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GCCs IPO pipeline remains strong this year

The pipeline looks very strong as both governments and private companies are keen to sell equity while there is strong interest in the region

Published: Tue 17 Jan 2023, 5:37 PM

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The UAE and Saudi Arabia were the most active IPO markets in the region last year both in terms of the value and the number of deals.

The UAE and Saudi Arabia were the most active IPO markets in the region last year both in terms of the value and the number of deals.

The pipeline of initial public offerings (IPOs) for the GCC in 2023 shows potential for healthy activity for primary equity issuances in 2023 with the region ending 2022 as one of the few bright spots in global IPO markets.

According to analysts at Kamco Invest, IPO pipeline for 2023 in the region remains strong and based on estimates at the start of the year. It could range between 27-39 companies between announced and rumoured GCC IPO issuances.

The pipeline looks very strong as both governments and private companies are keen to sell equity while there is strong interest in the region.

Analysts believe that the boom of IPOs in the GCC is attributable to multiple factors, including solid economic fundamentals, market evaluation, compelling value proposition and change in perspective from international investors.

“While we expect the trajectory of interest rate hikes, geopolitics, secondary stock market volatility and oil price volatility to continue to remain risks in 2023, it is worth noting that the prevalence of these factors did not stop strong IPO activity in 2022. Further, the GCC will continue to generate interest for its strong idiosyncratic businesses and family office listings from international investors, given their strong competitive positioning and established reach in the market, in our view,” Kamco analysts said in their latest report.

The report noted that the total addressable market for the number of deals in 2023 is much higher than 2022 achievements, based on commentary from the region’s exchanges.

“However, issuers are likely to look at the secondary market for more conducive entry-points in terms of market stability, valuations, and could potentially employ a wait-and-watch approach in 2023 before going ahead with their IPO plans,” they said.

The region’s primary equity capital markets outperformed global peers in 2022, despite mixed secondary market performances across stock exchanges, as quality IPO issuers continued to achieve significant oversubscription for their issuances.

The UAE and Saudi Arabia were the most active IPO markets in the region last year both in terms of the value and the number of deals. According to EFG Hermes, out of $91 billion raised through IPOs worldwide, around $21 billion, or 23 per cent, were raised by GCC companies in 2022. This is a massive increase when compared to the previous year when GCC IPOs accounted for just two per cent, or $10 billion, of the global IPOs.

In the UAE as many as 12 UAE companies came to the market, raising $11 billion, in addition to the joint Abu Dhabi-Riyadh listing of Mena food franchisee Americana, which raised $1.8 billion. Dubai entities that went for IPO included Dubai Electricity and Water Authority, Tecom and Salik.

Globally, there have been a total of 992 IPOs until the end of October 2022, down 44 per cent from the same period in 2021, according to EY data.

In 2022, issuers were able to showcase their unique business models, and in some cases, were rewarded for their value propositions in terms of being strong dividend yield plays from stable businesses such as utilities and consumer names.

Further, there remains opportunities for corporates to explore and execute dual listing options between exchanges, as listed corporates look at improving liquidity by foreign ownership limits (FOL).

Governments in the GCC remain active in both listing state-owned names to exchanges and providing additional support to private companies that are looking to execute an initial public offering.

Abu Dhabi launched the Dh5 billion Abu Dhabi IPO Fund in such an effort to strengthen the ADX, which will be reportedly overseen by the Supreme Council for Financial and Economic Affairs and managed by the Abu Dhabi Department of Economic Development (ADDED), and will invest in 5-10 private companies per year, with a focus on SMEs, and with a target ticket size of between 10=-40 per cent of the float,” Kamco said.

In 2022, total number of IPOs from the GCC jumped to 48 issuances in 2022 from 20 issuances in 2021, as per Kamco analysis. Proceeds for 2022 from GCC issuers went up by 3.1 times to $23.38 billion from $7.52 billion in 2021, based on data from Bloomberg and stock exchanges. IPO markets remained buoyant despite volatility in secondary market indices as issuers remained confident of their business fundamentals, communication to the market, and investor appetite for their issuances, Kamco said.

— issacjohn@khaleejtimes.com



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