GCC initial public offerings down 50pc
Manama, August 19, 2011
The number of initial public offerings (IPOs) in the GCC in the first half of the year fell by 50 per cent compared to the same period last year.
There have only been four deals this year so far, compared with eight in the first half of 2010.
Deal values also plummeted, down 57pc to $358 million as compared to the $830m raised during the same period last year.
PwC, a leading international professional services organisation, believes that the drop in the first half of 2011 in both the number and value of GCC IPOs is reflective of the continuing investor caution in light of current global economic uncertainties which has weighed down demand for new issues.
Unlike last year, where the IPO activity in the GCC region was dominated by Saudi Arabia's Tadawul, the UAE bourses were the most active in the region, accounting for three out of the four IPOs in the first half of 2011 and representing 74pc of the total capital raised.
Eshraq Properties Company, a real estate company in the UAE, raised S225m on the Abu Dhabi Stock Exchange and accounted for 63pc of the total amount raised in the GCC.
The fully-subscribed Eshraq Properties drew a number of local institutional investors as well as GCC investors.
Saudi Integrated Telecom Company's was the only IPO on Tadawul, raising $93m in May this year and this performance was in sharp contrast to the seven IPOs in the first half of 2010 which raised $685 million.
The two other IPOs in the UAE during the first half included the $18 million issue by Insurance House and a $22 million issue by Wataniya.
"The three IPOs in the UAE during the first half have brought a much awaited end to the drought of IPOs on the UAE exchanges," said PwC head of Middle East capital markets Steve Drake.
"The IPO by Eshraq Properties, a company in the recession-hit real estate sector, is a major confidence booster for both the investors as well as other companies looking to IPO in the near future.
"We have also seen continued interest in equity offerings by regional companies looking to list on international markets where there are perceived valuation benefits in certain sectors such as oil and gas.
"We believe that there is pent up demand for IPO capital in the market. However, realistic pricing and a strong growth story are crucial to draw investor interest and market demand," he added.
"Although the Saudi market has been uncharacteristically quiet in terms of IPOs in the first half of 2011, from what we are seeing, we anticipate a number of flotations coming to the Tadawul in the second half," he said.
"However, with the arrival of Ramadan and the summer holiday period, late September or early October is likely to be the earliest we see the next Saudi IPO," he added. - TradeArabia News Service