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Mena IPO proceeds surge 129% in second quarter.

The initial public offering market in the Middle East sustained its resilience with proceeds jumping 129 per cent in the second quarter and rising 14 per cent in the first half of this year.

In the first six months, there were a total of 16 deals raising $2.4 billion, 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, according to EY's "Mena IPO Update: Q2 2014".

In the second quarter, 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 second quarter 2013 by deal numbers.

GCC IPOs represented 90 per cent of all Mena IPOs in the first half, with 10 GCC IPOs raising $2.26 billion which was 67 per cent and 14 per cent higher than first half 2013. Saudi Arabia led 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.

The total value of IPOs in the six GCC countries peaked at a record $12 billion in 2007 and then plunged as markets froze up. Last year, GCC IPOs totalled roughly $2 billion.

Earlier this year, Dubai saw its first two IPOs since 2009, a $175 million offer by Emirates Reit and a $75 million offer by retail and restaurant firm Marka. Both were heavily subscribed, reflecting the strong appetite among investors in the wake of a major rebound of share prices with Dubai's benchmark index more than tripling since the end of 2012. The new UAE Companies Law, awaiting final approval by authorities and expected to take effect by end-2013, would be more significant in giving a further fillip to the IPO market in the UAE.

"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 second quarter, which is a good indication for a positive second half of the year," said Phil Gandier, Mena transactions leader at EY.

He said all the IPOs executed in the quarter 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's Mesaieed Petrochemical Holding Company launched the region's largest issue in the first half 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 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," said Mayur Pau, Mena IPO leader at EY.

Activity was spread broadly across sectors in first half 2014, with IPOs in the healthcare, power and utilities, retail, construction, oil and gas, telecommunications, leisure and tourism and industrial manufacturing sectors. The Menastock markets have continued the upward momentum from 2013 this year, remaining attractive with average price-to-earnings, or 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 the 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 the Mena. The demand for such funds has increased during the last two years as they offer impressive returns.

"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," said Gandier. "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," said Gandier.


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Publication:Khaleej Times (Dubai, United Arab Emirates)
Geographic Code:7UNIT
Date:Jul 20, 2014
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