Sunday 05, November 2017 by Jessica Combes

Four IPOs in Q3 2017 across GCC

 

The third quarter of 2017 witnessed a total of four IPOs in the Gulf Cooperation Council (GCC), which was a slight increase compared to the previous quarter (Q2 2017: two).

 

However, proceeds raised from Q3 2017 IPOs amounting to $140 million were lower by $31 million compared to Q2 2017 ($171 million).

Compared to the same period last year, Q3 2017 experienced a recovery as there were no IPOs in Q3 2016.

On a year to date (YTD) basis, 2017 has shown a significant increase in the number of IPOs with 17 offerings compared to four over the same period in 2016. However, proceeds raised during YTD 2017 were 4 per cent lower compared to YTD 2016, despite the increased number of IPOs, which was mainly due to the low value of IPOs listed on the NOMU parallel market in 2017.

 “GCC IPO market activity this quarter gained momentum representing a general improvement in market conditions and investor confidence in the region. We are seeing more and more companies engaging in IPO readiness activities, preparing themselves and getting ready for the right window. We expect to see companies go to market during 2018,” said Steve Drake, Head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East.

Tadawul remained the dominant exchange in the GCC in terms of IPO proceeds, raising $110 million via two IPOs, comprising 79 per cent of total IPO proceeds in Q3 2017. The largest IPO during the quarter was by Zahrat Al Waha Trading raising USD 61.2 million.

Muscat securities Market (MSM) witnessed its first IPOs since June 2015, raising $30 million via two IPOs, comprising 21 per cent of total IPO proceeds in Q3 2017. 

With total proceeds of $47.1 billion via 329 IPOs, global IPO activity in Q3 2017 was 23 per cent higher in terms of proceeds and 37 per cent higher in terms of the number of IPOs, compared to Q3 2016. 

Low volatility coupled with high equity valuations created a favourable listing environment. The only significant source of risk emanated from the Korean peninsula. As political uncertainties in Europe have largely disappeared and tax reform is on the agenda in the US, the typically strong fourth quarter looks promising.

Despite a number of large IPOs in the second and third quarters, Snap remains the largest IPO of the year with proceeds of nearly $4 billion.

Another strong display by the GCC debt issuers, as investors’ appetite for sovereign issuances remained relatively high, with KSA and the Kingdom of Bahrain amongst key sovereign issuers.

KSA domestic Sukuk programme included three tranches: a SAR 16.525 billion five year tranche, a SAR 14.475 billion seven year tranche and a SAR 6.0 billion 10 year tranche. Further, the Kingdom of Bahrain raised a total of $3 billion, via a $2.150 billion international bond and a USD 850 international Sukuk.

DAE Funding LLC a wholly-owned subsidiary of Dubai Aerospace Enterprise (DAE) Ltd, successfully issued a total $2.3 billion bond, which were split into three tranches: $500 million yielding four per cent and maturing in 2020, $800 million yielding 4.5 per cent and maturing in 2022, and $1 billion yielding five per cent and maturing in 2024. 

“GCC governments continue to tap into both domestic and international debt markets, bolstering their budgets amid prolonged low oil prices. We are set for a busy end of the year, with both KSA and UAE governments expected to tap the debt market with their international bond sale of USD 12.5 billion and USD 10 billion, respectively,” said Drake.