First signs of IPOs in the UAE since market recovery
The initial public offering ("IPO") market in the Gulf Cooperation Council ("GCC") in the second quarter ("Q2") of 2014 started off and ended on a high, with a total of seven IPOs, compared to two in Q1 2014. The quarter witnessed its first IPO in April with the UAE based company, Emirates REIT (CEIC) Limited, listing on NASDAQ Dubai Limited and raising USD 201 million. Also in April, Marka PJSC, a UAE based company, listed on the Dubai Financial Market (the "DFM") raising USD 77 million.
The Saudi Arabian Stock Exchange, Tadawul, witnessed three IPOs in Q2 2014 by Umm Al Qura Cement Company, Abdulmohsen AlHokair Group for Tourism and Development Co and Al Hammadi Company for Development and Investment raising USD 73 million, USD 220 million and USD 168 million, respectively. In Oman, there were two power company listings, Al Suwadi Power Company SAOG and Al Batinah Power Co SAOG, raising USD 84 million and 78 million, respectively.
The total value of the seven IPOs in Q2 2014 was USD 902 million, a slight decrease of 5% compared to Q1 2014, although this is a considerable increase compared to the same quarter last year where a total of three IPOs raised 48 million.
Looking at IPO performance for the first half ("H1") of 2014, there were a total of nine IPOs raising USD 1,855 million, compared to a total of five IPOs raising USD 385 million in H1 2013, an 80% increase in volume and 381% increase in value.
IPO performance and activity in H1 2014 and the positive responses from investors is a testament to the recovery of confidence in the market by both issuers and investors. The outlook for IPOs in the GCC appears to be strong particularly looking towards the latter part of 2014 and into 2015.
On the cross border front, the trend seems to continue with regional companies looking to list on international markets. However, Q2 2014 proved to be challenging as we saw several companies postponing their planned IPOs despite the recovery in markets.
Steve Drake, Head of PwC's Capital Markets in the Middle East region said:
"Equity capital markets performance in the region in the H1 2014 improved considerably with a total of nine listings, of which two were on the UAE stock exchanges which shows signs of recovery in that market. However the average offering value is still relatively modest albeit it has improved compared to the previous year. Looking ahead, the remainder of 2014 looks very strong and we would expect to see this continue into 2015. "
The European IPO market is enjoying buoyant conditions driven by rising market confidence and demand for new shares as investors seem relieved that the Eurozone crisis has dwindled. Both in terms of number of transactions and money raised European IPO activity for Q2 2014 (USD 32.7 billion from 106 IPOs) strongly outperformed Q2 2013 (USD 7.0 billion from 38 IPOs). Eleven of the quarter's twenty largest IPOs were executed in Europe. Although the IPO activity was spread across the continent, London Stock Exchange remained the leading European exchange with three out of the top ten European IPOs in both Q2 2014 and H1 2014 listing in London.
Overall, the UK IPO market saw 72 IPOs in H1 2014, raising a combined total of USD 22.7 billion. The Spanish IPO market continued its Q1 2014 uptick with flotations such as the real estate company Merlin Properties raising USD 1.7 billion in June. Other significant European IPOs include the European stock exchange operator Euronext raising USD 1.1 billion on Euronext Amsterdam, Euronext Brussels and Euronext Paris in June. Similar to the situation in the US, PE-backed IPOs made a robust contribution to European IPO activity in the first half of 2014, accounting for 35% of the total number of deals and 53% of the total amount of money raised.
The GCC debt capital markets in 2014 had an active second quarter, particularly in corporate bonds and sukuk, with large size deals that received a positive response from investors which was demonstrated by the tight yields achieved.
UAE corporate bond issuances were dominant this quarter, where we saw sizable issuances from DP World Limited, issuing a USD 1 billion 10 year bond, and Etisalat issuing two USD 500 million bonds in five and ten year tranches and two USD 1.6 billion bonds in seven and twelve year tranches. Other noteworthy issuances include Commercial Bank of Qatar issuing a USD 750 million bond and the Bahrain based, Gulf International Bank B.S.C, issuing a USD 533 million bond. On the sovereign front, Central Bank of Kuwait issued a USD 35 million treasury bond and nine tranches of USD 177 million treasury bonds amounting to USD 1.6 billion. Also in Q2 2014, the Qatar Central Bank issued three government bonds amounting to USD 261 million, USD 577 million and USD 261 million.
The sukuk market in the GCC saw corporate issuances from Saudi Electricity Global Sukuk Co.3 issuing a USD 1 billion and USD 1.5 billion sukuk maturing in 30 and 10 years, respectively. Also the UAE based Emaar Malls Group, issued a USD 750 million sukuk maturing in 10 years. On the sovereign front, the Central Bank of Bahrain issued three tranches of a USD 53 million sukuk and three tranches of a USD 95 million sukuk.
