UAE. The Gulf Cooperation Council (“GCC”) region experienced a slow start to the year with two Initial Public Offerings (“IPOs”) in Q1 2013, a pattern similar to the previous quarter which saw the same number of listings.
Although IPO volumes remained flat, total offering value increased more than three times to USD 377 million in Q1 2013 compared to total proceeds of USD 78 million raised in the same period last year. In comparison with Q4 2012 total offering value increased by 35% from USD 250 million.
Saudi Arabia continued to be the only IPO active market in the region, hosting both the offerings in Q1 2013. The two IPOs comprised the Northern Region Cement Company which raised USD 240 million and National Medical Care Company which raised USD 97 million.
Both the IPOs were oversubscribed and performed well in the after-market recording substantial gains on their debut on the Saudi bourse. The response from investors would seem to indicate a more positive market sentiment which hopefully should help to reinvigorate demand for IPO activity in the region.
Steve Drake, Head of PwC’s Capital Markets business in the Middle East region said: “With the exception of Saudi Arabia, IPO activity on regional stock exchanges in the first quarter continues to be subdued. We continue to see regional interest for equity rising but this interest is not yet manifesting itself into fresh equity being raised on the regional markets. In part this is due to certain regional markets remaining depressed and in others the regulatory process taking longer for companies coming to market. We are hopeful that 2013 will see an increase in activity over levels seen in recent years but it is unlikely to reach levels we saw pre-crisis in 2007 and 2008.”
In Europe, a surge in floats of private equity-backed companies during March 2013 may be the first signs of a recovery in the European IPO markets. The European IPO activity for the quarter rose by 40% from USD 2.9 billion to USD 4.1 billion.
This increase was driven by LEG Immobilien raising USD 1.5 billion on the Deutsche Börse being the largest IPO of the year so far and a number of floats of domestic and PE-backed companies in London. Additionally, aftermarket performance from the top IPOs has also been positive, with the majority of the top IPOs either improving on or holding the offer price after IPO.
The GCC bond market delivered healthy returns during Q1 2013, with positive performances across the major asset classes. Kuwait dominated the sovereign bond market, with the Kuwaiti Central Bank issuing USD 5.6 billion of bonds comprising treasury bills and long-term government bonds.
In Q1 2013, corporate bond issuances were largely concentrated in the banking sector with UAE based Abu Dhabi Commercial Bank and Emirates National Bank of Dubai raising USD 1.5 billion and USD 750 million, respectively. Other notable issuances included Ooredoo (previously known as Qatar Telecom) and Emirates Airline which raised USD 1 billion and USD 750 million during the first quarter.
The sukuk market in the GCC continued the upward trajectory in Q1 2013, reinforcing growing demand for Islamic debt instruments in the region. The growth was primarily driven by the UAE, which saw some big-ticket corporate sukuk issuances during this quarter with the likes of DEWA, Emirates Airlines and Dubai Islamic Bank, each issuing sukuks worth USD 1 billion.
The hybrid perpetual sukuk issuance by Dubai Islamic Bank was similar in structure to that issued by Abu Dhabi Islamic Bank at the end of last year, indicating the growing popularity of raising Tier 1 debt capital through public sale in the GCC. Sovereign sukuk issuances were led by the UAE in the first quarter, the most prominent being the Government of Dubai 10 year USD 750 million sukuk issued in January 2013.
Steve Drake said: “The debt markets in the GCC grew in line with their historical trend backed by strong market appetite and sustained funding needs. The Saudi debt market was largely sedated during the first quarter of this year, however, this is expected to change with a number of issuances mainly in the project finance/ construction sector currently in the pipeline.”
About Capital Markets Watch GCC
Capital Markets Watch GCC surveys conventional bond and Islamic issuance and new primary market equity IPOs on GCC’s principal stock markets and market segments (including exchanges in Kingdom of Saudi Arabia, Kingdom of Bahrain, Kuwait, Sultanate of Oman, Qatar and the United Arab Emirates) on a quarterly basis. This survey was conducted between 20 March 2013 and 31 March 2013 and captures the relevant data based on their transaction date.
Capital Markets Watch GCC is prepared by PwC Middle East (www.pwc.com/middle-east). All market data is sourced from publically available information and has not been independently verified by PwC.
About IPO Watch Europe
IPO Watch Europe surveys all new primary market equity IPOs on Europe’s principal stock markets and market segments (including exchanges in Austria, Belgium, Denmark, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK) on a quarterly basis. Movements between markets on the same exchange and greenshoe offerings are excluded.
IPO Watch Europe is prepared by PricewaterhouseCoopers LLP (www.pwc.com/uk) a limited liability partnership incorporated in England. PricewaterhouseCoopers LLP is a member firm of PricewaterhouseCoopers International Limited.
All market data is sourced from the stock markets themselves and has not been independently verified by PricewaterhouseCoopers LLP.
IPO Watch Europe Surveys and annual reviews are available at: http://www.pwc.co.uk/eng/publications/IPO_Watch_Europe_previous_editions.html
About the PwCs’ Capital Markets and Accounting Advisory Services Team in the Middle East
The Capital Markets and Accounting Advisory Services Team in the Middle East is part of the PwC’s global network of capital markets specialists who provide a broad range of advisory services to companies and investment banks in connection with capital market transactions. These include preparations for becoming a public company, selecting the right market and advisory team, assisting with reviewing accounting policies and GAAP conversion projects, advising on regulatory issues and undertaking financial and business due diligence investigations.
PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services.
For more information, please visit www.pwc.com.
Established in the Middle East for 40 years, PwC has firms in Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and the United Arab Emirates, with around 2,700 people.
For more information, please visit www.pwc.com/middle-east