After a summer in which equity preachers in the Middle East and North Africa found their faith tested by an absence of offerings, Oman’s first initial public offering (IPO) in two years is welcome news indeed. Nawras, the sultanate’s second mobile phone player, has opened for subscriptions to 40 percent of its capital in a month-long offering from September 15 to October 14, with the intent of raising between $471 million and $609 million. The wide range in projected IPO revenue is because the company is using book building to determine the issue price for the $260 million shares on offer, a first in Oman’s stock market history. This method of setting the issue price also gives Nawras greater ability to stir interest among international institutional investors, whereas the region’s other IPOs in the year to date were either inaccessible or short on attractiveness for international money.
But, for all the good signals the Nawras IPO sends regarding the vitality of the Muscat Stock Exchange, it is only a light drizzle after a drought and regional primary markets show only the vaguest promise for the fourth quarter.
This dusty picture was reinforced by corporate talk around the Gulf from late September when executives of Bahrain’s aluminum smelter, Alba, and United Arab Emirate information technology retailer Axiom, independently from each other touted the possibility of going public in the not-too-distant future. So far in 2010, similar announcements of possible impending flotation have far outnumbered the subscription offers actually put in front of investors. This is not to say that IPOs were a bad idea this year. According to Zawya, the thin crop of 2010 market entrants in the MENA — 21 companies entering bourses in Riyadh, Damascus, Amman, Tunis and Cairo — has seen eight stocks achieve massive growth. By September 20, each of these stocks was quoted at least at twice their issue price.
The list of gainers was led by Egypt’s solitary debutant, juicer Juhayna, which in a little more than three months rose from its EGP 1 par value to EGP 5.49 per share, however the real gain margin was much lower than 450 percent. The actual issue price, which included a hefty EGP 3.66 premium, indicates a three-month return rate of 18 percent since flotation.
On September 20, Three of the new market entrants were quoted lower than at the close of their respective first trading days. One of these underperformers was the largest IPO offered in the first 36 weeks of 2010: Saudi urban developer Knowledge Economic City. Its share price range in September was 12 to 14 percent below the stock’s SAR 10 issue price.
But there is one stock market in the wider Middle East which this year has been outperforming the region and most other finance centers on earth. The Istanbul Stock Exchange’s ISE 100 index, which closed 2009 below 53,000 points, has recently raced from one peak to the next, closing September 22 at 64,479.14 points. After a hiatus in new listings throughout much of the past decade, 2010 has seen IPO announcements bloom on the ISE.
According to the exchange, 14 IPOs in the first half of 2010 raised $842 million, and the official ISE list of current IPO applicants just added its 10th hopeful issuer on September 20: retail group Kiler, which applied to offer 13.05 percent of post-IPO capital of $93.8 million.
Of the IPOs in the Turkish pipeline, almost half are related to real estate — a traditional favorite of the Middle Eastern investor. According to the Istanbul Stock Exchange, four GYOs (the acronym in Turkish for real estate investment trusts) are in the 2010 IPO pipeline, the largest of which is the Emlak Konut GYO with a capital of TRY 2.5 billion, (Emlak Konut is an affiliate of Turkey’s Housing Development Authority).
Another fund is being floated by Akfen Group, which is known internationally for, among other things, construction and operation of airports. The Akfen GYO, which received approval for its IPO on August 25, is a partner with France’s Accor Group in hotel developments in Turkey, Russia and the Commonwealth of Independent States.
