Wednesday 08 / May / 2024
Muscat: After a positive start to the year, Initial Public Offerings (IPOs) in the Gulf Cooperation Council (GCC) region in the second quarter of 2017 witnessed a slowdown, both in terms of the number of offerings and total proceeds raised.
The Kingdom of Saudi Arabia (KSA) hosted the only three IPOs of this quarter; they were allocated between the Saudi Stock Exchange primary market and the parallel market, said a report released by PwC.
On the primary exchange front, the only offering in the second quarter of 2017 was by Jadwa REIT Alharamin Fund, which floated a total of 36 million shares, raising proceeds of $96 million. The primary objective of the fund is to provide its investors with current income by investing in income-generating real-estate assets in KSA, with a principal focus on the Holy Cities of Makkah and Medina.
Parallel market
On the parallel market front, the first and largest offering in the second quarter of 2017 was by Thob Al-Aseel Co. (Al Aseel), which floated 3 million shares, raising proceeds of $68 million. Al Aseel is engaged in import, export, wholesale and retail in textiles and readymade garments. The second offering was by Al Kathiri Holding Co. (Al Khathiri), which floated 0.8 million shares, raising proceeds of $6.7 million. Al Khathiri manufactures and distributes construction materials through its subsidiaries.
In terms of IPO performance in the second quarter of 2017, compared with the same period in the prior year, the number of offerings has slightly increased, with three IPOs in the second quarter of 2017, compared with two IPOs during the same period of last year. However, the total proceeds raised in the second quarter of 2017 were 38 per cent lower, compared with the same period of 2016.
Further, IPO activity in the first half of 2017 witnessed an increase in the number of offerings at 13, compared with the first half of 2016 at three, which was largely due to increased activity in the first quarter of 2017.
“During the second quarter f 2017, Saudi Arabia continued to be the main driver of IPO market activity in the GCC, while the NOMU parallel market for small and medium-sized enterprises in the Kingdom remained popular among investors,” said Steve Drake, head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East.
Global scene
Global IPO activity in the second quarter of 2017 increased by nearly 50 per cent in terms of both proceeds and the number of IPOs, compared with the second quarter of 2016. Compared with the first quarter of 2017, activity also increased in the second quarter of 2017, though less pronouncedly. In total, 379 IPOs raised $52.6 billion, compared with $35.2 billion via 253 IPOs in the second quarter of 2016 and $68 billion via 420 IPOs in the second quarter of 2015.
Asia-Pacific was dominant in terms of the number of IPOs again, accounting for 57 per cent of global transactions.
Debt issues
The appetite for debt issuance in the Gulf Cooperation Council surged throughout the second quarter of 2017.
Sovereign issuance by GCC governments remained the main theme, while the quarter saw Saudi Arabia issuing its first US dollar-denominated sukuk, raising proceeds of $9 billion.
The GCC main economies maintained high credit quality and investment grade status.
Corporate bond issuance remained very active across the region, while sovereign bond issuance activity slowed down in the second quarter of 2017.
On the sovereign front, the government of Saudi Arabia was the biggest contributor in the region, issuing a US$9 billion Islamic sukuk, followed by Sultanate of Oman’s $2 billion issuance.
The Saudi Arabia sukuk was structured into a $4.5 billion five-year sukuk tranche at 100 basis points over the mid-swap rate and an equal-sized 10-year tranche at a spread of 140 basis points to the benchmark.
The Oman seven-year sukuk was structured at 235 basis points to the benchmark.
