Saudi Arabia drives MENA IPO activity in Q3 2017: EY

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DUBAI — The Middle East and North Africa (MENA) region witnessed five IPO deals in the third quarter of 2017, representing a 400% increase when compared to the single IPO recorded in Q3 2016. Announced MENA value, or capital raised, reached $236.7 million in Q3 2017, a 20% increase on Q3 2016.

MENA IPO activity was primarily driven by three IPOs on the Saudi Stock Exchange (main market) valued at a total of$206.8 million. The Musharaka REIT Fund, which raised $95.1 million and was the largest IPO by capital raised in Q3 2017. The second largest IPO of the quarter was Zahrat Al Waha for Trading, which raised $62 million, followed by Al Maather REIT Fund, valued at $49.7 million.

After a gap of two years, the Muscat Securities Market (MSM) in Oman witnessed two IPOs raised in Q3 2017. The IPO of Al Ahlia Insurance Company raised $19.5 million, while the IPO of Vision Insurance raised $10.4 million.

Gregory Hughes, EY MENA IPO Leader, said: “The MENA IPO market outlook is positive against the backdrop of increasing stability in oil prices, improving investor confidence in the global markets and a strong desire to raise funds through privatization, resulting in a large pipeline of companies potentially preparing to come to market. Based on the pipeline of IPOs, we expect to see a number of premium government or partially government owned assets being floated over the next two years, particularly in the energy-related sector.”

In the last year, GCC markets have witnessed an increase in activity and demand in the region’s relatively new real estate investment trust (REIT) market. Saudi Arabia opened its stock market to REIT funds in 2016 and has seen six REIT listings since. In Q3 2017, two REIT funds were listed on the Saudi Stock Exchange, collectively raising $144.8 million.

However, no new listings were recorded in the Saudi NOMU market during Q3 2017. This follows nine IPOs in H1 2017 after the launch of the exchange segment in February 2017. The NOMU index continued to decline during Q3 2017 and was down by 43% from its launch date to the end of September 2017.

Mayur Pau, EY MENA Financial Services IPO Leader, said: “Saudi Arabia continues to lead the way for IPO activity in the region, with an increasing trend of REITs being listed on the exchange underlining investor interest in real estate assets in the country.”

“Furthermore, many private equity backed and family groups continue to assess the IPO market and are working on readiness for attractive IPO opportunities. In particular, the UAE, Saudi Arabia, and Egypt have a strong pipeline of announced and rumored IPOs, with a strong backlog of IPOs potentially preparing to come to market in the last quarter of 2017 and early 2018.”

The third quarter of 2017 saw 330 IPOs globally, with total proceeds of $37.6 billion, driven by 10 deals valued at over one billion USD each. This pushed stock exchanges in Brazil, Singapore, Switzerland and India onto the list of the world’s top 10 stock exchanges by capital raised, behind Shanghai and Hong Kong. Asia-Pacific continues to dominate IPO activity both by number of deals and proceeds, accounting for 60% of IPOs and 42% of capital raised worldwide so far in 2017.

Global IPO volume in the first nine months of 2017 has already exceeded the full-year total for 2016, with 1,156 IPOs globally (up 59% on year-to-date 2016) and proceeds of $126.9 billion (up 55% on year-to-date 2016).

Global IPO activity for 2017 is on course to be the busiest year since 2007, with approximately 1,600 to 1,700 IPOs expected to raise between $190 billion and $200 billion. — SG


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