Saudi leads IPO activity in the MENA region in Q2

Saudi Arabia led the IPO activity in the Middle East and North Africa (MENA) region, recording four out of nine IPOs in Q2 2018, according to a report by EY MENA.

The highest value IPO in the quarter was the Mefic REIT Fund IPO, listed on the Saudi Stock Exchange, which raised $237.5m.

The kingdom is seeing an increasing trend of Real Estate Investment Trusts (REITs) being listed on the exchange, which reflects investor interest in real estate assets in the country, EY said.

“The future inclusion of Saudi Arabia in the MSCI emerging markets index has drawn positive attention to the country, attracting investors from across the world,” said Phil Gandier, MENA Transactions leader at EY.

“The country’s Capital Market Authority has brought in a mandatory corporate governance code, considerably relaxed rules for foreign investors, and raised settlement rules for the domestic Tadawul stock market toward global standards, which have all led to a favourable transacting environment.”

Overall, the nine IPOs in the region raised $881.5m in Q2, posting a year-on-year increase in both IPO value and activity by 42.8 per cent and 12.5 per cent respectively.

Seven IPOs were recorded in the GCC (including three REIT listings), which raised $780.3m. That includes two cross border deals, listed in London and Oslo.

Apart from Saudi, Oman was the only other GCC country with IPO activity in Q2. The Muscat Securities Market recorded a single IPO by Arabia Falcon Insurance which raised $12.8m. Looking ahead, the Muscat bourse has an IPO pipeline of over 10 companies that are expected to complete their listings in the next two to three years.

In the wider MENA region, Egypt and Morocco recorded one deal each during the quarter, which raised $57.2m and $44m respectively.

Egypt is seeing an increasing number of both government-owned and private companies looking to tap the equity markets through IPO, EY said.

The Egyptian government’s IPO programme intends to list 23 public sector companies on the EGX, which is also in line with the 2018-2019 proposed budget aims of the government.

In terms of sectors, the report found that real estate raised the highest capital, with four REITs raising $553m, followed by oil and gas ($225m) and financial services ($57.2m).

Gregory Hughes, MENA IPO leader, EY said: “Although oil prices have increased, MENA countries are still feeling the impact of the significant drop in oil prices in recent years. IPO activity was relatively slow in H1 2018, but activity is expected to pick up in H2 2018 and beyond owing to the strong upcoming IPO pipeline.”

Globally, IPO activity and proceeds dipped in Q2 2018, with 325 IPOs raising $45bn, a decrease of 26 per cent and 19 per cent respectively, in comparison with Q2 2017.

“Reasonably strong equity markets, solid corporate earnings in many jurisdictions (albeit with some exceptions), and healthy pipelines across sectors and markets globally should drive an increase in listings in H2 2018 and beyond,” said Gregory.

“However, there is still significant uncertainty in several parts of Europe due to currency fluctuations in emerging markets and the ongoing tariff discussions globally driven by the US,” he added.