Less is more: MENA IPO market still slow, but value of deals increases in Q3

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An investor talks on his mobile phone, whilst working on his computer, on the trading floor of the Muscat Securities Market (MSM) in the Commercial Business District of Ruwi in Muscat, October 2, 2007. Image for illustrative purposes.

An investor talks on his mobile phone, whilst working on his computer, on the trading floor of the Muscat Securities Market (MSM) in the Commercial Business District of Ruwi in Muscat, October 2, 2007. Image for illustrative purposes.

REUTERS/Stringer

Only four stock market flotations took place across the Middle East and North Africa region during the third quarter of 2018, with just two of those taking place on Gulf markets, according to a new survey.

The MENA IPO Eye study by global accountancy firm EY revealed that the third quarter numbers bring the total number of IPOs to have taken place so far this year to 19, which is a 24 percent year-on-year decline (9M 2017: 25 IPOs).

Yet despite the lower number of IPOs so far this year, the total value of deals has increased. For the three-month period, $349.9 million was raised through IPOs, which is a 21.9 percent year-on-year increase. For the nine-month period, the value of deals increased by 43 percent to $1.86 billion.

There were no real estate investment trusts listed during the past quarter, despite there being nine REIT IPOs during the first six months of 2018 - eight of which took place on the Saudi stock market.

On Tuesday, Alkhabeer Capital also announced that it is planning to list a one billion Saudi riyal ($266.7 million) REIT on Tadawul.

The four IPOs to take place during the quarter were the $220.6 million IPO of Leejam Sports Company on the Saudi market, the $69.7 million flotation of Cairo for Investment & Real Estate Development Co on the Egyptian Exchange, the $52 million IPO of Dhofar Generating Company on the Muscat Securities Market and a $7.6 million listing of financial services firm Tunisie Valeurs on the Tunis stock exchange.

Gregory Hughes, MENA IPO leader for EY, said: “While IPO performance has been slow this year, regulatory updates and inclusions in global indices have been positive for the GCC IPO market," he said, pointing to the announcements by FTSE Russell and MSCI that Tadawul will be upgraded to emerging market status on their indices, and the agreement signed between MSCI and Tadawul to create a tradeable index by the end of this year that can be used by exchange-traded funds (ETFs).

“Looking to Oman, increased clarity in regulatory processes in the power and water sectors has created transparent competition in the sectors, encouraging developers and investors. With as many as six power generation and water desalination companies planning IPOs within three years, Oman’s IPO pipeline looks very healthy,” Hughes said.

The MENA trend was reflected globally, with the 302 listings around the world in the third quarter representing a 15 percent year-on-year decrease. However, unlike the MENA region, the amount raised globally by IPOs during the period was down 2 percent to $47.1 billion.

“Current market and investor confidence fluctuations are causing companies to delay or pull out of planned IPOs in Q4 2018 despite the recovery in oil prices,” the report said.

Further reading:

(Writing by Michael Fahy; Editing by Shane McGinley)

(michael.fahy@refinitiv.com)

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