15 March 2018

MENA IPOs see year-end surge in 2017

Source: EY. MENA IPO activity from Q116 to Q417.
Source: EY. MENA IPO activity from Q116 to Q417.

-  MENA IPO activity witnessed a 60% surge with eight deals in Q417, raising the highest value since 2014

-  UAE leads the MENA IPO value with US$2.2 billion in Q417

-  More regional energy companies to go public in 2018 and beyond

In the fourth quarter of 2017, MENA IPO activity witnessed eight deals, representing a 60% surge in volume over the same period in 2016. The MENA IPO value, or capital raised, amounted to US$2.95 billion in Q417, over 10 times the capital raised last year and the highest since 2014, said EY.

The UAE led the MENA IPO market in value, having raised a cumulative of US$2.2 billion in capital, primarily contributed by the Emaar Development IPO (US$1.3 billion), which has been the biggest IPO in the region since 2014.

The UAE also saw another successful issuance in the form of the ADNOC IPO which raised a capital amounting to US$850.9 million.

In Oman, the Muscat Securities Market recorded the highest number of listings with three IPO deals during Q417, raising a combined capital of US$8.9 million.

The MENA IPO activity is expected to gain momentum in 2018 bolstered by economic reforms and privatisation drive of countries such as KSA. This, coupled with improved oil prices, favourable government initiatives and strong investor appetite, is likely to spur more listings in the MENA, especially from regional government-entities.

Gregory Hughes, MENA IPO Leader, EY says: “The IPO activity is poised for further growth in 2018, especially with government and quasi-government owned assets preparing to go public in Kuwait, Egypt, KSA and the UAE. The IPO activity in the region is likely to see a mix of local and international floatings. In addition, family-owned, owner managed, and private equity-backed businesses are also signalling their intention to go to the market during 2018; this again could include a combination of local and international offerings of different sizes.”

KSA remains a bright spot in the region. The IPO market in the country looks buoyant with major regulatory reforms underway. Public listings of Saudi Aramco, Saudi Exchange, and other large government-related entities are expected soon.

Tadawul - the KSA stock exchange - is also on its course to join MSCI’s Emerging Market Index and has been swift in improving the regulatory environment and allowing foreign investments to be in line with global standards.

In the last quarter of 2017, Tadawul raised an announced value of US$110 million, while KSA's parallel market, NOMU, saw a decrease by 48% in 2017 with no IPOs in Q317 or Q417. However, effective from 1 January 2018, the Saudi Capital Market Authority (CMA) has allowed direct investments by non-resident foreign investors on NOMU.

Mayur Pau, MENA Financial Services IPO Leader, EY, says: “The CMA’s recent updates could encourage more small and mid-cap companies to go public in 2018, leading to a rebound in IPO listings on NOMU alone.

"The ADNOC IPO is one of the most successful regional issuances in recent times and it is likely to pave the way for more public listings from the MENA energy sector.”

Pau also noted that the IPO activity pipeline for the UAE and Kuwait look promising with major government-owned firms announcing their plans to go public within the next two years.

Collectively, the GCC markets witnessed six IPOs deals in Q417, recording a volume increase of 200% from the same period last year, while the deal value rose by over 10 times the capital raised in the previous year, reaching US$2.4 billion in Q417. The real estate sector raised the highest capital with US$1.3 billion, closely followed by the energy sector with US$850.9 million. The real estate investment trust (REIT) fund came third with capital of US$110 million raised.

Activity in the global IPO market surged in 2017 with the listing of 1,624 deals, raising an aggregate capital of US$188.8 billion. EY said this is a significant growth trajectory in the number of deals listed (up 49%) and capital raised (up 40%), in comparison to 2016. The numbers also make 2017 the most active year for IPOs since 2007 and the global IPO market is projected to grow even further in 2018.

“With a large number of companies already gearing to go public in the next couple of years and that one of the world’s largest IPO may come from the MENA itself, the outlook for regional IPO activity remains robust,” concludes Hughes.