Three factors that will drive 2014 IPO activity in the Middle East
MENA IPO activity is expected to remain on firm footing in 2014 following a strong uptick in listings in the last quarter of 2013, to close the year with a total of seven deals raising around $726.2 million, EY MENA IPO Update: Q4 2013 said Wednesday. Better market fundamentals are expected to support a solid start to 2014 for new offerings according to an article in Saudi Gazette.
Phil Gandier, MENA Transaction Advisory Services Leader, EY, said: “The MENA IPO market is rebounding and recovering. The improving macro-economic backdrop driving up stock market valuations and rising investor confidence in key markets saw the IPO yearend on a high. Q4 has seen an increase in both volume and value compared to 2012, registering the highest value of IPOs since 2008.”
“Additionally, in our Capital Confidence Barometer report, 73 percent of executives in MENA see the local economy improving, with the highest percentage of confidence being in indicators such as economic growth (70 percent), employment growth (64 percent) and credit availability (59 percent). The confidence in these indicators bodes well for the region as economic growth and credit availability are key drivers for the IPO market,” Gandier added.
In Q4 2013, seven IPOs in MENA recorded a 133 percent increase in terms of volume and 114 percent in terms of value compared to Q4 2012. The largest IPO was from UAE with DAMAC Real Estate Development Ltd listing on the London stock exchange and raising US$348m in a global depository receipt (GDR) offering. Two other IPOs from the UAE were also in the UK, with two in Oman and one each in Saudi Arabia, Morocco and Tunisia.
“Although IPOs have still not reached pre-financial crisis levels, there has been a notable improvement in performance. The stage is set for this momentum to continue across the region and we expect the strong performance in the US and Europe to reflect in MENA,” Gandier further said.
In 2013, 23 MENA IPOs raised $3 billion, a 64 percent increase in terms of volume and 51 percent increase in terms of value compared to 2012. Tunisia led with nine IPOs, followed by five in Saudi Arabia, four in Oman, three in the UAE and one each in Iraq and Morocco.
“Family businesses are increasingly looking at IPOs as a means of monetizing wealth, raising capital and institutionalizing the business and the MCSI upgrading of Qatar and UAE to emerging markets may help to boost interest in the region,” he added.
Financial services was the leading sector in 2013 by deal volume with seven IPOs, followed by three in the power and utilities sector and two each in transport and the real estate sector.
The largest IPO during 2013 was Asiacell Communications in Iraq with a capital raise of $1.3 billion.
Three IPOs from the UAE (Al Noor Hospital, DAMAC Real Estate Development Ltd and Action Hotel Plc) raised $740.7 million from foreign listings on the London stock exchange in 2013.
“Some issuers have decided to go outside of MENA and it will be interesting to see how this trend of issuers going overseas will develop in the coming year. There is a strong pipeline of good quality businesses preparing to IPO over the next nine months. It usually takes companies 12 to 18 months to get ready to float and there is plenty of preparatory work under way. If the macroeconomic conditions in the region continue to improve, the next 18 months to two years will be quite busy,” Gandier noted.
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