The 2012 IPO market performance in the GCC region, with total of nine IPOs raising $1.684 billion compared to the same number of IPOs in 2011 raising $789 million, increasing significantly by 113% in terms of offering value, according to a report.
“Q2 2012 proved to be the strongest in terms of IPO performance both in number and offering values with 4 IPOs raising a total of $1.104 billion, 77% higher than the total proceeds raised in Q4 of the year,” The PwC in its latest report said.
Saudi Arabia dominated the IPO market with 7 IPOs raising $1.420 billion thereby contributing 84% to the total value raised in the GCC during 2012. The other two listings were in Oman one each in the second and Q4 of 2012 raising $264 million in aggregate. The Tadawul also hosted the largest IPOs in 2012 was the Al Tayyar Travel Group which raised a total of $365 million, closely followed by Saudi Airline Catering Company which raised $354 million. Both of these issuances were over-subscribed and have performed strongly in the after-market.
Initial Public Offering (IPO) activity remained relatively stable in the six-nation Gulf Cooperation Council (GCC) with two IPOs raising $250 million in Q4 of 2012 compared to Q3 2012where one IPO raised $252 million.
Total proceeds raised from the two IPOs in Q4 2012 were 15% higher than the amount raised from the three IPOs in Q4 2011 of $212 million, showing a modest improvement compared to the previous year. The two IPOs during Q4 2012 included the Saudi based Dallah Healthcare Holding Company which raised $144 million and that of Alizz Islamic Bank raising $106 million in Oman.
The three UAE stock exchanges remained largely inactive during 2012 in terms of domestic IPO activity compared to the previous year which witnessed 3 IPOs. However, there were two cross-border offerings of two UAE based entities during 2012 with NMC Health listing on the London Stock Exchange raising $187 million and Amira Nature Foods listing on the New York Stock Exchange and raising $90 million.
“2012 continued to be a challenging year for the regional equity markets with valuations and pricing generally being depressed. Although IPO proceeds did increase during 2012, the relatively low number of IPOs demonstrated the continued suppressed demand for equity as an asset class,” Steven Drake Head of PwC’s Capital Markets in the Middle East region said.
“Looking forward to 2013, we would largely expect to see the regional exchanges track global trends and so until we see significant improvements in the more developed markets, we could perhaps expect to see low regional IPO volumes.
“The one possible exception to this would be Saudi Arabia where we have seen some positive gains on the Tadawul in the second half of 2012. This may well explain why we at PwC have seen an increase in IPO interest in the Kingdom. If valuations remain relatively robust going into 2013 then we would be more optimistic about IPO activity in the Kingdom since our sense is that there remains latent demand within the issuer community”.
The value of IPOs in Europe increased by more than seven-fold year on year in Q4 of 2012, making it the strongest performance since Q3 2011, which saw 121 IPOs raise $12.4 billion. Around 70 IPOs raised $10 billion in Q4 2012 compared with 78 IPOs raising $1.2 billion in Q4 2011. The quarter was dominated by the IPOs of Direct Line and Megafon in London and Talanx and Telefónica Deutschland in Germany which accounted for 57% of the proceeds raised in the quarter.
Looking at the year as a whole, 2012 proved a challenging year with 263 IPOs raising just $14.5 billion, compared with 430 IPOs raising $35.4 billion in the prior year, a 59% decline in value. London remained the dominant market in Europe in 2012 with 73 IPOs raising just $6.8 billion compared with 101 IPOs raising $18.8 billion in 2011, which was boosted by the jumbo IPO of Glencore which raised $9.2 billion. After a quiet summer, London finished the year strongly with 26 IPOs raising $5.2 billion in Q4 compared with 17 IPOs raising $1.1 billion in the same quarter of the prior year.
During 2012, the bond markets in the GCC fell behind 2011 as government issuances receded compared to the previous year. Within the GCC, the UAE continued to dominate the conventional bond market with large issuances on both the corporate and sovereign fronts during Q4 of 2012. The Abu Dhabi National Energy Co. (Taqa), issued a $2 billion corporate bond in two tranches in December 2012 maturing in 2018 and 2023 respectively. Another prominent UAE issuance was the government-owned International Petroleum Investment Company’s $2.9 billion sovereign bond, which was issued in three tranches. Among other GCC countries, the Central Bank of Kuwait remained active in Q4 of 2012 with total sovereign issuance of $3.8 billion having short-term tenors between 3 and 6 months.
The sukuk market ended the year with yet another strong quarter reflecting growing investor confidence in the asset class. Abu Dhabi Islamic Bank issued the first of its kind, $1 billion hybrid perpetual tier 1 sukuk in November 2012 carrying a coupon of 6.375%. The issue was 30 times oversubscribed underpinning strong investor demand. Qatar also remained active in Q4 with 5 year corporate sukuks issued by Qatar International Islamic Bank and Qatar Islamic Bank raising $700 million and $750 million, respectively. The year 2012 also witnessed the largest sukuk issuance by the Saudi Arabian General Aviation Company raising nearly $5 billion at the start of the year.
“The low profit rates achieved on Islamic instruments are highly attractive to issuers in the region as they tend to be a lower cost option to conventional debt. We expect this trend to continue into 2013, as confidence in debt markets on the back of early signs of stability in the euro-zone area which would augment the debt markets in the GCC,” Steven Drake, added.