DUBAI: With total proceeds raised in Q1 2014 were higher by 183% than in Q1 2013, the two IPOs in the GCC raised $953million, according to a PwC report.
Initial Public Offerings (IPO) in the Gulf Cooperation Council countries (GCC) in the first quarter (Q1) 2014 showed improvements in terms of offering value compared to Q1 2013, albeit IPO volumes remained relatively stable at two offerings.
The Qatar Exchange saw its first IPO since 2010 with the listing of Mesaieed Petrochemical Holding Company (MPHC) raising $881 million. The MPHC offering received a strong response from investors being five times oversubscribed. It is hoped that the MPHC listing will act as a catalyst for other companies considering to afloat on the Qatar Exchange. Saudi Marketing Company was the second IPO in the quarter, raising $72 million on the Tadawul Stock Exchange.
Continuing the trend of cross border offerings by regional companies listing on the London Stock Exchange (LSE), Gulf Marine Services, a United Arab Emirates based private equity backed company, listed on the Premium Market of the LSE in March raising $296 million.
“Although we have seen an increase in values in Q1 2014, we are still not seeing significant IPO activity on our regional markets. In Saudi Arabia there is a strong pipeline for example but companies are taking time getting through the CMA review process. In the UAE we see some appetite but a lot of that appetite is for cross border offerings rather than local exchange offerings,” Steve Drake, Head of PwC’s Capital Markets in the Middle East region, said.
The European IPO market is enjoying buoyant conditions driven by rising market confidence and suppressed demand for new shares as investors seem relieved that the Eurozone crisis has dwindled. Both in terms of number of transactions and money raised European IPO activity for Q1 2014 ($16.1 billion from 42 IPOs) strongly outperformed Q1 2013 ($5.7 billion from 18 IPOs). Nine of the quarter’s twenty largest IPOs around the globe were executed in Europe. Although the IPO activity was spread across the continent, the LSE remained the leading European exchange with five out of the top ten European IPOs listing in London.
Overall, the UK IPO market saw 26 IPOs of the total 42 IPOs in the period raising a combined total of $8.5 billion. The two largest European IPOs of the past quarter were international telecommunications group Altice (raising $2 billion on NYSE Euronext Amsterdam) and Danish outsourcing company ISS (raising $1.8 billion on NASDAQ OMX Copenhagen). The Spanish IPO market has also experienced an uptick with the flotations of real estate companies and REITs such as Hispania Activos Immobiliaros and Lar Espana Real Estate Socimi, raising $763 million and $547 million respectively. Similar to the situation in the US, PE-backed IPOs made a robust contribution to European IPO activity in the first quarter of 2014, accounting for 36% of the total number of deals and 46% of the total amount of money raised.
Turning to the public debt markets, during Q1 2014, Kuwait Projects Company (KIPCO) issued a $500 million bond which received a positive response from investors and was six times oversubscribed. In the United Arab Emirates this quarter, ADCB Finance Cayman Limited issued a $750 million bond in March. Furthermore, the Central Bank of Kuwait issued five government bonds this quarter each amounting to approximately $177 million and maturing in one year.
The GCC sukuk market was dominated by corporate issuances from Saudi Arabian based companies and sovereign issuances from the Qatar government. The Saudi Arabian National Commercial Bank issued a $1.333 billion sukuk in February making it the country’s largest issuance by a financial institution. Also in the Kingdom, Islamic Development Bank and Saudi Electricity Company issued a $1.5 billion and $1.2 billion sukuk, respectively. On the sovereign front, Qatar Central Bank was a key player issuing two sukuk in January in the amount of $1.921 billion and $1.098 billion.
“Public debt issuances continued to be strong in Q1 2014. The challenge we will see going forward is whether issuances will be sustained at similar levels given the apparent availability of conventional bank debt in the regional markets,” Steve Drake, said.