IPO performance is still low as compared to other global markets where we are seeing strong demand, particularly in the US, according to PwC IPO report.
“The Omani based Sembcorp Salalah Power and Water Company, which offered 35% of its issued share capital amounting to $138 million (OMR 53 million), listed on the Muscat Stock Exchange,” IPO report added.
Sembcorp Salalah Power and Water Company’s was the only IPO in the GCC which was oversubscribed and showed strong demand from both regional and international investors. This is the first quarter since 2011 where we did not see any listings on Tadawul, the Saudi Stock Exchange.
One Initial Public Offering (IPO) in the third quarter of 2013 (Q3 2013) in the Gulf Cooperation Council (GCC) attests to the equity markets familiar dry summer period in the region. The quarter started with the Holy month of Ramadan in July, followed by the Eid holidays in August and it is only in September that begins to see some activity.
IPO performance in the same quarter of 2012 was similar with only one listing in the GCC. However, the offering size in Q3 2012 was 45% higher as compared to Q3 2013.
“IPO performance during this quarter was not surprising as we typically expect to see slower activity during Ramadan and the summer period, albeit IPO performance is still low as compared to other global markets where we are seeing strong demand, particularly in the US. We know from the clients we are working with that there is increased appetite for equity offerings both within and outside the region. We would expect to see the return of a number of offerings in both the UAE and KSA. The apparent slowdown in the KSA market is to a large degree related to the length of time issuers’ are taking with the Capital Market Authority (CMA) review process, which is currently increasingly the lead time of companies coming to market,” Steven Drake, Head of PwC’s Capital Markets Group in the Middle East region, said.
In Europe, 52 IPOs raised $4.1 billion in Q3 2013, over eight times the amount raised during the same period in 2012. A busy final quarter is expected, with the British Royal Mail’s debut in early October widely predicted to be the largest IPO in Europe this year. PwC is also seeing the return of companies who had postponed their IPOs in the past three years due to market conditions, with postponements in 2013 also falling to their lowest levels since the financial crisis.
“Furthermore, private equity backed companies have continued to dominate IPO activity in the quarter, with two of the top five European IPOs raising close to $1.4 billion. Year to date, private equity backed transactions have raised approximately half of all European IPO proceeds and PwC expects private equity backed issuers to continue to drive activity in the near future.
“London dominated the quarter with over half of total IPO proceeds raised or $2.3 billion, continuing the trend seen in Q1 and Q2 2013.
“In the debt market, sovereign bonds were prevalent this quarter with issuances from Bahrain, Qatar, Kuwait, Oman and Saudi Arabia. One of the most prominent sovereign issuances was the 10 year $1.5 billion bond issued by Bahrain. There was also strong demand from investors for corporate issuances this quarter which was demonstrated by the successful issuance of $1 billion of bond by the Saudi Arabian based company, Saudi Basic Industries Corporation (SABIC). Another corporate issuance this quarter was the United Arab Emirates based Ruwais Power Company, which completed $825 million bond issuance.
“Sukuk also contributed to the debt market this quarter with encouraging market conditions and positive response to issuances such as a $500 million sukuk issued by the Abu Dhabi based Al Hilal Bank and the $453 million perpetual senior sukuk issued by the Saudi Arabian based Almarai Company.
“Debt continues to be one of the main methods of raising public securities in the region as governments and companies continue to issue bonds and sukuk thanks to favourable market conditions and strong demand by investor. We see no reason for this trend declining given the continued demand for capital the region is experiencing,” Steve Drake said.