MENA IPOs see year-end surge in 2017

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.

Singapore IPO activity in 2017 to surpass 2016

Singapore’s initial public offerings (IPOs) have raised US$329 million in 1H17 according to figures* by PwC Singapore, published today. The volume of IPO funds raised by the end of 2017 is likely to surpass 2016 levels with professional services leading the way as the sector with the most funds raised.

Two professional services IPOs – HRnetGroup and Shopper360 – have raised a total of US$134 million, ahead of the US$26 million raised in 2016.

Singapore Exchange’s (SGX) traditional strength, real estate industrial trusts (REITs) and business trusts accounted for 33% of Singapore’s IPO proceeds. The expected listing of NetLink Trust of up to US$1.6 billion will likely bring the sector up and build momentum for the rest of 2017, PwC said.

Tham Tuck Seng, Capital Markets Leader at PwC Singapore, said: “Singapore’s 1H17 numbers suggest that, apart from REITs and business trusts, niche sectors in the consumer space and professional services will be the next big growth opportunity for the local exchange. As SGX bolsters efforts in supporting technology startups, we can also expect to see more issuances from technology-driven activities.”

Follow-on (FO) performance in Singapore for 1H17 continues to be dominated by REITs and business trusts, accounting for 82% of total FO funds raised. In today’s rising interest rate environment, the equity market has become a vital fundraising platform to reduce interest costs. For REITs and business trusts, eight out of 10 are deploying the FO funds raised to acquire properties, with two using the funds to repay loans and borrowings.

Rising sectors such as consumer and professional services will continue the uptrend with Singapore’s position as one of the main business and financial services centres in the region. Following the signings of a series of memorandums of understanding with key players in the technology and startup ecosystem, such as A*Star’s EPTL, the Info-communications Media Development Authority of Singapore (IMDA) and PwC’s Venture Hub, PwC says technology and medical technology will also boost this growth.

Healthcare is one of the more well-developed sectors in Singapore with one of the world’s largest healthcare groups, IHH Healthcare, listed in the country. Singapore’s strong reputation as a medical centre of excellence in the region and the attractive market trading valuation for this sector (which sees the price-earnings ratio hovering in the range of 30 to 40 times) make it more attractive for healthcare players to list here. In addition to this, Singapore is expected to remain the choice listing destination for REITs and business trusts with notable interest from Chinese-based real estate players.

With the public consultation for dual class shares ending earlier this year, Singapore could become a more attractive location for listing in Asia. But with the Hong Kong Stock Exchange (HKEx) looking to introduce a third board with dual class shares, this has become a race to see which bourse is faster to the market, PwC notes.

SGX is a choice listing destination for Asian businesses and a springboard for international businesses to access the wider Asian region, PwC said. As markets in the region become more sophisticated, competition will likely get more intense, the company predicted.

Tham concludes: “For Singapore to remain ahead of the curve, we must continue to maintain our existing strengths (e.g. REITs and business trusts) and capitalise on new opportunities (e.g. the rise of new technologies). If we continue in this direction, we are confident Singapore will continue to be relevant for investors and market players in search of future growth.

“With Singapore’s pro-business environment and strong fundamentals – such as transparent regulatory regime, international exchange, and relatively quick time to market – Singapore remains a premier location for capital fundraising.”

*This study was conducted between 1 January and 30 June 2017 for IPOs, and between 1 January and 15 June 2017 for FOs, based on their first trading date. All market data is sourced from the stock markets themselves and has not been independently verified by PricewaterhouseCoopers.

posted from Bloggeroid

Frost & Sullivan sees demand for independent analyses supporting IPOs

Frost & Sullivan is expecting strong growth in the number of initial public offerings (IPOs) on the Australian Stock Exchange (ASX) in 2017. The number of proposed listings on the ASX for 2017 looks strong with close to 45 already in the pipeline to date, the company has noted.

Frost & Sullivan also said that IPO listings in 2016 on the ASX finished the year on par with 2015. Information technology and financial technology (fintech) listings represented almost 25% of the total IPO market. 

Frost & Sullivan contributed to a number of those IPOs in 2016 with independent market reports (IMRs), which detail market size, forecasts, growth, market drivers and trends pertaining to the industry that the company seeking to offer an IPO operates in. An IMR is typically inserted into the prospectus or can be used as a standalone document. 

Frost & Sullivan has produced over 40 IMRs for ASX-based IPOs over the last five years, said Andre Clarke, MD, ANZ at Frost & Sullivan. "Frost & Sullivan has produced a number of IMRs as companies and their lead managers are becoming more aware of the importance of independent market analysis in an increasingly competitive and regulated Australian IPO market," says Clarke.

"Potential investors are looking to understand the growth drivers in an investee's business, and seek confirmation and assurance that the investee is operating in an attractive and growing market."

Frost & Sullivan anticipates a continued need for prospectuses to include more accurate, up to date market data, and has strengthened its IMR team in Australia to cater to the expected wave of IPOs this year. The team will be led by Ivan Fernandez, Industry Director, ANZ at Frost & Sullivan with continued support from Mark Dougan, who authored most of the IMRs that Frost & Sullivan has already produced.

"Ivan's 15 years of experience at Frost & Sullivan in Australia working with many clients across a range of industries makes him the perfect person to lead this team. Ivan has a unique understanding of what market information is required in a prospectus to maximise funding for each IPO," added Mr. Clarke.

Frost & Sullivan has contributed to over 100 IPOs on the SGX, Bursa Malaysia, and the HKEX (Hong Kong Exchange). IPOs that Frost & Sullivan has successfully supported on the ASX include dried food supplier Murray River Organics, services conglomerate Spotless, and Crowd Mobile, which makes mobile products.