Saudi stock exchange and REITs dominate Gulf IPO market in 2018

Overall deal values fell 33 percent last year, deal volumes dropped by 39 percent

  
Investors talk as they monitor screens displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh.

Investors talk as they monitor screens displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh.

REUTERS/Faisal Al Nasser

The Saudi stock exchange (Tadawul) emerged as the most active market for initial public offerings (IPO) in the GCC in 2018, with REITs accounting for the highest share of IPO proceeds in the region, a report by global consultancy PwC showed. 

The Saudi stock exchange (Tadawul) was the most active IPO market in the GCC region in terms of value, accounting for $1.2 billion, which was followed by the Qatari market at $800 million of IPO proceeds.

In 2018, a total of $2.2 billion was raised from 17 IPOs across the GCC region, down by 33 percent from a year earlier, in which $3.3 billion was generated from 28 IPOs in 2017.

The fourth quarter generated the highest quarterly share of IPO proceeds in the GCC in 2018.

“Overall, the IPO activity in Q4 has been stronger than all of the quarters to date in terms of value, generating $1.03 billion in Q4 compared to $ 1.17 billion in the first three quarters cumulatively,” Steve Drake, leader of PwC’s Middle East riskassurance and capital markets business, told Zawya in emailed comments.

“In terms of volume, more IPOs took place in Q4 (5 IPOs), compared to 3 IPOs in Q3. So overall, we see Q4 as a strong quarter which helped 2018 to end in a strong position,” he said.

“The IPO activity in Q4 was largely attributable to a single IPO (Qatar Aluminium or Qatalum) raising over $750 million out of $1.03 billion total proceeds raised during the quarter. Qatalum opened much above the IPO offer price and has remained above since,” he added.  

While the IPO of Qatar Aluminium Manufacturing Company at Qatar Stock Exchange, which raised $ 758 million, was the largest in the GCC region in 2018, four out of the top five GCC IPOs for the entire year were on the Saudi Stock Exchange. These were the $218 million IPO by Leejam Sports Company, the $174 million listing by Bonyan REIT, a $173 million listing by Sedco Capital REIT, and a $126 million IPO by Jadwa REIT Saudi Fund.

Thus, real estate dominated the IPO market last year, accounting for 47 percent of total IPO proceeds, followed by metals and mining, which generated 35 percent of the overall proceeds in 2018.

On whether the performance of the regional IPO market in the fourth quarter has beaten the expectations, Drake told Zawya that “it can argued that this performance was in line with expectation as the timing of Qatalum IPO was expected to be in Q4”.

Cautious outlook

Looking ahead for 2019, caution persists for the IPO market in the GCC, though government initiatives and cross-border IPO activity should mean a pick-up in the market, according to the report.

The U.S. Federal Government interest rate will impact the outlook for 2019, as any aggressive rate hikes will likely dampen the region’s debt capital markets activity, according to PwC’s Drake.

“Macro-economic and geopolitical uncertainty continues to weigh on the sentiment of investors. That said, we believe that capital markets opportunities are still present for companies that are well placed in terms of their sector, valuation and readiness to successfully go through an IPO,” he told Zawya.

“We see a number of companies looking at assessing the right time of going to market and planning to get ready when the time is right in terms of liquidity and valuation,” he added.

Drake noted that while there was no IPO activity in the United Arab Emirates last year, UAE-based companies raised capital through public offerings on global bourses. Shallow water driller Shelf Drilling raised more than $225 million via the Oslo Borse, and temporary buildings specialist RA International raised $25 million through an IPO on the London Stock Exchange’s junior market, AIM.

(Reporting by Nada Al Rifai; Editing by Michael Fahy)

(nada.rifai@refinitiv.com)

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© ZAWYA 2019

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