The strong indicator of the high liquidity and the investors interest in alternate avenues has been the IPO of power company AES Barka (AESB). The RO11.09mn initial public offering (IPO) was oversubscribed 17 times mobilizing a whopping RO189mn. AESB is the largest independent power and water generation company in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Oman and received strong response from both retail as well as institutional investors. This will encourage other infrastructure companies to tap the primary markets and take advantage of the strong investors sentiments on the bourses.
However, the big story of the year so far has been the listing of Oman Telecommunication on MSM. The market saw huge investors’ interest in the secondary markets after Omantel’s IPO was oversubscribed by more than 3-times. The share price of Omantel jumped a whopping 87.5% to end of July 2005 to reach RO2.4. Omantel’s stock in its first month of trading was #2 in terms of volumes and value of shares traded on the exchange.
We believe that the future direction of the market is likely to be dictated by the performance of the corporate sector in the coming earnings season. Another round of good performance can act as a trigger for another rally in the market. Also the MSM has announced changes in the listing and trading regulations which will help in retaining and attracting new listings and investors. MSM has also been investing in the technology and has announced that it intends to implement a new trading system which is expected to be implemented by December 2005. We believe information technology will be a major driving force on the back of which GCC capital markets will revamp and integrate with other capital markets.
Table 1: MSM Historical Performance
|
Year |
Transactions('000) |
Volume (mn shares) |
Value (RO mn) |
Market Cap (RO mn) |
No. of Companies |
Index Gains |
|
2000 |
N/A |
146.1 |
215 |
1,948 |
113 |
N/A |
|
2001 |
N/A |
127.9 |
164 |
1,722 |
119 |
24.4% |
|
2002 |
92.9 |
191.8 |
231 |
1,984 |
127 |
26.2% |
|
2003 |
179.1 |
315.2 |
593 |
2,790 |
139 |
42.1% |
|
2004 |
255.0 |
333.2 |
759 |
3,587 |
166 |
23.8% |
|
1H2005 |
182.4 |
211.2 |
616 |
4,319 |
178 |
61.5% |
Source: MSM Statistics and Global Research
The Oman stock market continued its surge in 2005 as the MSM general index gained 61.5% in the first 6 months of the year. All the sectoral indices notched up handsome gains led by the banking sector which reported 71.96% gains during the first half. Industry sector too reported a strong growth of 52.87%. The services sector was up by 32.76% over 2004 end. The market capitalization of the MSM stood at RO4.3bn at June end, crossing the US$10bn-mark during the month of May.
Table 2: MSM Performance during 1H 2005
|
Index |
End Dec 2004 |
End June 2005 |
% Change |
|
Banking Sector |
4,520.64 |
7,818.99 |
71.96% |
|
Services Sector |
1,520.45 |
2,018.58 |
32.76% |
|
Industry Sector |
2,811.91 |
4,298.62 |
52.87% |
|
MSM General |
3,375.05 |
5,450.38 |
61.49% |
Source: MSM Statistics
The strong growth was accompanied with the surge in the trading volumes as the volumes of shares traded (annualized) swelled by 27% over the trading volume observed at 2004 end. Overall, about 211.2mn shares changed hands during the first 6 months of 2005. The value of shares traded (annualized) too increased by 62.3% over the 2004 end, totaling RO616mn till June-2005. During the month of June 2005, the aggregate market breadth was heavily tilted towards the advancers and broad-based buying was evident in the market as 60 stocks reported a monthly gain as compared to 31 decliners.
Table 3: Capital raising in 2004
|
Source |
No. of Issues |
Issue Size in RO mn |
|
IPO |
4 |
30.78 |
|
Rights Issue |
9 |
13.67 |
|
Private Placements |
4 |
3.14 |
|
Bonds |
7 |
261.30 |
|
Total |
45 |
339.99 |
Source: Central Bank of Oman
On the primary markets, the IPO of Dhofar Power Company was oversubscribed by nearly nine times as it mobilized RO87mn. The increase in the parallel market’s trading volume was mainly due to the listing of AES Barka stock on the exchange. AES Barka is the largest independent power and water generation company in Oman established on a BOO (build own and operate) basis. AES Barka hogged the limelight when it was listed on the MSM and on the first day of trading shot up to RO1.93 as compared to its IPO price of RO0.99 per share. However, the market was expecting this kind of buying frenzy as the issue was oversubscribed 17 times. The strong investors attention that AES Barka garnered is likely to spur other companies in the industry to tap the primary market.
Already, another big-shot in the utilities sector, Omantel, has announced its much-awaited IPO of 225mn shares (30% of share capital) at a price of RO1.280 per share – RO1.180 premium and 100 baiza nominal value- aggregating to RO288mn. The Omantel IPO was the biggest-ever offering in the history of Omani capital market
