Saudi dominates IPO market in region in 2010

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Saudi Arabia still leads the region for initial public offerings this year with King Abdullah Economic City the biggest issue so far, according to research.

The Kingdom has seen seven of the eight IPOs – finance raising through the issue of company equity to investors – in the region, just higher than the seven for the region in total for the first half of 2009, according to PricewaterhouseCoopers, the professional services firm.

King Abdullah Economic City raised SR1.02 billion, the equivalent to 32.7% of the total capital raised in the GCC, although the total raised was less than last year at SR3.112 billion compared with SR4.533 billion, a fall of 31.4%.

KAEC is an investment vehicle created to manage the funding of the economic city project, which will have six components, including a sea port, industrial valley, educational zone, and a central business district. Master planning for the 168 million square metre site is coordinated by Emaar.

The only non-Saudi IPO of 2010 was in Qatar, for the Mazaya Qatar Real Estate Development Company, which raised QR522.72 million in the first quarter. However, Europe and China are still raising more capital than the GCC equity markets.

Last month contractor Abdullah A.M Al Khodari Sons Company and Riyadh-based Al Jouf Cement Company will issue initial public offerings totaling 77.75 million shares.

“We’re optimistic that we will see a pickup in activity in the GCC towards the end of 2010 and into 2011 and that we will see a return of IPOs to the regional markets,” said Steve Drake, head of Middle East Capital Markets Group, at PricewaterhouseCoopers. “We are seeing a significant increase in activity behind the scenes and a number of companies are gearing up for IPO this year.

He adds that there has been a "step-change" in sentiment and with a pent up demand for capital, companies are preparing to come to the market. "As it takes between six and nine months to prepare for IPO, we’re likely to see more companies list by the end of the year or early 2011,” he said.

European stock exchanges, led by London, saw IPO activity rise for the fifth quarter in a row during the April to June period, amid signs of a modest recovery in investor interest in primary listings. There were 168 IPOs on European exchanges in the first half of 2010 with an offering value of €13,730 million (approximately SR63.75 billion).

The decline in IPO values for the region run contrary to money raised from Islamic bonds, or sukuks. Debt sales from Saudi companies totaled SR12.11 billion ($3.23 billion) by May 2010, up from SR750 million in the period in 2009, according to data compiled by Bloomberg. Saudi Electricity - which recently launched projects and tenders - sold SR7 billion in bonds in May.

Today it was revealed that Saudi Binladen Group, one of the country’s biggest contractors, issued a SR700 million sukuk on 12th July through a private placement to local investors, according to HSBC Saudi Arabia, the lead managfer and book runner for the issue.