Saudi Arabia leads MENA IPO activity, raises $603 mln in Q1

Saudi Arabia saw the most initial public offering (IPO) activity in the Middle East and North Africa (MENA) in the first quarter of 2018, raising $603.2 million from five deals, consultancy firm EY said in a recent report.

The top three IPOs in terms of value were listed on the Saudi Stock Exchange (Tadawul); SEDCO Capital REIT, Jadwa REIT Saudi and Al Rajhi REIT. SEDCO Capital REIT’s listing was the biggest MENA IPO of the quarter, valued at $173.3 million.

"The increasing trend of real estate investment trusts (REITs) being listed on the exchange is indicative of the growing investor interest in the Kingdom's real estate assets," the report added.

The Tadawul index also gained more than 9 percent in the first quarter, outpacing many other emerging market indices.

The recent upgrade by FTSE is expected to pump billions of dollars of foreign investment into Tadawul. A similar move from MSCI is likely in June, making way for the region's biggest stock market to gain another possible EM status upgrade next year.

"The developments in Saudi Arabia underline that investor sentiment has been on a rebound, especially with the spike in oil prices and the Kingdom's diversification plan starting to take effect, said Gregory Hughes, MENA IPO Leader, EY.

While there were no listings on other GCC exchanges, EY said the pipeline looked robust with a large number of companies already gearing up to go public in the next two years.

Elsewhere in the region, Egypt saw a successful issuance for BPE Holding for Financial Investments, which raised $26.4 million.

IPO activity is expected to further increase this year with Egypt having selected 23 companies for the first phase of its state IPO program, the report said.

Overall, the MENA region saw six deals raise $629.6 million in Q1 2018, a 57.1 percent increase in value year-on-year.  However, the number of deals dropped by 45.5 percent during the period.

According to the report, the IPO pipeline in the United Arab Emirates looks promising with Emirates Global Aluminum, Abu Dhabi Ports Company, and Etihad REIT planning to go public in 2018.

The Kuwait Stock Exchange is also expected to get a boost with its inclusion in the FTSE Russell's Emerging Market Index this year and possible flotation of the exchange next year.

"The economic reforms, market development initiatives and privatization drive in Saudi Arabia, the UAE, Egypt, and Kuwait will prepare the way for a buoyant MENA IPO market in the forthcoming quarters. The upcoming months are projected to show an improvement in volume, particularly with a strong pipeline of announced and rumored IPOs," said Mayur Pau, MENA Financial Services IPO Leader, EY.

Despite market volatility, global IPO markets raised $42.8 billion in Q1 2018, a 28 percent year-on-year increase on Q1 2017. However, with 287 listings, deal activity was down 27 percent in the first three months of this year compared to Q1 2017.