GCC Capital Markets Watch 018 USD.bn raised from IPOs in 018 in the GCC, compared to USD 3.3bn in 017. Q4 018 generated USD 1bn of proceeds. 17 IPOs in 018 in the GCC, down from 8 in 017. Five IPOs took place in Q4 018. USD 14.bn of sovereign bonds were issued in 018 by the Kingdom of Saudi Arabia, the largest bond issuer of the year. The largest bond issuer for Q4 018 was SABIC Capital II BV at USD bn. www.pwc.com/me/capital-markets-watch
GCC IPO markets raised USD.bn in 018, with annual proceeds 33% down GCC IPO activities Global IPO activities Top 5 GCC IPOs in 018 USD 758m Qatar Stock Exchange USD 18m USD 174m Bonyan REIT Real estate is the GCC s most active market by value in 018 #1 # Qatar Stock Exchange Qatar Aluminium Manufacturing Company Metals and mining Leejam Sports Company Sports and fitness USD 173m Sedco Capital REIT Real estate USD 16m Jadwa REIT Saudi Fund Real estate #3 Muscat Securities Market Companies in REITs and Metals sectors dominated the IPO market in 018 #1 # #3 Real estate USD 1bn 47% of total 018 IPO proceeds Metals and mining USD 0.8bn 35% of total 018 IPO proceeds Sport and fitness USD 0.bn 10% of total 018 IPO value Continuing caution for GCC IPOs going into 019 Volatility Geopolitical uncertainty Government initiatives Cross-border IPO activity USD 0.8bn USD 1.bn USD 0.8bn
018 ended on a promising note with Q4 being the best quarter in the year from an equity capital markets perspective. The listing of Qatar Aluminium Manufacturing on the Qatar Stock Exchange raised USD 758 million, representing over 40% of the total proceeds raised in the region in 018 and was the exchange s largest IPO by proceeds in the last four years. remained the most active exchange by number of IPOs and the Kuwaiti stock exchange performed strongly in terms of investment returns possibly helped by its inclusion in the FTSE Russell Emerging Market Index from September 018. Whilst there were no IPOs in the UAE in 018, UAE based companies have successfully raised capital through IPOs on international exchanges. Shelf Drilling, the world s largest shallow water driller, raised over USD 5 million from the Oslo Börse. Construction firm RA International also raised USD 5 million from its London AIM IPO. A number of corporate debt issuers approached the US and European markets in Q4 018 activity that is expected to marginally slow down in early 019, as new issuers wait for their year end results to be finalised. The outlook for 019 will depend on the Federal Government interest rate, with any aggressive rate increase likely to have a dampening effect on debt capital markets activity. Macro-economic and geopolitical uncertainties are looking to remain in the immediate future. As the market adjusts to the new norm, capital markets opportunities are still present for companies that are well prepared. Steve Drake PwC Middle East Capital Markets Leader 3
Initial Public Offerings (IPOs) IPO activity improved in Q4 despite slow first nine months driven by volatile oil prices and geopolitical uncertainty in the region Overview Q4 was a remarkable quarter for the GCC equity markets in 018, with five IPO transactions generating total proceeds of USD 1.03 billion, 4% of the annual GCC IPO proceeds. We have seen activities across issuers from all six GCC countries. Qatar Stock Exchange has welcomed its largest IPO of the past four years in terms of total proceeds Qatar Aluminium Manufacturing, which generated USD 758 million. REIT IPOs cooled off in H of 018 after strong activities in H1. This is mainly due to lower demand for real estate across the region and declining spreads between returns of REITs and deposit rates for safer time deposits. The equity markets remained active in 018, although showed declining statistics in terms of primary IPOs compared to 017. Q4 was a noticeable quarter for 018 but still some way behind the eight IPOs in the last quarter of 017, which generated USD.46 billion. continued to lead the GCC stock markets with the most active stock exchange by number of listings and proceeds raised. The GCC IPO outlook for 019 hinges on the oil price as well as the geopolitical climate. There is a cautious investor sentiment which is expected to linger in the early months of 019. 4
IPOs by country Qatar Aluminium Manufacturing Company s listing was the largest in the GCC in 018, and was.5 times oversubscribed Figure 1: GCC IPOs during Q4 018 Kingdom of Bahrain (BAH) Number of IPOs in Q4: 1 Kingdom of Saudi Arabia (KSA) Number of IPOs in Q4: 3 State of Qatar (QTR) Number of IPOs in Q4: 1 Figure : Top 3 GCC IPOs in Q4 018 by money raised 1 Qatar Aluminium Mefic REIT National Company for Manufacturing Company Learning and Education Sector: Industrial Money raised (USD): 758m Exchange: Qatar Stock Exchange No. of shares offered: 73.4m Sector: Real Estate Money raised (USD): 108m Exchange: No. of shares offered: 40.5m Sector: Education Money raised (USD): 66m Exchange: No. of shares offered: 13.0m 3 5
Value of IPOs (USDm) Volume of IPOs Value of IPOs (USDm) Volume of IPOs GCC IPO trends More than 50% of the total 018 IPO proceeds were raised during Q4 Figure 3: GCC IPO activity since 013 11,000 10,500 4,000 8 35 30 3,500 5 3,000,500 16 17 0,000 15 1,500 1,000 500 0 9 6 4 70 10,750 1,439 78 3,300,198 013 014 015 016 017 018 10 5 - Value (USD m) Volume Figure 4: GCC quarterly IPO activity since 013 7,500 7,000 3,000 National Commercial Bank and Dubai Parks and Resorts IPOs ADNOC and Emaar Development IPOs 14 1,500 Launch of NOMU Parallel Market 10 10,000 7 8 Qatar Aluminium Manufacturing Company IPO 8 1,500 5 5 5 6 1,000 500 0 4 5 5 3 3 3 4 1 1 1 1 1 337 48 138 179 953 90 1,603 7,9 185 1,15 0 101 471 74 0 37 400 10 34,455 430 463 484 1,07 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 013 014 015 016 017 018 4 0 Value (USD m) Volume 6 Source: Bloomberg terminal, PwC analysis
% change since 1 January 017 Market performance The cumulative total return remained largely unchanged in Q4 with the exception of DFM, which continued its downward trend Figure 5: GCC equity markets performance by cumulative total return since 1 January 017 0% 10% DFM MSM ADX 0% -10% -0% -30% -40% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 017 018 Source: Eikon (Thomson Reuter), PwC analysis Figure 6: Share price performance of 018 GCC IPOs* by sector, relative to the respective all share index, from the IPO date to 31 December 018 Education 15% Logistic -18% Industrial 34% Consumer Discretionary 1% Energy -1% Financials -3% Real Estate -16% -40% -30% -0% -10% 0% 10% 0% 30% 40% * The IPOs of Integrated Holding Co KCSC, National Building and Marketing, Al Nefaie Umm Alqura REIT and Alkhabeer REIT have been excluded due to insufficient data. 7
Global IPOs SoftBank s IPO was the largest of the year with proceeds of USD 1.3bn and, if the entire overallotment option is exercised, would be the second largest in history Figure 6: Global IPO activity Average free float Q4 017 Q3 018 Q4 018 31.5% 3.8% 31.3% Figure 7: Top exchanges by % of total IPO proceeds raised Others, 6% Deutsche Bourse, 6% LSE Group, 7% Shanghai SE, 5% NYSE, 14% HKEX, 15% Source: Dealogic as at 31 December 018 NASDAQ (Global), 15% Globally, 018 started as a promising year for IPOs, but eventually did not fully live up to its potential. High equity valuations, low volatility and strong economic and corporate fundamentals were evident, but as the year progressed, geopolitical unrest, weakening fundamentals and less accommodative monetary policy put a brake on activity levels. Numerous IPOs were postponed or even cancelled. In the fourth quarter, 84 IPOs raised USD 56.1bn compared to proceeds of USD 67.7bn from 439 IPOs in Q4 017. A wide range of jumbo IPOs were executed throughout the year, most notably the SoftBank spin-off in December. With pregreenshoe proceeds of USD 1.3bn, it is the fourth biggest IPO in history, and has the potential to become second largest if the greenshoe is exercised. This led Asia-Pacific to become the leading region in terms of IPO activity. The region accounted for 45% (USD 99.1bn) of proceeds and 55% (649) of the number of deals in 018. Coming second is the Americas which accounted for 34% (USD 75.3bn) of proceeds and 5% (95) of volume. Trailing behind is EMEA, accounting for 1% (USD 47.3bn) of IPO proceeds and 0% (35) of volume. Figure 8: Top 3 global IPOs in Q4 018 by proceeds 1 SoftBank Exchange: Tokyo SE Pricing date: 10 Dec 018 Money raised: USD 1.3bn Free Float: 33.5% Knorr Bremse Exchange: Deutsche Borse Pricing date: 10 Oct 018 Money raised: USD 4.4bn Free Float: 9.8% 3 Aston Martin Lagonda Global Exchange: NYSE Pricing date: 3 Oct 018 Money raised: USD 1.4bn Free Float: 5.1% 8
GCC bond and sukuk issuances GCC debt market outperformed its peers Despite the increasing Federal interest rate, fluctuating oil prices and global economic downturns, the GCC bond market has shown commendable performance. It has delivered stronger risk-adjusted returns than many other traditional bond markets since 013. The decision to include GCC nations in JP Morgan s Emerging Market Bond Index (EMBI Index) from January 019 and the ascending tendency of oil prices were likely to have contributed to the overall GCC performance and boosted the issuance of GCC debts in 018. In October 018, the UAE enacted a new legislation allowing the UAE Federal Government to issue sovereign bonds, which is likely to lead to an increase in bond activity in the region. $1.4 billion $.0 billion $1.0 billion Total value of sovereign bond issued in Q4 018 by the Kingdom of Saudi Arabia KSA issued a USD 1.4 billion sovereign bond in two tranches. The two tranches will mature in 03 and 08, with the coupon rate of 3.68% and 4.06% respectively. Total value of corporate bond issued by SABIC Capital II B.V. in Q4 018 SABIC issued two tranches of corporate bond with coupon rates of 4.0% and 4.5% respectively, maturing in 5 and 10 years. Total value of Sukuk issuances in Q4 018 by Tabreed Sukuk SPC Ltd. Sukuk and Aldar Sukuk Ltd. Tabreed Sukuk SPC Ltd., a special purpose acquisition company for the National Central Cooling Company, issued a 7 year sukuk totaling USD 500 million with a coupon rate of 5.5%. Aldar Sukuk Ltd., the special purpose vehicle for Aldar Properties PJSC, issued a 7 year USD 500 million valued sukuk with a coupon rate of 4.75%. 9
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 Capital Markets Leader, Middle East Direct: +971 (0) 4 304 341 Mobile: +971 (0) 50 451 4661 Email: s.drake@pwc.com Muhammad Hassan Partner, PwC Capital Markets, Middle East Direct: +971 (0) 4 304 3443 Mobile: +971 (0) 50 174 47 Email: muhammad.hassan@pwc.com Sergiu Gherasim Partner, PwC Capital Markets, KSA Direct: +966 (11) 110400 Mobile: +971 (0) 56 417 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 October 018 and 31 December 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. 019 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.