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Gulf IPO market slows in first half, Saudi dominates

Saudi companies dominated the Gulf's dull IPO market which saw drop in value and slight increase in volume during the first half of this year.

Companies in the Gulf raised $829.65 million (Dh3 billion) from IPOs during in the first half of 2010 as compared to $1.2bn issues a year earlier, a decrease of 31 per cent.

A total eight companies went public issues in the first half of 2010 against seven for the same period last year.

The IPO activity during the first half was below 2009 levels. In 2009, the combined value of GCC IPOs was $2bn, up from $1.7bn in 2008.

Saudi Arabia with 11 issues and Qatar with one were the only active markets last year.

NCB Capital, a subsidiary of National Commercial Bank of Saudi Arabia, said in a study that Saudi Arabia and Qatar were the only two countries to see IPOs in the first half with seven of them coming from the Kingdom with total offerings of $684.4 million (Dh2.5 billion).

The real estate sector dominated the issuances of $416.2m while financial services accounted for $101.3m during the first half.

The Knowledge Economic City IPO in Saudi Arabia, worth $272m, has been the largest issuance so far in 2010.

In reflection of the market uncertainty, however, Saudi Arabia's Al Tayyar Travel

Group cancelled an initial public offering of $320m in February after a book building process failed to attract enough demand.

Going forward, NCB Capital said the Gulf IPO pipeline looks healthy.

As the regional governments continue with their diversification efforts, sectors such as telecommunication, transport and industry will likely see renewed issuance.

In its maiden offering, Al Jouf Company of Saudi Arabia raised $173.3m in July to fund its expansion plans.

For the rest of the year, 79 IPOs have been announced so far, 39 of them in Saudi Arabia and 20 in the UAE.

The largest pipeline issuance announced is that of Emirates Post of UAE which is set to launch a $272.3m IPO.

Large issuances are also expected from Naseej in Bahrain ($265.2m) and Damac for Commerce and Services, UAE ($245m).

Bond, sukuk market
NCB Capital said sovereign and non-sovereign companies raised $12 billion (Dh44 billion) through conventional and Islamic bond (sukuk) issuances in the Gulf region during the first half of 2010, as investors were encouraged by debt restructuring efforts and continued government issuances.

The sovereign sukuk (Islamic bond) experienced a particular turnaround from the first few months of the year as the Bahraini and Qatari governments tapped the debt market, taking the total value of sukuk offerings in the Gulf to $4.1 billion. Companies raised $7.9bn through conventional bonds during the first half of 2010.

NCB Capital, Saudi Arabia's investment bank, said the near to medium term outlook for the Gulf debt markets is promising thanks to a large project pipeline and active government spending.

NCB Capital said the region's governments are coming forward to offer long-term funding to companies through special credit institutions.

By Waheed Abbas

© Emirates 24|7 2010