MENA IPO Values Down 45% In Q3 2013

Initial public offering (IPO) value levels in the MENA region fell by 45.3 per cent in Q3 2012 as compared to the same period last year, according to Ernst & Young’s (EY) MENA Q3 2013 IPO update.

The only IPO in the region during the third quarter of the year was launched by Oman’s Sembcorp Salalah Power and Water Company in the power and utilities sector. It raised $138 million, falling short of the $252.3 million raised by Saudi’s City Cement, the sole listing in Q3 2012.

“The third quarter of the year is historically a slow period for IPOs,” said Phil Gandier, MENA head of transaction advisory services, EY.

“This year, the summer months coinciding with Ramadan led to a slower paced environment for raising money for IPOs. However, we have seen an increase in the number of companies in the region contemplating IPOs in the coming months so we expect activity to pick up.

“There is an appetite to invest in profitable local companies that have scale and Pan Arab operations,” said Gandier.

“Within the Gulf, the Tadawul is expected to attract a large number of IPOs due to its high liquidity and the new facility of cross-listing for overseas companies.”

Gandier also said that the UAE’s efforts to promote inward investment are effective in attracting funds to the region. Solid fundamentals and strong demographic trends are making companies across the GCC appealing to investors, he added.

The key challenge for the regional IPO market is the relatively lower level of liquidity in the exchanges as compared to international markets.

“The choice of other exchanges and valuation differential may also present a challenge for the regional exchanges, although this will depend on the sector and ‘go-to-market’ credentials of individual companies,” said Gandier.

“But we expect the market to pick up in the coming years as more and more companies proceed along the IPO journey and regional and global investors look towards the region for investment opportunities.”