Markets show IPO strength boost for construction

Impressive offerings in 2014 raised over $10bn, boosting confidence for GCC construction sector

Middle East financial markets are showing signs of increased confidence. Image: Getty.
Middle East financial markets are showing signs of increased confidence. Image: Getty.

Several large IPOs issued in the GCC in 2014 totalling over $10 billion show signs that the economy is improving, according to a statement issued by Texas-based professional services company PwC.

Improved market performance and macroeconomic fundamentals as well as a conducive regulatory environment were all contributing factors to positive market sentiment and investor appetite, encouraging issuers to execute their IPO plans, PwC’s Capital Markets team found.

Five IPOs in Q4 2104 alone raised $7.3 billion and included:

  • National Commercial Bank which listed on the Saudi Stock Exchange, Tadawul, which raised USD 6.0 billion, making it the largest IPO during 2014 in the GCC.
  • Dubai Parks and Resort PJSC, which listed on the Dubai Financial Market (“DFM”), and raised USD 695 million
  • Amanat Holdings PJSC, another DFM listing, raised USD 382 million
  • Electrical Industries Co., which listed on Tadawul, and raised USD 194 million
  • Al Maha Ceramics, which listed on the Muscat Stock Exchange, and raised USD 21 million.

Saudi's National Commercial Bank is a key player in the construction industry and has assets estimated at aroound $116 billion. 

PwC says 16 IPOs were made during the year - more than in 2013 when nine offerings raised $702 million.

The two leading markets were Saudi Arabia and the UAE. More money was raised via the Tadawul, but more IPOs were made on the DFM during the year. PwC said it was interesting to note that more and more regional companies were floating on the London Stock Exchange. Recently, Gulf Marine Services, Al Noor Hospitals Group, Damac Real Estate Development Limited (“DAMAC”) and Action Hotels plc had listed with the LSE.

Steven Drake, Head of PwC’s Capital Markets team in the Middle East region said: “In 2014 we saw some impressive offerings such as the amount raised by NCB proving that the appetite for IPOs in the region had recovered. With oil prices at relatively low levels and a number of regional market indices lower than we have seen recently, the real challenge is whether or not investor appetite will remain. We should soon know the answer to this question as scheduled Q1 2015 IPOs look to come to market.”

In debt capital markets, the UAE remained a strong player too. The last quarter of the financial year was key, with notable issuances such as Emirates NBD PJSC issuing a USD 1.0 billion bond and Mubadala GE Capital PJSC issuing a USD 500 million bond, both with a 5 year maturity.

The Central Bank of Kuwait issued a series of bonds in Q4 including a five tranche bond each of USD 510 million, a USD 595 million bond and a three tranche bond each of USD 425 million. The Central Bank of Kuwait also issued four tranches of t-bonds each of USD 170 million.

In the sukuk market, Bahrain Mumtalakat Holding Company BSC issued its first USD sukuk issuance in Q4 of USD 600 million. Also accessing the debt market for the first time was flydubai, a UAE based company, issuing its first USD 500 million sukuk in November. Another corporate sukuk was issued by DIFC Investment LLC, the investment arm of Dubai International Financial Centre, raising USD 700 million. On the sovereign front, the Central Bank of Bahrain was an active issuer with a three tranche sukuk of USD 53 million each, as well as a three tranche sukuk of USD 95 million each.

Drake added, “The debt capital markets continued to mature and develop in the region in 2014 where we saw companies accessing the market for the first time as well as the issuance and formation of newly structured debt. Furthermore, certain regulators in the region have released, or will be releasing, new rules to improve the regulatory framework for the bond and sukuk market to support and further encourage issuances. The outlook for debt in the region in 2015 is expected to continue being active; however, we have yet to see the full impact lower oil prices will have on the regions debt markets.”

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