs rose during recent years in GCC with 18 IPOs have closed during the first half of 2008 as compared to 22 during the first half of 2007.
Ghandour says the number of IPOs rose during recent years in GCC with 18 IPOs have closed during the first half of 2008 as compared to 22 during the first half of 2007.
"During 2007 and the first half of 2008, IPOs were sold, on average, at a discount to book value and to earnings relative to the GCC stock markets. Average IPO size increased by 108 per cent during the first half of 2008 relative to the first half of 2007," said Ghandour. Based on available data, average IPO size is estimated to increase by 15 per cent during 2008 relative to 2007, while the total amount raised from IPOs has increased by 70 per cent during the first half of 2008 relative to first half of 2007.
As Ghandour says previous IPOs were mainly concentrated in a limited number of sectors, but upcoming IPOs are relatively expanding to new sectors.
Saudi top
Saudi Arabia attracted 10 of the 18 IPOs in the GCC during the first half of 2008 for a total of $6.8bn.
The UAE attracted six IPOs for $685m; Qatar one IPO for $511m and Oman one IPO for $35m. Saudi Arabia's Al Inma Bank was the largest IPO in the Middle East in the second quarter of 2008 raising $2.8bn, which amounted to 60 per cent of the total funds raised.
Saudi Arabia's Rabigh Refining and Petrochemical Company and Mobile Telecommunications Company Saudi Arabia combined accounted for 75 per cent of the capital raised in the first quarter of 2008.
Other large IPOs in the region included Mohammad Al Mojil Group with $559.94m. The UAE's Depa United Group raised $432.3m and was followed by two Egyptian companies - Palm Hills Developments with $348.22m and Maridive and Oil Services with $272.93m.
Phil Gandier, Head of Transaction Advisory Services for Ernst & Young Middle East, said: "Although the drop in number and amount of capital raised in IPOs has been more severe in mature global markets, the region has shown some resilience as a result of liquidity created on the back of continuously increasing oil prices .
Gandier is optimistic about the flow of "IPOs for the rest of the year due to the large number of announced and to-be-announced IPOs. Companies that have either withdrawn or postponed their IPOs would revisit going public once they realise that market conditions in the Middle East are less fraught with the uncertainty that is persisting in other regions."
In a recent report, Ernst & Young Middle East said there were 52 IPOs during 2007 and in the first half of 2008, there have been 26. The total capital raised in the first half of 2008 amounted to $8.69bn compared to $4.83bn from 33 IPOs during the same period last year.
The Middle East markets raised $4.72bn from 13 IPOs in the second quarter of 2008 compared to $3.9bn in the same period in 2007. The capital raised was 20 per cent higher than amounts raised in the first quarter of 2008.
Faisal Hasan, Head of Research, Global Investment House, believes that the IPOs in the GCC region were having good investors' response despite the fact whether the secondary market are in bull or bear phase.
"The return in terms of first day and first month are very good and investors are looking for the IPO in order to diversify their holding and we believe that quality IPO will continue to evoke good subscription levels," said Hasan.
Commenting on the thriving Saudi Arabian IPO market, which has seen a steady stream of issues, Hasan said most of the IPO have come at SR10 and have given multiple times return so investors' have been thronging to the IPO.
"However, only the nationals are allowed to participate in the IPO. Given the size of Saudi economies, there is still room for more listed companies as it is still nowhere comparable to the other emerging market in terms of market depth. Still, the major portion of the economy, energy and family business are not much represented in the capital market but the situation is changing and the family businesses as well as government is looking at IPO route.
"There should be a regular flow of IPO as primary and secondary market complement each other and will provide investor with alternate investment avenues," said Hasan.
Huge demand
The GCC stock markets have increased by an average of 24 per cent during 2006-08, while IPOs launched during the period did better than the overall stock performance, appreciating by an average of 180 per cent, said a report by Gulf Capital .
Over-subscription levels during the first half of 2008 have increased as compared to first half of 2007 figures. The average demand per IPO stood at $ 2.7bn in first half of 2008 compared to $3.4bn by 2007-end and $15.3bn 2006-end. During 2007 and the first half of 2008, IPOs were sold, on average, at a discount to book value and to earnings relative to the GCC stock markets.
Emirates Business 24/7 2008
