MENA IPO Eye Q4 2014

Transcription

1 MENA IPO Eye Q4 214

2 214 highlights 214 has been a good year for Middle East and North Africa (MENA) IPO markets, moving closer to the pre-crisis levels of 28, despite a backdrop of volatility. Mayur Pau MENA IPO Leader 214 was a watershed year for a number of reasons. We saw the largest MENA IPO with the National Commercial Bank (NCB) in Saudi Arabia, Emaar Malls activity on the Dubai Financial Market (DFM) and the return Despite the volatility in the markets, driven by dropping oil prices, the fundamentals in the MENA region are still strong and supported for 215. The outlook for 215 is positive and we expect that, once oil prices stabilize, companies will come to the MENA markets to IPO. For feedback, please mayur.pau@ae.ey.com. Inside 214 highlights 1 Key trends in outlook 3 Q Key trends impacting MENA IPOs 6 Q1 215 outlook 8 Key events to look out for 12 Contacts 12 Companies in the MENA region raised US$11.5 billion in 214 against US$3. billion in 213 as the MENA markets become increasingly more attractive to companies looking to IPO. IPO activity in 214 is almost comparable with the levels of capital raised in 28 (US$13.2 billion), after averaging only US$2.2 billion during Growing IPO activity in 214 was underpinned by positive market performance and sentiment, increasing investor appetite, government initiatives to redistribute wealth and higher valuations. MENA IPO activity (28 14) Capital raised (US$b) Source: Zawya Capital raised Number of IPOs US$8.5 billion increase in capital raised in MENA compared with 213 Capital raised in 214 was almost four times the capital raised in 213, while the number of IPOs increased by 1 to 27 companies in 214. The IPO of the NCB of Saudi Arabia during Q4 214 was the largest IPO in MENA, raising capital of US$6 billion. The second-largest IPO was in the UAE, with Emaar Malls Group raising US$1.6 billion in Q Company Domicile Sector Amount raised Exchange** (US$ million) NCB KSA*** 5,998.1 Saudi SE Emaar Mall Group UAE 1,579. Dubai FM Mesaieed Petrochemical Holding Company Qatar Oil and gas 95.3 Qatar SE Dubai Parks and Resorts PJSC UAE Leisure and tourism Dubai FM Amanat Holdings PJSC UAE Health care Dubai FM Sources: Zawya IPO Monitor; Mergermarket; ThomsonOne **Exchange SE stock exchange, ***KSA Kingdom of Saudi Arabia Volume (number of IPOs) 1 MENA IPO Eye Q4 214

3 Capital raised (US$b) Volume (number of IPOs) Key trends in 214 Saudi Arabia and the UAE were the most active IPO markets in 214 Saudi Arabia and the UAE had the highest number of IPOs in the MENA region during 214, driven by strong macroeconomic and announced regulatory reforms. Both markets have collectively raised proceeds of approximately US$1 billion in IPOs. IPOs by country (by capital raised and no. of IPOs) US$95m (1) US$669m (13) in MENA because of the authorities unfamiliarity with such a structure, due to the IPO not being directly backed by an asset or based on historical performance. The IPO of Marka, Dubai Parks and participate in these companies. companies in Q4 214 has prompted the UAE Securities and Commodities Authority to consider banning listings of start-up IPOs in saturated sectors, as reported by Bloomberg news. US$3,186m (7) US$6,726m (6) Q4 214 was the most active quarter for IPOs in MENA against a backdrop of falling oil prices Saudi Arabia A reduced number of outbound listings for MENA companies In 214, only two small outbound listings were executed (Gulf Marine Services and RAK Petroleum), which represented only 2.4% of the total capital raised for 214, highlighting the shift in the largest IPOs now being executed in MENA. Industrial manufacturing, real estate, and oil and gas were the most active sectors Industrial manufacturing was the most active in the food and beverages, oil and gas, and real estate sectors. Based on capital raised, the top three IPO sectors the IPO of the NCB, real estate (US$1.9 billion), and oil and gas (US$1.2 billion). IPOs by sector (by capital raised and no. of IPOs) US$423m (5) US$55m (2) US$915m (3) US$1,183m (3) UAE US$1,882m (3) Qatar US$534m (11) US$5,998m (1) Other countries Oil and gas Leisure and tourism Health care Industrial manufacturing Other sectors The MENA IPO market was highly active in the last quarter improvement in the capital raised during 214 was against a backdrop of high volatility in the second half of the year. MENA IPO activity (Q1 214 Q4 214) Oil price and regional indices movements (monthly, 214) Index prices 12, 1, 8, 6, 4, 2, Jan 214 Feb 214 Mar 214 Apr 214 May 214 Jun 214 Jul 214 Aug 214 Sep 214 Oct 214 OPEC basket price Abu Dhabi SE Dubai FM Nov 214 Dec 214 Kuwait SE Saudi SE Europe Brent Spot Price Source: EIA and Zawya Note: as on 18 December Q1 14 Q2 14 Q3 14 Q4 14 Falling oil prices increasing volatility Capital raised Number of IPOs Key regional stock indices declined toward the end of 214, wiping off much of the gains in the year. This was primarily driven by declining oil prices and geopolitical uncertainly in the region Oil prices (US$ per barrel) MENA IPO Eye Q

4 215 outlook Strong fundamentals to drive growth in 215 The outlook for 215 is positive, with several factors supporting strong fundamentals in the MENA region, including the following: Continuing investor appetite Gradual liberalization of key MENA markets through regulatory changes in certain key markets (particularly the UAE and Saudi Arabia) Continuing impact of MSCI s upgrade of Qatar and the UAE to emerging market status Government initiatives to share wealth with their population Social infrastructure investments Upcoming global events in the region These factors have combined as key facilitators to drive the market momentum seen during 214. The potential roadblocks to this momentum include global equity trends, geopolitical unrest and continued volatility from oil prices. Companies preparing for IPO and waiting for the right time to strike, once oil prices stabilize Although the IPO pipeline in the region is strong, with more than 6 announced IPOs, we expect some to be deferred until oil prices stabilize and volatility in the markets improve. A monthly survey by Reuters highlighted that crude oil prices to grow gradually over the next year. According to a recent Bloomberg survey, the price of Brent oil is expected to reach US$82 by the end of 215. Expected regulatory change freedom The announced regulatory changes in 214 are likely to be implemented in 215 to help drive the number of IPOs in the MENA region and aid investment. The Saudi Stock Exchange s recent announcements to open institutions and the regulatory reform announced in the UAE than the current 55% requirement (as reported in The National), among announcements in other MENA markets are all part of the recent reforms that will improve investor sentiment in the new year. On the basis of the pipeline of companies considering an IPO, we believe the industrial manufacturing, real estate and construction sectors will be the most active in 215 as market conditions drive the need for raising capital. in 215, given they are likely to be the hardest hit in times IPO funds as an attractive option for investments of either high demand or foreign ownership limits. A number of IPO funds have entered the MENA market in 214 because of improved valuations and as a result of a strong IPO pipeline. This included Al-Masah Capital Management Delta Insurance Company. In Q4 214, Saudi Arabia s Capital Markets Authority (CMA) approved one IPO fund each from Saudi Hollandi Capital and Oman-based Bank Muscat s subsidiary Muscat Capital. IPO funds may continue to be an attractive option to investors in 215 and become increasingly popular. 3 MENA IPO Eye Q4 214

5 Q4 214 Q4 214 saw a surge in IPO activity, which helps close a positive year MENA IPO activity picked up in Q4 214 after a traditionally quiet summer period, with eight IPOs across the region that collectively raised a total capital of US$7.4 billion. compared with Q Malls, which raised US$1.6 billion in Q The MENA IPO Eye is a quarterly publication covering the MENA IPO markets. Through the publication, we intend to highlight the latest developments, market trends and outlook of IPO activity in the region that are valuable insights for those companies For feedback, please mayur.pau@ae.ey.com. Company Domicile Sector Amount raised (US$m) Listing date Exchange NCB KSA 5, November 214 Saudi SE Dubai Parks and Resorts PJSC Amanat Holdings PJSC Electrical Industries Company Résidences Dar Saada SA UAE Leisure and tourism December 214 Dubai FM UAE Health care and education November 214 Dubai FM KSA Industrial manufacturing December 214 Saudi SE Morocco December 214 Casablanca SE Total 7,397.2 Sources: Zawya IPO Monitor, Mergermarket; ThomsonOne The largest listing in MENA s history and the second-largest globally in 214 The NCB, Saudi Arabia s biggest bank by asset size, is 8% owned by the Saudi Government and was oversubscribed by 23 times ahead of its IPO in November 214. As reported by Bloomberg, the main driver for the IPO was to redistribute wealth by issuing 15% of the 25% equity offered for the IPO to Saudi nationals, at US$45 per share. The share price jumped on listing and currently trades at US$56, indicating the desired value transfer was achieved. This IPO also represents activity in the sector for the year. It is anticipated that international institutional investors will be very attracted by the NCB shares once announced reforms come into force in 215. of Amanat and Dubai Parks and Resorts, following on from the IPO of Marka earlier in the year. These IPOs added new sectors to the UAE bourses. Both Amanat and Dubai Parks and Resorts were oversubscribed, as was Marka; however, both companies have lost value since their IPO (16.5% and 2% at year-end, respectively), while Marka s value remained stable. Volatility in the markets The recent fall in global oil prices has resulted in volatility in the MENA markets. Stock exchanges in Dubai, Kuwait, Saudi Arabia, Qatar and Bahrain have tumbled due to falling oil prices. Investors have become cautious, resulting in losses in Q4 214, despite other market fundamentals remaining largely unchanged. Therefore, amid all positive signs that indicate growth of the IPO market, there exists the need for caution and a sense of timing. MENA IPO Eye Q

6 MENA IPO activity (Q1 211 Q4 214) Capital raised (US$m) 8, 6, 4, 2, , , , ,14.8 1, ,426.3 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14* Volume (number of IPOs) Source: Zawya Capital raised (US$m) Volume Insights on the largest MENA IPO of 214: NCB IPO The NCB IPO forms part of a government plan to redistribute wealth among the population of the largest Gulf state amid regional political turmoil. US$6 billion (SAR22.5 billion) 25% stake 5 million shares (3 million shares allocated to Saudi individual investors and the remainder to the country s Public Pension Agency) SAR45 per share 19 October 214 to 2 November November 214 at SPT Investors LLC. The pricing of SAR45 per share came below expectations, as analysts expected it to be between SAR5 and Consultancy in Riyadh. to the market, which is a huge positive. We would generally see a re-rating of banking stocks going forward on the back of the interest seen in NCB s IPO. Saleem Khokhar, Head of Equities at NBAD Asset Management Group. Q4 214 saw a surge in IPO activity, which is traditionally a busy period for IPOs, raising a total of US$7.4 billion nine times higher The NCB was the largest listing in MENA s history and the second-largest globally in 214, raising US$6 billion capital. against a backdrop of volatility driven by declining oil prices. Three IPOs from the MENA region raised US$1.7 billion, representing an increase of 11 times in terms of value compared with Q The UAE leads the MENA region in terms of capital raised, followed by Tunisia and Bahrain. The largest issue was from the UAE s Emaar Malls Group, which raised US$6. billion in September MENA IPO Eye Q4 214

7 Key trends impacting MENA IPOs Macroeconomic fundamentals MENA GCC MENAP oil exporters f 214f 213 Oil prices (US$ per barrel) Dec 213 Jan 214 Feb 214 Mar 214 Apr 214 May 214 Jun 214 Jul 214 Aug 214 Sep 214 Oct 214 Nov 214 Dec 214 Europe Brent Spot Price OPEC basket price Government expenditure 1,4 1,2 1, f 215f 216f MENA government expenditure (US$b) GCC government expenditure (US$b) Source: IMF, October 214 According to IMF, the MENA region is expected to register a GDP growth of 3.8% by 215, compared with 2.6% in 214. the MENA economies by enabling the creation of more private sector opportunities. Equity market trends Source: OPEC and EIA As of 15 December 214, the Brent crude price has fallen as low as US$61.1 and the OPEC basket price has declined to US$57.9, compared with US$19.9 and US$15.9 respectively in 213. The fall in oil prices may have caused volatility in the key MENA stock markets; however, the oil price is expected to stabilize and not have a long-term impact on the MENA economies due to expansion reserves estimated at US$2.45 trillion (IMF estimates). Source: BMI Government expenditure in MENA is expected to grow by 2.1% to US$1,16 billion and, in the GCC, by 1.3% to US$577 billion in 215. Falling oil prices are not expected to curb the government expenditure in the short term, as the MENA regional governments if required, to meet domestic spending commitments. P/E DY 3.5% 2.6% 3.7% 5.2% 3.8% 3.6% 2.3% 3.8% 3.3% 8.1% 1.3% 1.7% 11.4% 9.6% 14.6% 14.1% 12.8% 12.5% 16.5% 13.3% % 5% 1% 15% 2% Abu Dhabi SE Bahrain SE Dubai FM Kuwait SE Muscat SM Qatar SE Saudi SE Egypt SE Casablanca SE Tunis SE Sources: Zawya Note: as on 21 December 214 Stock market Market cap (US$ billion) YTD return (%) Saudi SE % Qatar SE % Abu Dhabi SE % Kuwait SE % Dubai FM % Egypt SE % Bahrain SE % Casablanca SE % Muscat SM % Tunis SE % Source: Zawya Note: as on 18 December 214 of Kuwait, Muscat, Saudi Arabia and Dubai have been highly volatile, with much of the gains in the year being wiped out as of December 214. The Egyptian Stock Exchange had the highest year to date (YTD) returns (23%) compared with other stock markets. Moreover, the regional stock markets remain attractive, with an average price-to-earnings (P/E) ratio of 12.6% as of December 214. The average dividend yield (DY) of regional stock exchanges at the end of December 214 was 4%. MENA IPO Eye Q

8 Regional stock market performance YTD 214 (%) 6% 12% Market return (% change) 5% 4% 3% 2% 1% % 1% 2% 1% 8% 6% 4% 2% 3% 2 Jan 14 2 Feb 14 2 Mar 14 2 Apr 14 2 May 14 2 Jun 14 2 Jul 14 2 Aug 14 2 Sep 14 2 Oct 14 2 Nov 14 2 Dec 14 % Abu Dhabi SE Dubai FM Kuwait SE Qatar SE Saudi SE Source: Zawya MENA IPO activity improved in line with global IPO trend Global IPO activity witnessed a growth of 5% in capital raised, which amounted to US$265.5 billion in 214 compared with US$171.1 billion in 213. The trend in the MENA IPO activity remained robust in 214 and consistent with global IPO activity, as MENA witnessed a total of 27 IPOs (raising US$11.5 billion) compared with 26 IPOs (raising US$3.1 billion) in 213. Strong market fundamentals continued in Q4 214, as there were 336 global IPOs, raising close to US$69.3 billion. Global IPO activity (Q1 211 Q4 214*) 8 Capital raised (US$b) Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Capital raised (US$b) Volume (number of IPOs) Volume (no. of IPOs) Source: EY *Updated 4 December MENA IPO Eye Q4 214

9 Q1 215 outlook Companies riding out the volatility The MENA IPO market is expected to be cautious, given the current volatility levels. Regional companies are expected to watch the markets closely and wait for the oil price to settle down before launching new IPOs in Q1 and Q The decline in oil prices caused an emotional reaction from regional and international investors concerning the curtailment of future government and infrastructure spending. However, annual budget announcements of several governments in MENA indicate the oil price movements have not materially impacted short-term spending plans. Therefore, in the following quarters, we expect the markets to stabilize, with the fundamentals in place for a sustained period of steady IPO activity. Crude oil price forecast (US$ per barrel) US$ per barrel Jun 14 Sep 14 WTI spot average Dec 14 Mar 15 Jun 15 Sep 15 Brent spot average Dec 15 Firms preparing for an IPO in Q1 215 According to Zawya IPO Monitor, more than 6 companies from the MENA region have announced plans of going public in 215. The UAE is expected to have the highest number of IPOs. to be listed in Egypt, the UAE and Oman, which are Edita Food Industries, Massar Solutions and TruckOman. Other prominent names in the announced list include the Saudi Airlines Cargo Company, Oman Reinsurance company, Al-Sulaiman Holding and Arab Paper Manufacturing Company. Local markets continuing to attract large companies Moreover, companies in the MENA region are considering domestic IPOs rather than a foreign listing. DAMAC, which was listed in London Stock Exchange in 213, applied for its registration and subsequent listing on the DFM, which was approved by the UAE Securities and Commodities Authority on 23 December 214. This is a potential boost for the UAE stock market. Source: Energy Information Administration (EIA) Note: WTI West Texas Intermediate Falling oil prices will affect the MENA IPO markets in the short run, resulting in planned IPOs being deferred; however, we expect the markets will pick up as soon as the oil price stabilizes. IPO activity is expected to continue against a backdrop of unchanged government spending plans. Several IPOs are planned in Q1 215 and include companies from Egypt, the UAE and Oman. MENA IPO Eye Q

10 Date (quarter)* Issuer Size of offering (US$m) Sector Exchange Q December Cerealis 5.34 Food and beverages Tunis SE Q December Résidences Dar Saada SA Casablanca SE Q November Dubai Parks and Resorts PJSC Leisure and tourism DFM Q November Electrical Industries Company Industrial manufacturing Saudi SE Q November RAK Petroleum Public Company Limited 2.91 Oil and gas Oslo SE (Norway) Q November Amanat Holdings PJSC Health care DFM Q November NCB 5,998.8 Saudi SE Q October Al Maha Ceramics Company SAOC 2.62 Industrial manufacturing Muscat SM Q September Emaar Mall Group 1,579. DFM Q September Délice Holding Food and beverages Tunis SE Q September Zain Bahrain Telecommunications Bahrain SE Q June Abdul Mohsen Al Hokair Group Leisure and tourism Saudi SE Q June Al Hammadi Company for Development and Investment Health care Saudi SE Q May Arabian Cement Company Egypt Industrial manufacturing Egypt SE Q June Al Suwadi Power Company SAOG Power and utilities Muscat SM Q June Al Batinah Power Company SAOG Power and utilities Muscat SM Q April Marka PJSC Retail DFM Q May Umm Al-Qura Cement Company Industrial manufacturing Saudi SE Q May Lesieur Cristal S.A Food and beverages Casablanca SE Q May Tawasol Group Holding 12.4 Construction Tunis SE Q June Maghreb International Publicité 4.43 Services Tunis SE Q April Emirates REIT (CEIC) Ltd 175. Nasdaq Dubai Q March Gulf Marine Services 275. Oil and gas FTSE (London) Q March Sotipapier Industrial manufacturing Tunisia Q January Saudi Marketing Company Retail Saudi SE Q January Cellcom 5.91 Telecommunications Tunis SE Q January Mesaieed Petrochemical Holding Company Oil and gas Qatar SE Source: Zawya *Date of IPO closing 9 MENA IPO Eye Q4 214

11 Country Issuer Sector UAE Al Bayader International Industrial manufacturing Al Waseet International FZ LLC Media Arabtec Construction (LLC) Construction Aster DM Healthcare Health care Burooj Properties LLC Danube Building Materials FZCO Industrial manufacturing Emaar Hospitality Group LLC Leisure and tourism Gulf Capital PJSC Ithmar Capital Khidmah LLC Massar Solutions PJSC Mawarid Finance PJSC Shelf Drilling Oil and gas Tasweek Real Estate Development and Marketing Al Habtoor Group LLC* Construction Al Habtoor Motors LLC* Al Qudra Holding PJSC* Alpha Tours LLC* Leisure and tourism Daman Investments PSC* Future Pipe Industries Group Limited* Industrial manufacturing Metito Overseas Limited* Power and utilities Rotana Hotel Management Corporation PJSC* Leisure and tourism Saudi Arabia ACWA Power International Power and utilities Almana General Hospital Hofuf Health care Nas Holding Arab Paper Manufacturing Company Industrial manufacturing Dr Sulaiman Al Habib Medical Center Health care Murabaha Company Saudi Airlines Cargo Company Oil and gas Saudi Company for Hardware Industrial manufacturing Saudi Ground Services Company Saudi Stock Exchange (Tadawul) Taajeer Co. for machinery, real estate and vehicles trading Al Aqeeq Real Estate Development Company* Al Sawani Food and Industrial Supply Company* Retail Al-Ittefaq Steel Products Co.* Industrial manufacturing Qatar Barwa Bank QIC International LLC Al-Sulaiman Holding Conglomerates Aljasr Takaful Insurance Company Damaan Islamic Insurance Company Qatar Airways* Source: Zawya *Delayed IPO MENA IPO Eye Q4 214

12 Country Issuer Sector Kuwait Mezzan Holding Company Food and beverages Housing Finance Company KSCP Oman Sama Telecommunications Telecommunications Connect Arabia Telecommunications Al Khonji Real Estate & Development LLC (Aqar) Jindal Shadeed Iron & Steel Co. LLC Mining and metals Oman Reinsurance Company SAOC TruckOman LLC Alargan Towell Investment Company LLC Barr al Jissah Resort Company Muscat Electricity Distribution Company SAOC Power and utilities Oman Merchant Bank* Bahrain Istikhlaf Bank Khalifa bin Salman Port* Lebanon Middle East Airlines Patchi* Food and beverages Egypt Raya Contact Center Services Smart Villages Development And Management Company Wadi Group Agriculture Arabtec Egypt for Construction Construction Edita Food Industries Food and beverages Delta Cement Construction Etisalat Misr SAE Telecommunications Morocco Total-Maroc Oil and gas Source: Zawya *Delayed IPO 11 MENA IPO Eye Q4 214

13 Key events to look out for MENA IPO Retreat Dubai (by invitation only) Middle Eastern M&A and Private Equity Forum 214 (Ritz Carlton, DIFC Dubai) Euromoney Saudi Arabia Conference Opportunities and Capital Markets (Al Faisaliah Hotel, Riyadh, Saudi Arabia) TBC 5 May May 215 Strategies for companies going public or raising capital through IPOs will be discussed, with guidance from a dedicated panel of industry experts and professionals. Mergermarket s Middle Eastern M&A Forum will provide an in-depth review of the deal activity in the region and consider future investment trends for dealmakers in the Middle East over the next 12 months. The Euromoney Saudi Arabia Conference is the biggest and international investors. Contacts Mayur Pau mayur.pau@ae.ey.com Darrell Traynor darrell.traynor@ae.ey.com Shahzad Shaikh shahzad.shaikh@ae.ey.com MENA IPO Eye Q

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