UAE leads Gulf region IPO market in first half

DUBAI — The UAE takes lead in initial public offerings (IPO) in the Gulf region as it contributed 75 per cent of the total capital raised in the first half of 2011, according to a PricewaterhouseCoopers (PwC) report.

By Abdul Basit

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Published: Sat 20 Aug 2011, 12:01 AM

Last updated: Tue 7 Apr 2015, 3:47 AM

UAE IPO market shows signs of recovery against backdrop of declining GCC activity as the first half of 2011 for IPO saw another below par performance in the GCC with the number of floats reducing by 50 per cent to four compared to eight IPOs in the first half of last year.

Deal values also recorded a 57 per cent decline to $358 million as compared to the $830 million raised during the same period in 2010.

PwC believes that the drop in the first half of 2011 in both the number and value of GCC IPOs is reflective of the continuing investor caution in light of current global economic uncertainties, which has weighed down demand for new issues.

Unlike last year, where the IPO activity in the GCC region was dominated by Saudi Arabia’s Tadawul, the UAE bourses were the most active in the region accounting for three out of the four IPOs in the first half of 2011 and representing 74 per cent of the total capital raised.

Steve Drake, Head of PwC Capital Markets Middle East, said: “The three IPOs in the UAE during the first half have brought a much-awaited end to the drought of IPOs on the UAE exchanges. Most notably, the IPO by Eshraq Properties, a company in the recession-hit real estate sector, is a major confidence booster for both the investors as well as other companies looking to IPO in the near future.”

Eshraq Properties Company, a real estate company in the UAE, raised $225 million on the Abu Dhabi Stock Exchange and accounted for 63 per cent of the total amount raised in the GCC. The fully-subscribed Eshraq Properties drew a number of local institutional investors as well as GCC investors.

“We have also seen continued interest in equity offerings by regional companies looking to list on international markets where there are perceived valuation benefits in certain sectors such as oil and gas. We believe that there is pent up demand for IPO capital in the market however realistic pricing and a strong growth story are crucial to draw investor interest and market demand,” Drake said.

Saudi Integrated Telecom Company’s was the only IPO on Tadawul raising $93 million in May this year and this performance was in sharp contrast to the seven IPOs in the first half of 2010, which raised $685 million. The two other IPOs in the UAE during the first half included the $18 million issue by Insurance House and a $22 million issue by Wataniya.“Although the Saudi market has been uncharacteristically quiet in terms of IPOs in the first half of 2011, from what we are seeing, we anticipate a number of flotations coming to the Tadawul in the second half. However, with the arrival of the holy month of Ramadan and the summer holiday period, late September or early October is likely to be the earliest we see the next Saudi IPO,” he added.

GCC debt market

The debt market in the GCC continues to grow with 2011 first half-year results improving compared to the same period last year. However, a large proportion of the debt issues in the first half of 2011 were sovereign and government-related entities and amongst the most prominent were the bonds and sukuks issued by the Qatar Central Bank amounting to $13.7 billion in total.

Performance of corporate issuances on a stand-alone basis was mixed during the first half of this year as the political unrest in the GCC had a negative impact, especially during the March-April period. The majority of the corporate debt issuances during the first half of 2011 have targeted the Euro Market where lenders have shown continued appetite for GCC bonds. The tenures for such issuances ranged between three to 15 years and there were no short-term issuances.

Drake added: “The debt market is valued at about $1 trillion globally and Islamic finance is forecast to grow at 15 to 20 per cent a year. The Islamic finance market has provided lenders a prolific mode of diversifying their revenue streams from the conventional modes and we have seen a growing preference of this mode by the financial sector in the GCC region.”

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