GCC IPO and debt capital markets expand in Q2

The initial public offering (IPO) market in the Gulf Cooperation Council (GCC) in the second quarter of 2014 ended on a high with seven IPO listings, compared to two in Q1 2014, according to PricewaterhouseCoopers (PwC).

The quarter witnessed its first IPO in April with the UAE-based company Emirates REIT (CEIC) listing on Nasdaq Dubai and raising $201 million. Also in April, Marka, another UAE-based firm, listed on the Dubai Financial Market (DFM) raising $77m.

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 $73m, $220m and $168m, respectively.

In Oman, there were two power company listings, Al Suwadi Power Company and Al Batinah Power Co, raising $84m and $78m, respectively.

The total value of the seven IPOs in Q2 2014 was $902m, a slight decrease of 5 per cent compared to Q1 2014, although this is a considerable increase compared to the same quarter last year where a total of three IPOs raised $48m.

Looking at IPO performance for the first half of 2014, there were a total of nine IPOs raising $1.85 billion compared to a total of five IPOs raising $385m in H1 2013, an 80 per cent increase in volume and a 381 per cent 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, PwC said.

The outlook for IPOs in the GCC appears to be strong particularly looking towards the latter part of 2014 and into 2015, it believes.

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. "

GCC debt capital markets

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 sizable issuances from DP World Limited, issuing a $1b 10-year bond, and Etisalat issuing two $500m bonds in five- and 10-year tranches and two $1.6b bonds in seven- and 12-year tranches.

Other noteworthy issuances include Commercial Bank of Qatar issuing a $750m bond and the Bahrain-based Gulf International Bank issuing a $533m bond.

On the sovereign front, Central Bank of Kuwait issued a $35m treasury bond and nine tranches of $177m treasury bonds amounting to $1.6b. Also in Q2 2014, the Qatar Central Bank issued three government bonds amounting to $261m, $577m and $261m, respectively.

The sukuk market in the GCC saw corporate issuances from Saudi Electricity Global Sukuk Co.3 issuing a $1b and $1.5b sukuk maturing in 30 and 10 years, respectively. Also the UAE-based Emaar Malls Group issued a $750m sukuk maturing in 10 years.

On the sovereign front, the Central Bank of Bahrain issued three tranches of a $53m sukuk and three tranches of a $95m sukuk.

Steve Drake said: “DCM in the GCC has grown and continues to grow as demand for debt remains strong. In Q2 2014, we saw sizeable issuances, many of which were oversubscribed.

The debt market in the region is expected to continue to flourish due to factors such as government spending, development of new projects and macroeconomic conditions, to name a few. However, there still remains an element of risk or uncertainty in the region as a result of the political unrest in the Middle East, which can contribute to the risk premiums seen on regional issuances.”

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