MENA IPOs Raise $1.7bn In Q3 2014

Almost $1.7 billion was raised in the MENA region during the third quarter of 2014, representing a ten-fold increase from the $150.7 million registered in the same period last year, according to the EY IPO update.

The region saw a total of three listings during the third quarter from Emaar Malls Group (EMG), Zain Bahrain and Tunisia’s Delice Holding.

EMG listed on the Dubai Financial Market (DFM) in September while the other two were closed in Q3 2014 and will be listed in the beginning of Q4 2014.

“The third quarter witnessed the largest IPO of 2014 to date; Emaar Malls Group raised $1.6 billion, potentially signalling a shift in the regional business perception of local markets,” said Phil Gandier, MENA head of transaction Advisory Services, EY.

“The IPO, which closed in September this year, was heavily oversubscribed (over 30 times), indicating growing investor confidence and appetite to deploy capital which has been waiting on the side-lines.”

Historically, Q3 has one of the lowest levels of deal activity in the year with the trend also continuing in 2014.

“Q3 2014 has been relatively slow in terms of IPO volume compared with other quarters due to the quiet summer period,” said Mayur Pau, MENA IPO Leader, EY.

“However, the strong fundamentals of the MENA region and improved valuations are likely to drive IPO volume, with a significant backlog expected to come to market over the next quarters as companies wait to go public at the right time.”

The report forecasts a positive future for IPOs in the Gulf during the next year.

“MENA IPO activity is expected to surge in 2015, particularly in the GCC countries, with market valuations returning to somewhere near pre-financial crisis levels,” said Gandier.

He added that companies in the financial services and real estate sectors are expected to dominate the IPO pipeline.

“With a growing regional economy and regulatory initiatives being implemented, investor confidence is expected to rise and bring liquidity to the market. Government spending on infrastructure and diversification of oil-based economies have created more opportunities in the private sector. These continued developments are expected to encourage companies to raise capital from the market,” said Gandier.

MENA capital markets have also been introducing new reforms in a bid to encourage local firms to consider domestic IPOs.

Saudi Arabia’s recent announcement of opening the stock market to allow direct investment by foreign companies will raise its profile in the international scene, EY said. In the UAE, luxury property developer Damac’s potential listing on the DFM is expected to boost the local markets.

“The more relaxed regulations are increasing the attractiveness of local markets,” said Pau.

“Regional regulators are continuing to focus more on measures to increase IPOs, thus leading to a much-needed deepening of the equity market in the region and improved sentiment from global investors. MENA regional authorities have also been streamlining IPO rules to encourage some of the region’s family business to list as a way of making business more transparent.”