GCC Capital Markets Watch Q 018 USD 8m raised from IPOs in Q 018 across KSA, Kuwait and Oman (Q 018: USD 6m). IPOs in Q 018 in GCC, across a wide range of sectors. USD.bn of sovereign bonds issued by the Kingdom of Saudi Arabia. www.pwc.com/me/capital-markets-watch
As typically seen, the third quarter has been less active than the previous quarters in terms of volume, but proceeds have improved. However, some interesting trends have been observed. Firstly, REIT IPOs did not dominate the market activity during this quarter, with all three GCC IPOs from different sectors. Secondly, unlike the first two quarters, IPO activity was not confined to KSA only. Boursa Kuwait, one of the region s oldest stock exchanges, welcomed its first IPO in more than ten years, after a thorough infrastructure restructuring and reconfiguration, raising USD 1 million. Overall, the equity markets activity remained subdued due to the economic slowdown and increase in interest rates driven by the US Federal interest rate hikes in the year to date. In debt markets, the oil price surge has reduced GCC governments borrowing needs. However, the corporate debt issuance activity has largely maintained pace, driven by the general consensus that there will be further interest rate increases in the near future. This encouraged a number of companies to issue their debts towards the end of the quarter, and we expect this trend to continue into the fourth quarter. Overall, the Capital Markets activity in the region is progressing at a cautious pace. There are signs of recovery, but it remains to be seen whether they are enough to counter the escalating pressure from increasing geopolitical uncertainties and interest rate hikes. Steve Drake PwC Middle East Capital Markets Leader GCC Capital Markets Watch Q 018
Initial Public Offerings (IPOs) Continued slowdown in IPO activity seen this quarter Overview Affected by the macroeconomic conditions, including fluctuating oil prices, 018 has been a slow year for IPOs, with a number of issuers putting equity transactions on hold. Despite this, the 1 IPOs in the year to date have generated total proceeds of USD 1. billion, compared to USD 85 million from the 0 IPOs in the first three quarters of 017. Q 018 welcomed two listings of more than USD 00 million each. Tadawul s fresh issuance activity slowed during Q compared to the same period last year. Leejam Sports Company was the only IPO on Tadawul during this quarter, compared to three listings during the equivalent period of last year. Proceeds were not however negatively impacted, with USD 18 million generated a seven percent increase compared to the USD 0 million raised from the three IPOs in the same period in 017. Boursa Kuwait has been in the spotlight with its infrastructure upgrade that reconfigured and restructured the stock exchange and its announced plan to privatise. The Kuwaiti exchange s first IPO in over 10 years raised USD 1 million. Looking forward to the next quarter, with the subdued economy due to global geopolitical uncertainties, it remains to be seen if this quarter s activities are the early signs of recovery. GCC Capital Markets Watch Q 018
IPOs by country Whilst Tadawul experienced a decline in IPO activity, Boursa Kuwait welcomed its first IPO in over ten years - a healthy diversification from the REIT IPOs that dominated the region in Q1 and Q Figure 1: GCC IPOs during Q 018 Republic of Kuwait Number of IPOs: 1 Kingdom of Saudi Arabia (KSA) Number of IPOs: 1 Sultanate of Oman Number of IPOs: 1 Figure : GCC IPOs in Q 018 by money raised 1 Leejam Sports Integrated Holding Co. Dhofar Generating Company KCSC Company Sector: Sports and fitness Money raised (USD): 18 million Stock Exchange: Tadawul No. shares offered: 16 million Sector: Industrial Money raised (USD): 1 million Stock Exchange: Boursa Kuwait No. shares offered: 88 million Sector: Energy Money raised (USD): 5 million Stock Exchange: MSM No. shares offered: 89 million GCC Capital Markets Watch Q 018
Value of IPOS (USDm) Volume of IPOs Value of IPOS (USDm) Volume of IPOs GCC IPO trends Q experienced the lowest quarterly IPO volume for the year to date, although proceeds have continued to increase Figure : GCC IPO activity since 01 11,000 10,500,000 8 5 0,500 5,000 0,500 16 0,000 1,500 1,000 500 0 1 9 6 70,000 1,9 78,00 85 1,85 01 01 015 016 017 017 18018 YTD YTD YTD Value (USD m) Volume 17 15 10 5 0 Figure : GCC quarterly IPO activity since 01 7,500 7,000,000,500 National Commercial Bank and Dubai Parks and Resorts IPOs Launch of NOMU Parallel Market 10 ADNOC and Emaar Development IPOs 1 1 10 8,000 7 8 1,500 5 5 6 1,000 5 5 500 1 1 1 1 1 7 8 18 179 95 90 1,60,500 185 1,15 0 101 71 7 0 7 00 10,55 0 6 9 0 Q1 Q Q Q Q1 Q Q Q Q1 Q Q Q Q1 Q Q Q Q1 Q Q Q Q1 Q Q 01 01 015 016 017 018 Value (USD m) Volume Source: Bloomberg terminal, PwC analysis 0 GCC Capital Markets Watch Q 018 5
% change since 1 January 017 Market performance Q 018 reconfirms the trend that has become apparent since the beginning of the year markets of two fortunes Figure 5: GCC equity market performance by cumulative total return since 1 January 017 0% 15% Tadawul DFM MSM ADX 10% 5% 0% -5% -10% -15% -0% -5% -0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 017 018 Source: Bloomberg terminal, PwC analysis Figure 6: Share price performance of GCC sector IPOs* relative to the respective all share index, from date of IPO to 0 September 018 Consumer Discretionary -1% Energy -% Financials -8% Real Estate -16% -18% -16% -1% -1% -10% -8% -6% -% -% 0% * The IPOs of Integrated Holding Co KCSC, National Building and Marketing and Al Nefaie Umm Alqura REIT have been excluded due to insufficient data. Source: GCC stock exchanges, PwC analysis GCC Capital Markets Watch Q 018 6
Global IPOs At USD 7.5bn proceeds, China Tower is the largest IPO in two years globally Figure 7: Global IPO activity Figure 8: Top stock exchanges by proceeds Others, 8% LSE Group, 6% Shanghai SE, 6% Source: Dealogic as at 0 September 018 NYSE, 16% HKEX, 17% NASDAQ (Global), 16% Typical of the third quarter, summer trading was thin only Asia-Pacific saw increased activity, driven by jumbo IPOs on the HKEX. Global IPO activity in Q 018 suffered compared to last year - proceeds fell by 5% and volume by % although year to date proceeds still exceeded the same period last year. In total, 61 IPOs raised USD 6.8bn compared to USD 9.bn from IPOs in Q 017. Asia-Pacific led this quarter, accounting for 56% (USD 6.bn) of the global proceeds and 57% (150) of the number of deals in Q 018. In second place, the Americas accounted for % (USD 15.9bn) of proceeds and 8% (7) of the number of IPOs. Trailing behind is EMEA, suffering disproportionately from geopolitical unrest and the summer lull in financial markets, accounting for only 10% (USD.7bn) of IPO proceeds and 15% (9) of the number of deals in the quarter. Year-to-date, Asia-Pacific is also leading, as the region accounted for 1% (USD 66.bn) of proceeds and 5% (61) of the number of IPOs. Figure 9: Top global IPOs in Q 018 by proceeds 1 China Tower Meituan Dianping Viva Energy Exchange: HKEX Exchange: HKEX Exchange: ASX Pricing date: 1 Aug 018 Pricing date: 1 Sep 018 Pricing date: 11 Jul 018 Money raised: USD 7.5bn Money raised: USD.bn Money raised: USD.0bn Free Float: 7.1% Free Float: 8.7% Free Float: 5.5% GCC Capital Markets Watch Q 018 7
GCC bond and sukuk issuances Nasdaq Dubai hosted the largest UAE debt issue by value Proceeds generated from sovereign bonds decreased to USD.9 billion in Q 018 compared to USD.8 billion in Q 018. In contrast, corporate bond and sukuk proceeds increased to USD.5 billion (Q: USD.0 billion), predominantly attributable to DP World. The company completed its seventh debt listing on NASDAQ Dubai, raising USD. billion from corporate bond and USD 1.0 billion from sukuk issuance in the current quarter, which together with their past issuances take the aggregate value of total debt issuances to USD 6.7 billion. Looking back at the past quarter, the higher oil price, together with the increased output, have reduced the pressure on governments expenditure reform programmes. Consequently, sovereign bond issuance activities have slowed down. $. billion $. billion $1.0 billion Highest value of sovereign bond issued in Q 018 by the Kingdom of Saudi Arabia The Kingdom of Saudi Arabia issued a sovereign bond that is intended to be used for the Kingdom s external funding for the year. It consists of three tranches: a USD 1.9 billion five year tranche, a USD 0.8 billion seven year tranche and a USD 0.6 billion ten year tranche. Total value of corporate bond issued by DP World in Q 018 The UAE based global port operator issued three corporate bonds raising USD. billion with varying maturity dates, carrying coupon rates ranging from % to 5%. Total value of DP World sukuk issuance in Q 018 DP World listed its fourth debt of the quarter on Nasdaq Dubai as sukuk for USD 1 billion. GCC Capital Markets Watch Q 018 8
How PwC can help At PwC we understand that good preparation is essential to a successful IPO. We have experience of a wide range of international, regional and domestic IPOs, and can provide expert guidance from initial planning, through execution and beyond. IPO preparation IPO execution Our IPO Readiness Assessment is an early stage diagnostic review of the critical areas needed for a successful float. We will highlight where current processes, procedures, structures and practices fall short of the requirements for a company whose shares are to be publicly traded, and provide recommendations on how to address these gaps. We work with issuers and their advisors to provide IPO advisory and assurance services. This may include working capital reports, financial due diligence report, financial positions and prospects procedures assessment, assistance with MD&A drafting in relation to a prospectus, comfort letters and project management. Contacts Steve Drake Partner, PwC Middle East Capital Markets Leader Direct: +971 (0) 0 1 Mobile: +971 (0) 50 51 661 Email: s.drake@pwc.com Muhammad Hassan Partner, PwC Capital Markets, Middle East Direct: +971 (0) 0 Mobile: +971 (0) 50 17 7 Email: muhammad.hassan@pwc.com Sergiu Gherasim Partner, PwC Capital Markets, KSA Direct: +966 (11) 11000 Mobile: +971 (0) 56 17 6719 Email: sergiu.gherasim@pwc.com About PwC s GCC Capital Markets Watch GCC Capital Markets Watch surveys IPOs on GCC s principal stock exchanges and market segments in addition to conventional bonds and Sukuk issuance on a quarterly basis. This survey was conducted between 1 July 018 and 0 September 018 and captures the relevant data based on their transaction date. GCC Capital Markets Watch is prepared by PwC Middle East (www.pwc.com/me). All market data is sourced from publicly available information and has not been independently verified by PwC. 018 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.