Global and regional IPO

Global and regional IPO Impact of Financial Crisis DIFC Economics Workshop 8: IPOs, M&A & Alternative Investment Markets in the MENA Region Phil Gandier February 2010

Session brief Q4 2009 Global IPO update Summary of recent regional IPO activity Regional IPO outlook Impact of Financial Crisis Post listing performance of recent IPOs Regional Stock Indices performance What we have been hearing - market sentiment A longer term view Measures that matter Page 2

2009 Global IPO Update (Jan Nov)

January November 2009: key highlights Global IPO activity by number of IPOs, was lower in the first 11 months of 2009 (459 deals) compared with the same period in 2008 (740 deals). 40% fewer IPOs than the first 11 months of 2008. Number of IPOs in October and November 2009 is highest since Q2 08. Total capital raised in the first 11 months of 2009 just exceeded (US$94.9 billion) the level for the same period in 2008 (US$94.6 billion). Amount of capital raised in October and November 2009 was the highest capital raised per quarter since Q4 07. Full year figures for 2009 are expected to follow this upward trend. 762 deals raised US$95.2 billion in the full year 2008. Global IPO activity increased significantly in the second half of 2009, compared to the first half of 2009. Thirteen IPOs had funds raised of over US$1 billion in October and November 2009, compared with 7 IPOs in Q3 09 and 2 IPOs in Q2 09. Brazil s Banco Santander Brasil raised US$7.5 billion, which constituted 7.9% of global capital raised. It is the world s largest IPO so far this year and Brazil s largest IPO ever. The second largest IPO in the first 11 months of 2009, China State Construction Engineering Corp, raised US$7.3 billion, which constituted 7.7% of global capital raised. The top 3 IPOs in the first 11 months of 2009 accounted for 21% of global capital raised. Page 4

January November 2009: key highlights Improved economic conditions in many countries, the deployment of the various stimulus plans, stronger performance of global equity markets and increasing investor optimism contributed to the increase in IPO activity in the second half of 2009. Asia Pacific represented 70% of IPO activity (by deals) for the 11 months of 2009. The US IPO market seems to be in recovery there has been an increase in IPO listings and new IPO filings though still below historical levels. There are also positive signs for the Europe IPO market. The number of IPO listings and amount of capital raised increased, but are still lower than historical level. The Middle East market remain stagnant during 2009. Emerging markets analysis: Although facing a decline in IPOs compared to 2007, both in number of deals and capital raised, emerging markets continued to drive activity in the global IPO market: Developing countries made up 70% of the number of deals globally, whereas developed countries made up 30%. Developing countries raised 70% of the total global capital raised compared to 30% from the developed economies. The developing countries share of capital raised was mainly due to China and Brazil s IPO activity, which constituted 53% of global capital raised in the eleven months of 2009. Six of the top 10 IPOs and 12 of the top 20 IPOs by capital raised were from emerging markets. Six of the top 20 IPOs were former state-owned enterprises (4 from China and 1 deals from India and Poland each). BRIC (Brazil, Russia, India and China) countries together raised US$53.3 billion (56% of total capital raised) in 160 deals (35% of total deal numbers) for the first eleven months of 2009. Page 5

January November 2009: key highlights Geographical analysis: By number of IPOs: Asia Pacific was the leading region with 70% market share. Europe, Middle East and Africa (EMEA) and North America regions had 14% market share each. Asian countries (China/HK, South Korea, Japan, Thailand, Singapore, Malaysia, Indonesia and Macau) accounted for 273 IPOs. Eleven of the top 20 IPOs by value are domiciled in the Far East, 7 were from China/HK. China/HK, South Korea and US were market share leaders with 155, 50 and 46 IPOs respectively. By capital raised: Asia Pacific was the market share leader with 61%. North America and Central and South America were ranked second and third with 18% and 13% market share respectively. China/HK, US and Brazil were market share leaders with 41% (US$39.1 billion), 16% (US$14.9 billion) and 13% (US$12.7 billion) respectively. Industry analysis: Leading industries (by number of deals) include industrials (77), materials (68) and technology (52). Leading industries (by capital raised) include financials (US$21.7 billion), industrials (US$16.1 billion) and real estate (US$9.5 billion). Page 6

January November 2009: key highlights Exchange analysis: By number of IPOs: China s Shenzhen Stock Exchange (SZE), Hong Kong s HKEx and South Korea s KOSDAQ were the top three exchanges respectively for the eleven months of 2009. By capital raised: Hong Kong s HKEx, US s NYSE and China s Shanghai Stock Exchange (SSE) were the top three exchanges respectively. Page 7

January November 2009: key highlights The global Top 20 Club (top 20 IPOs by capital raised) Emerging markets represent 6 of the top 10 IPOs and 12 of the top 20 IPOs. Asia Pacific region accounts for 65% of the Top 20 Club (13 IPOs out of 20). Seven IPOs were from China/HK and 2 deals were from Macau. North America region accounts for 15% of the Top 20 Club (3 IPOs out of 20). All three deals were from US companies. EMEA region account for 10% of the Top 20 Club (2 IPOs out of 20). They were from Poland and Netherlands. Eighteen of the top 20 listed on their home exchange (as their primary exchange). The other 2 of the top 20 were from the listing of Macau companies on the Hong Kong Stock Exchange. The top 20 IPOs globally raised US$52.0 billion which represents about 55% of global funds raised in the eleven months of 2009. Greater China was the source of 9 of the top 20 IPOs for the first 11 months. The minimum deal value to join the global Top 20 Club for the 11 months of 2009 has risen to US$1.1 billion, compared to US$0.8 billion in 2008. The minimum deal value to join the global Top 10 Club for the 11 months of 2009 and 2008 are similar, around US$1.9 billion. Financials industry generated six of the top 20 IPOs, while media and entertainment industry accounted for 2 of the top 20 IPOs. Page 8

Global IPO activity: number of deals and capital raised by year Source: Dealogic, Thomson Financial, Ernst & Young Page 9

Global IPO activity: number of deals and capital raised by quarter Source: Dealogic, Thomson Financial, Ernst & Young Page 10

Global IPO activity: distribution of IPOs by world region (by number of deals) 2008 January November 2009 Source: Dealogic, Thomson Financial, Ernst & Young Page 11

Global IPO activity: distribution of IPOs by world region (by capital raised) 2008 January November 2009 Source: Dealogic, Thomson Financial, Ernst & Young Page 12

January November 2009 Global IPO activity: by region and number of deals China/HK lead by number of deals, followed by South Korea and US North America Central and South America EMEA Asia Pacific US 10% (46) Canada 4.4% (20) Brazil 1.0% (5) Chile 0.2% (1) Poland 5% (24) Saudi Arabia 2.4% (11) United Kingdom 1.5% (7) Syria 0.7% (3) Greece 0.4% (2) Spain 0.4% (2) Tunisia 0.4% (2) France 0.2% (1) Germany 0.2% (1) China/HK 34% (155) South Korea 11% (50) Australia 3.7% (17) Japan 3.7% (17) Thailand 3.7% (17) India 3.3% (15) Singapore 3.3% (15) Malaysia 2.0% (9) 14% 14% 70% 2% Source: Dealogic, Thomson Financial, Ernst & Young Page 13

January November 2009 Global IPO activity: by region and capital raised China/HK lead by total capital raised (US$), followed by US and Brazil North America Central and South America EMEA Asia Pacific US 15.7% ($14.9b) Canada 1.8% ($1.7b) Brazil 13% ($12.7b) Chile 0.1% ($42m) Poland 2.5% ($2.4b) Netherlands 1.7% ($1.6b) Saudi Arabia 1% ($1.0b) Qatar 1% ($1.0b) United Kingdom 0.7% ($0.7b) China/HK 41% ($39.1b) Macau 4.6% ($4.4b) Malaysia 3.6% ($3.4b) India 3.4% ($3.2b) Singapore 2.8% ($2.6b) South Korea 2.4% ($2.2b) Australia 2.2% ($2.1b) 18% 8% 61% 13% Source: Dealogic, Thomson Financial, Ernst & Young Page 14

Global IPO activity: by industry and number of deals 2008 January November 2009 Retail 5% Telecommunication s 3% Consumer products & services 7% Real estate 6% Media & entertainment 4% Consumer staples 9% Energy & power 7% Materials 15% Financials 9% Industrials 17% Healthcare 7% High technology 11% Source: Dealogic, Thomson Financial, Ernst & Young Page 15

Global IPO activity: by industry and total capital raised 2008 January November 2009 Source: Dealogic, Thomson Financial, Ernst & Young Page 16

January November 2009 Global IPO activity: by stock exchanges* Top 10 by number of deals Primary exchange No. of deals % Shenzhen Stock Exchange (SZE) Hong Kong Exchanges & Clearing Ltd (HKEx) 73 15.9% 47 10.2% KOSDAQ 46 10.0% NASDAQ 29 6.3% New York Stock Exchange (NYSE) Australian Securities Exchange (ASX) Bombay Stock Exchange (BSE) 29 6.3% 20 4.3% 15 3.3% NewConnect Warsaw 14 3.0% Toronto Venture Exchange (TSXV) 13 2.8% Catalist Singapore 11 2.4% Top 10 by total capital raised Primary exchange Hong Kong Exchanges & Clearing Ltd (HKEx) New York Stock Exchange (NYSE) Funds raised US$m % $17,707 18.7% $16,963 17.9% Shanghai Stock Exchange (SSE) $16,085 17.0% NASDAQ $8,069 8.5% Shenzhen Stock Exchange (SZE) $7,336 7.7% Sao Paulo Stock Exchange (BOVESPA) $5,164 5.4% Bursa Malaysia (KLSE) $3,488 3.7% Bombay Stock Exchange (BSE) $3,229 3.4% Australian Securities Exchange (ASX) $2,410 2.5% Warsaw Stock Exchange (WSE) $2,390 2.5% *Data based on domicile of the exchange, regardless of the listed company domicile Source: Dealogic, Thomson Financial, Ernst & Young Page 17

2008 Global IPO activity: by stock exchanges* Top 10 by number of deals Primary exchange No. of deals % Shenzhen Stock Exchange (SZE) Australian Stock Exchange (ASX) 69 9.0% 65 8.5% NewConnect Warsaw 50 6.6% Toronto Venture Exchange (TSXV) 42 5.5% KOSDAQ 39 5.1% Bombay Stock Exchange (BSE) London Alternative Investment Market (AIM) Hong Kong Exchanges & Clearing Ltd (HKEx) Warsaw Stock Exchange (WSE) Singapore Stock Exchange (SGX) 33 4.3% 27 3.5% 24 3.1% 24 3.1% 21 2.8% Top 10 by total capital raised Primary exchange New York Stock Exchange (NYSE) Saudi Stock Exchange (Tadawul) Funds raised US$m % $24,831 26.1 % $9,704 10.2 % Shanghai Stock Exchange (SSE) $8,545 9.0% London Stock Exchange (LSE) $5,540 5.8% Hong Kong Exchanges & Clearing Ltd (HKEx) Sao Paulo Stock Exchange (BOVESPA) $4,803 5.0% $4,566 4.8% Shenzhen Stock Exchange (SZE) $4,129 4.3% Bombay Stock Exchange (BSE) $3,937 4.1% Indonesia Stock Exchange (IDX) $2,593 2.7% Euronext $2,506 2.6% *Data based on domicile of the exchange, regardless of the listed company domicile Source: Dealogic, Thomson Financial, Ernst & Young Page 18

Emerging markets: IPO activity by year in the BRIC countries Source: Dealogic, Thomson Financial, Ernst & Young Page 19

Emerging markets: IPO activity by quarter in the BRIC countries Source: Dealogic, Thomson Financial, Ernst & Young Page 20

January November 2009: top 20 IPOs by capital raised Issue date Issuer name Domicile nation Industry description Proceeds (US$m) Primary exchange 7/10/09 Banco Santander Brasil SA Brazil Financials 7518 New York Stock Exchange (NYSE), Sao Paulo Stock Exchange (BOVESPA) 24/7/09 China State Construction Engineering Corp China Industrials 7342 Shanghai Stock Exchange (SSE) 21/9/09 Metallurgical Corp of China Ltd China Industrials 5130 25/6/09 Companhia Brasileira de Meios de Pagamento VisaNet Brasil Shanghai Stock Exchange (SSE); Hong Kong Exchanges & Clearing Ltd (HKEx) Brazil Financials 4258 Sao Paulo Stock Exchange (BOVESPA) 10/11/09 Maxis Bhd Malaysia Telecommunications 3294 Bursa Malaysia (KLSE) 20/11/09 Sands China Macau Media & entertainment 2505 Hong Kong Exchanges & Clearing Ltd (HKEx) 6/10/09 Verisk Analytics Inc United States Financials 2156 NASDAQ 27/10/09 PGE Polska Grupa Energetyczna SA Poland Energy & power 2135 Warsaw Stock Exchange (WSE) 9/10/09 Wynn Macau Ltd Macau Media & entertainment 1870 Hong Kong Exchanges & Clearing Ltd (HKEx) 30/10/09 Myer Holdings Australia Retail 1862 Australian Securities Exchange (ASX) Page 21

January November 2009: top 20 IPOs by capital raised Issue date Issuer name Domicile nation Industry description Proceeds (US$m) Primary exchange 17/11/09 CapitalMalls Asia Ltd Singapore Real estate 1783 Singapore Stock Exchange (SGX) 12/11/09 China Merchants Securities Co Ltd China Financials 1628 Shanghai Stock Exchange (SSE) 6/8/09 Everbright Securities Co Ltd China Financials 1605 Shanghai Stock Exchange (SSE) 3/11/09 Delta Lloyd Groep Netherlands Financials 1602 Euronext 2/10/09 Glorious Property Holdings Ltd China Real estate 1361 16/9/09 SinoPharm Group Co Ltd China Healthcare 1296 8/5/09 China Zhongwang Holdings Ltd China Materials 1270 Hong Kong Exchanges & Clearing Ltd (HKEx) Hong Kong Exchanges & Clearing Ltd (HKEx) Hong Kong Exchanges & Clearing Ltd (HKEx) 17/8/09 National Hydro Electric Power Corp Ltd (NHPC) India Energy & power 1247 Bombay Stock Exchange (BSE) 4/11/09 Hyatt Hotels Corp United States Media & entertainment 1093 New York Stock Exchange (NYSE) 30/9/09 Talecris Biotherapeutics Holdings Corp United States Healthcare 1064 NASDAQ Page 22

Summary of regional IPO activity

Value raised for listed IPO s (2005-2010*) In 2007, the regional IPO market reached its peek of US$13.5 Billion The last quarter of 2008 was impacted by the crisis as the regional IPOs raised only US$12 million. The downward IPO trend continued in 2009 with just US$1.99 Billion value raised, which included Vodafone Qatar IPO that raised US$952 million during Q2 2009. Over the 2005 to 2010* period, majority of the value raised was through the Saudi market, with Nasdaq Dubai taking second place and followed by Doha SE. Source : Zawya Source : Zawya Note : Contains all listed IPOs in Jordan, Kuwait, Oman, Bahrain, Egypt, Qatar, Saudi Arabia & UAE during 2005 to 15 th Feb 2010 Page 24

Number of listed IPO s (2005-2010*) Maximum number of regional IPOs happened during 2007. The growth trend continued until Q3 2008. Only 2 IPOs were completed in Q4 2008, both in Amman SE. The regional IPO market had just 12 IPOs during the whole of 2009. Out of this 11 of them took place in Saudi Arabia. During the past five years, the most active were the Saudi SE and Amman SE among the other regional stock exchanges. Source : Zawya Source : Zawya Source : Zawya Note : Contains all listed IPOs in Jordan, Kuwait, Oman, Bahrain, Egypt, Qatar, Saudi Arabia & UAE during 2005 to 15 th Feb 2010 Page 25

Effects of the financial market turmoil on the Regional IPOs

Average price movements on regional bourses Source : Zawya Source : Zawya Note : Includes prices of all listed IPOs in the respective stock exchanges during the period. Stocks that are not currently in trade are excluded. Page 27

Average price movements on regional bourses Source : Zawya Source : Zawya Page 28

Average price movements on regional bourses Source : Zawya Source : Zawya Page 29

Average price movements on regional bourses Source : Zawya Source : Zawya Page 30

Average price movements Source : Zawya As of Q4 2009, IPOs listed during the 2005 2009 (Q4) time frame have seen their prices decline, no matter which stock exchange they have listed on. During the middle of 2009 the prices started to stabilize, however the Dubai debt issue impacted all the regional bourses. Muscat SM is the only regional bourse that has an average IPO price in the positive territory compared to its listing day price during the past 5 years. Page 31

Weighted average price movements on regional bourses Source : Zawya, E&Y Analysis A weighted average calculation reveals a downward trend in the Prices of recent IPOs. (2005 to 2010). Although the prices started recovering during the April 2009, the Dubai debt crisis had an impact on the prices during the Q4 2009 Highest weights were given to Saudi SE 39.05% at, with the Amman SE at 26.04% and the UAE SE at 13.02% based on the number of IPO listed Page 32

Regional Stock Indices performance (2008-2010*) Source : Zawya Note: * till 15 th Feb 2010 Page 33

What we have been hearing market sentiment "The west has realised that the future is in the East, be it the Middle East or the BRIC (Brazil, Russia, India, China) countries. Global focus is shifting to this direction. The UAE is in a prime, easily accessible location, and its laws are straightforward," said Amani Choudhry, Managing Director, Mayfair Wealth Management. "The economic situation, both in Jordan and globally, is a difficult one, with much uncertainty still looming, and an overall sentiment of lack of confidence," says Tanya Khammash, head of equity research at ABC Investments. So far only two IPO issues are expected to come out this year, Yahya Al-Jabri, executive president of the Capital Market Authority (CMA) of Oman told Reuters. The Capital Market Authority (CMA) has accepted a request from Al-Tayar Travel Group to stop the initial public offering (IPO) of its shares on Feb. 22-28 after a book-building process failed to attract enough demand, the Saudi Press Agency said quoting a CMA statement. Page 34

What we have been hearing market sentiment "Overall market sentiment is weak on the UAE bourses. There's no sign of long rally in the near future. Historically Sunday is a down day for the market. Of course, the global positive cues will lessen the volatility on the markets particularly DFM, which had been highly fluctuating in the past two, three weeks. The DFM market may settle down and remain range bound till 1600 points, said Taimur Saadat, Head of Technical Analysis at Arab Capital Markets Resource Center. "Having learnt their lesson from the economic crisis, 2010 will see an increased focus on risk management," said Saad Maniar, Managing Partner, Horwath Mak. Investment community expects Abu Dhabi, Qatari and Saudi stock markets to recover this year despite GCC Investor Confidence Index dipping 2.4 points to 114.5 points in January, according to Shuaa Capital confidence survey. "A lack of confidence continues to hold back the Saudi market. At present, the market has a far greater response to falls than rises on global markets. Economic conditions are improving, but without greater investor confidence the market will struggle to make significant gains over the remainder of the year," the Riyadh-based Jadwa Investments said in a study on Tadawul's performance. Page 35

Long term view Regional economies expected to outperform other economies the ME has a great growth story to tell Strategic rationale for IPO s in region has not changed succession planning, institutionalization, monetization, financing, branding etc although financing may have moved up in terms of a priority There is a strong IPO pipeline in the Middle East with around 50 announced in Saudi Arabia during 2010 think of the large % of businesses still run in a family business model However, the markets are more skeptical than in the past and regional companies are going to have to consider the following factors in order to have a better chance of a successful IPO: Page 36

Long term view measures that matter What makes a successful IPO? (e.g. long term trading price > than IPO price) Based on studies carried out by E&Y and others over a 10 year period, the following factors were identified as best practices in successful IPOs and should be considered by regional IPO candidates: Preparation Systematically implemented new programs, policies, and systems common to a public company even before becoming one Modified their internal control systems, financial accounting, executive compensation, and employee incentive programs Lead time Instituted improvement initiatives months, if not years, before the offering. About a year-and-a-half before the offering. Competitive position They were far stronger than their competitors financially and non-financially at the time of the offering (growth potential) Non-financial matters include strength of management, brand, quality of strategic planning function, customer loyalty, ability to attract and retain talent and especially, CORPORATE GOVENANCE The lesson here is IPO candidates who want to be successful need to look at an IPO as a long term transformation, rather than an event. More time has to be spent on readiness Plan, Plan, Plan Page 37

Thank you

Appendix: definitions The data presented in the Annual IPO report is from Dealogic, Thomson Financial and Ernst & Young. For the purposes of the Quarterly and Year End IPO press release, we focus only on IPOs of operating companies and define an IPO as follows: A company's first offering of equity to the public. This report includes only those IPOs for which Dealogic, Thomson Financial and Ernst & Young offer data regarding the issue date (the day the offer is priced and allocations are subsequently made), trading date (the date on which the security first trades) and proceeds (funds raised including any overallottment sold). Postponed IPOs or those which have not yet been priced are therefore excluded. In an attempt to exclude non-operating company IPOs such as trusts, funds and special purpose acquisition companies (SPACs), companies with the following Standard Industrial Classification (SIC) codes are excluded: 6091: Financial companies that conduct trust, fiduciary and custody activities 6371: Asset management companies such as health and welfare funds, pension funds and their third party administration as well as other financial vehicles 6722: Companies that are open-end investment funds 6726: Companies that are other financial vehicles 6732: Companies that are grant-making foundations 6733: Asset management companies that deal with trusts, estates and agency accounts 6799: Special Purpose Acquisition Companies (SPACs) In our analysis, unless stated otherwise, IPOs are attributed to the domicile nation of the company undertaking an IPO. The primary exchange on which they are listed is as defined by Dealogic, Thomson Financial and Ernst & Young research. A foreign listing is where the stock exchange nation of the company is different from the company's domicile nation (i.e., issuer's nation). Page 39