The MENA IPO market continued its recovery to end the first half of the year strongly, according to EY's MENA IPO Update: Q2 2014.
There were a total of 16 deals raising $2.4 billion in the first six months of the year, an increase of 14 per cent for both volume and proceeds on the same period in 2013 and the highest amount of capital raised in the first half since 2008. In Q2 2014, there were 11 IPOs raising $1.1 billion, a 129 per cent increase on the previous quarter and a rise of 22 per cent compared to Q2 2013 by deal numbers.
GCC IPOs represented 90 per cent of all MENA IPOs in H1, with 10 GCC IPOs raising $2.26 billion which was 67 per cent and 14 per cent higher than H1 2013. Saudi Arabia led the GCC activity in the first half of the year with four IPOs, followed by the UAE with three, Oman with two and Qatar with one.
Phil Gandier, MENA Transactions Leader, EY, says: "The IPO market is very strong across MENA, particularly among the GCC countries which continue to attract large IPOs and drive the strong performance in the region. In the first half of the year, the majority of IPO deals were in Q2, which is a good indication for a positive second half of the year. All the IPOs executed in Q2 2014 were within the regional market which shows a shift from the trend of international listings in the last few quarters. The combination of improved liquidity and reasonable valuations will continue to drive the IPO activity in the region."
Qatar'sMesaieed Petrochemical Holding Company launched the region's largest issue in H114 in Qatar, raising $903 million in January 2014. Saudi Arabia and Tunisia had the highest number of IPOs with four each across the first half of the year. The fundamentals of the Saudi economy along with the increased appetite for equities and improved valuation have contributed to a better IPO performance in the Kingdom.
"The regional IPO market has seen some notable developments in terms of new deals. Emirates REIT Ltd. was the first listing with a capital raise since 2008 on Nasdaq Dubai and Marka was the first IPO on DFM since 2009. The upgrading of the UAE to emerging markets status in May 2014 will go a long way towards changing investors' perceptions and will help to boost the long-term prospects of the market," says Mayur Pau, MENA IPO Leader, EY.
Activity was spread broadly across sectors in H1 2014, with IPOs in the healthcare, power and utilities, retail, construction, oil and gas, telecommunications, leisure and tourism and industrial manufacturing sectors.
Regional stock market performance and rise of IPO focused-funds
The MENA stock markets have continued the upward momentum from 2013 this year, remaining attractive with average price-to-earnings (PE) of 13.9 at the end of June 2014. The stock exchanges of Kuwait, Morocco and Saudi Arabia had the higher PE ratios.
The number of IPO focused funds in MENA could be on the rise with more IPOs set to enter MENA markets in the next two years, which could bring in greater investment and IPO opportunities. Currently, there are only a handful of IPO-focused funds in MENA. The demand for such funds has increased during the last two years as they offer impressive returns.
Prospects are bright for the second half of 2014
Phil concludes: "In the second half of 2014 we expect the MENA IPO market to remain buoyant with the fundamentals in place for a sustained period of strong and steady IPO activity. With a solid pipeline of IPO-ready businesses across a broad range of geographic markets and from multiple sectors, strong investor confidence and expected "IPO friendly" regulatory and legal reforms in key markets, we expect an uptick of IPOs in the second half of 2014."