Press release

Revival of market sentiment despite low regional IPO performance, driven by stronger global equity capital markets and strong macroeconomic fundamentals

Dubai – 9 February 2014: Market sentiment in the Gulf Cooperation Council’s (“GCC”) equity market in the fourth quarter (“Q4”) 2013 was revived, setting the tone for 2014 in what is anticipated to be a stronger year for Initial Public Offering (“IPO”) activity. Q4 2013 witnessed a total of five IPOs, of which two were on international exchanges, PwC found.

Regional exchanges welcomed the listings of Bawan Co Ltd on the Saudi Stock Exchange ‘Tadawul’ and Takaful Oman Insurance and Al Madina Takaful on the Muscat Securities Market, Oman. Total proceeds from the three regional IPOs in Q4 2013 was USD 178.8 million, 28% lower than the total proceeds in the same quarter last year and 52% lower in the average offering value for the same period, indicating the remainder of sluggish IPO performance. Total proceeds in Q4 2013 were largely driven by the Bawan Co’s offering which raised USD 143.9 million, representing 80.5% of the total amount raised this quarter. The two other offerings by Takaful Oman Insurance and Al Madina Takaful raised USD 10.6 million and USD 24.2 million, respectively.

The two international noteworthy IPOs this quarter were the UAE based Damac Real Estate Development and Kuwait based Action Hotels both listing on the London Stock Exchange (“LSE”) raising USD 379.1 million and USD 50.2 million, respectively.

Looking at the overall IPO performance in 2013, the total number of regional listings compared to 2012 remained stable at 9 IPOs. However, total IPO proceeds in 2013 were 58% lower than in 2012. Total proceeds from the three international offerings during 2013 were 9% higher than the proceeds raised by the 9 regional IPOs.

Steve Drake, Head of PwC’s Capital Markets in the Middle East region said:“Although the number and value of regional IPOs remain low, we are seeing signs of recovery in the region’s market sentiment and investor appetite due to the revival of the international equity capital markets and stronger macroeconomic environment. The pipeline for IPOs in 2014 is expected to be strong as companies seek to raise capital and market indices improve. We are seeing many more referrals as a firm than we did at the same time last year.”

The European IPO market revived as investors seem relieved that the Eurozone crisis has dwindled and the Euro-area recession maybe coming to an end. Both in terms of number of transactions and money raised European IPO activity for 2013 (USD 36.7 billion from 144 IPOs) strongly outperformed 2012 (USD 15.9 billion from 82 IPOs). The London Stock Exchange (LSE) was clearly the leading European exchange in 2013, followed by NYSE Euronext (“EU”) and Deutsche Börse. Private equity-backed IPOs as well as several privatisations have made a robust contribution to European IPO activity in 2013. Seven out of the ten largest European IPOs of the year were all executed in the final quarter; these were, amongst others: Royal Mail raising USD 3.2 billion on LSE in October, Merlin Entertainment raising USD 1.7 billion on LSE in November and Riverstone Energy raising USD 1.2 billion on LSE in October.

The GCC debt market performance in 2013 was relatively slow as compared to 2012. Saudi Arabia’s debt market was one of the most active this quarter both on the conventional, and specifically, Sukuk arena. One of the large issuers this year was Saudi Basic Industries Corporation (“SABIC”) which issued a USD 1,022 million bond in November and a USD 1,000 million bond in September. Corporate conventional issuances this quarter also included USD 500 million by Abu Dhabi Commercial Bank and USD 500 million by another UAE issuer, First Gulf Bank. On the sovereign front, Qatar Central Bank and Central Bank of Bahrain were active players with numerous treasury bills and bond issuances such as two bonds issued by the Qatar Central Bank in December, each with a value of USD 412 million and an aggregate issuance of USD 923 million, USD 79 million and USD 264 million treasury bills this quarter by the Central Bank of Bahrain.

The Sukuk market this quarter thrived in the GCC with significant issuances specifically from Saudi Arabia, UAE and Qatar. The General Authority of Civil Aviation in Saudi Arabia issued a USD 4,056 million Sukuk, one of the region’s largest issuances this year. Also in Saudi, we saw issuances from companies in the financial sector such as the USD 1,067 million Sukuk by the Riyad Bank and the USD 667 million Sukuk by Saudi Hollandi Bank. Furthermore, the UAE based Sukuk Funding Limited and the Qatari Ooredoo were two of the prominent issuers this quarter with a USD 750 million and USD 1,250 million Sukuk, respectively. Sovereign Sukuk issuances were also active this quarter where for example Qatar Central Bank issued two Sukuk in December both with a value of USD 137 million; the Central Bank of Bahrain issued three Sukuk this quarter each with a value of USD 47 million and three additional short term leasing Sukuk each with a value of USD 53 million.  

Steve Drake said:“The consistent growth of Sukuk year after year has proven resilient to market conditions, as it is increasingly becoming a popular source of financing. The debt markets in the region are unlikely to slow in the foreseeable as new projects for infrastructure development continue”.

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Notes to editors:

1. About Capital Markets Watch GCC

Capital Markets Watch GCC surveys conventional bond and Islamic issuance and new primary market equity IPOs on GCC’s principal stock markets and market segments (including exchanges in Kingdom of Saudi Arabia, Kingdom of Bahrain, Kuwait, Sultanate of Oman, Qatar and the United Arab Emirates) on a quarterly basis. This survey was conducted between 20 December 2013 and 31 December 2013 and captures the relevant data based on their transaction date. Capital Markets Watch GCC is prepared by PwC Middle East (www.pwc.com/middle-east). All market data is sourced from publically available information and has not been independently verified by PwC.

2. About IPO Watch Europe

IPO Watch Europe surveys all new primary market equity IPOs on Europe’s principal stock markets and market segments (including exchanges in Austria, Belgium, Denmark, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK) on a quarterly basis. Movements between markets on the same exchange and greenshoe offerings are excluded. IPO Watch Europe is prepared by PricewaterhouseCoopers LLP (www.pwc.com/uk) a limited liability partnership incorporated in England. PricewaterhouseCoopers LLP is a member firm of PricewaterhouseCoopers International Limited. All market data is sourced from the stock markets themselves and has not been independently verified by PricewaterhouseCoopers LLP.
IPO Watch Europe Surveys and annual reviews are available at: http://www.pwc.co.uk/eng/publications/IPO_Watch_Europe_previous_editions.html

3. About the PwCs’ Capital Markets and Accounting Advisory Services Team in the Middle East

The Capital Markets and Accounting Advisory Services Team in the Middle East is part of the PwC’s global network of capital markets specialists who provide a broad range of advisory services to companies and investment banks in connection with capital market transactions. These include preparations for becoming a public company, selecting the right market and advisory team, assisting with reviewing accounting policies and GAAP conversion projects, advising on regulatory issues and undertaking financial and business due diligence investigations.

4. About PwC

PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.
Established in the Middle East for 40 years, PwC has firms in Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and the United Arab Emirates, with around 2,700 people. (www.pwc.com/middle-east)
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
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