BrazilEY reports IPO activity and value on the up for the Middle East in Q2
In its quarterly IPO round-up for the Middle East and North African region, the Big Four accounting and advisory firm EY has reported an increase in both deal volume and value for Q2 2018.
According to Ernst & Young’s latest MENA IPO Eye report, $881.5m was raised in the region through nine IPOs in the second quarter of this year, with seven of the deals recorded in the GCC and Saudi Arabia accounting for four to lead the $780.3 million recorded in the Gulf. Altogether, IPO activity increased by 12.5 percent year-on-year, while deal value jumped by 42.8 percent.
The local rise in deal number and proceeds is in contrast to recent global trends, with 325 IPOs raising $45 billion worldwide over the past quarter to register a respective decline of 26 percent and 19 percent compared to Q2 of 2017. Still, the Big Four firm characterised local IPO activity as flat overall for the first half of this year – albeit with a promising short-term outlook.
“Although oil prices have increased, MENA countries are still feeling the impact of the significant drop in oil prices in recent years. Gregory Hughes, EY’s IPO Leader for MENA explained. “IPO activity was relatively slow in H1 2018, but activity is expected to pick up in H2 2018 and beyond owing to the strong upcoming IPO pipeline.”
Hughes continued; “Reasonably strong equity markets, solid corporate earnings in many jurisdictions (albeit with some exceptions), and healthy pipelines across sectors and markets globally should drive an increase in listings in H2 2018 and beyond. However, there is still significant uncertainty in several parts of Europe due to currency fluctuations in emerging markets and the ongoing tariff discussions globally driven by the USA.”
Locally, the upswing in results of the quarter was driven primarily by activity in Saudi Arabia, which was the only GCC nation to record activity with the exception of the $12.8 million raised from a single IPO in Oman. Outside of the GCC, both Egypt and Morocco each recorded one deal, with growing pipelines reported for Oman and Egypt in the near future and increased investor interest in the Saudi Arabian market.
“The future inclusion of Saudi Arabia in the MSCI emerging markets index has drawn positive attention to the country, attracting investors from across the world,” Phil Gandier, EY MENA Transactions Leader said. “The country’s Capital Market Authority has brought in a mandatory corporate governance code, considerably relaxed rules for foreign investors, and raised settlement rules for the domestic Tadawul stock market toward global standards, which have all led to a favorable transacting environment.”
Further pushing the local market was the ongoing regional trend toward Real Estate Investment Trust listings (REITs, which provide investors a liquid stake in income-producing real estate enterprises), with four of the Q2 deals being in the sector and together raising $553 million of the ~ $882 million overall total. The oil & gas sector attracted the next highest capital of $225 million, with financial services contributing $57.2 million.
