Trimary markets in December ended 2007 on a much higher note than many had foreseen for the year when giving their expectations 12 months ago, depicting 2007 as recovery year for regional financial markets with little to get excited about. And specifically, after an erratic performance in 2006, the market for initial public offerings in 2007 was described as a bottle of champagne without the sparkle. Instead, the IPO market in 2007 has surprised analysts and inspired new trust that 2008 and the following years will bring larger and qualitatively strong IPOs. While not quite reaching the size of the two largest IPOs in 2007 – of banks VTG in Russia and Citic in China – the Arab countries’ largest IPO, by DP World, was not far behind as it fetched $4.96 billion compared with around $8 billion for VTG and almost $6 billion by Citic.
2007 also proved that investor’s appetite for IPOs has not dampened and in the month of December, the market witnessed the announcement, closing or listing of at least seven IPOs. Starting with the UAE, Abu Dhabi saw three IPO announcements in December. Islamic insurance provider, Mithaq Lil-Takaful, said it will float 55% of its shares for general subscription in January 2008. But the company did not disclose the amount it wants to raise. Also on the Abu Dhabi Securities Market (ADSM), Al Nahda International Education Company plans to offer 72% of its shares to the public in an attempt to raise over AED 727 million ($198 million). With National Bank of Abu Dhabi as the lead manager, the IPO is scheduled to be launched in the first quarter of 2008. Third in line but in no way least, diversified group Al Qudra Holding announced that it will list on the ADSM after offering 30% of its shares in Q1 2008. Although the company did not disclose the amount it will raise, demand for Al Qudra’s shares is expected to be high according to market analysts.
But the most interesting announcement in the UAE which has generated a lot of buzz on the GCC’s stock markets came from Dubai-based Emirates Airlines, the region’s largest and the world’s eighth largest airline, which said it will launch an initial public offering that could value the carrier at up to $20 billion. The move is in line with the company’s expansion strategy and would help financing more than $60 billion of aircraft purchases. Although rumors about an IPO were leaked in early November, the country’s flagship carrier officially announced its plans for an IPO in December. Emirates Air, which is fully owned by the Government of Dubai, said the timing and the value of the offer will be determined at a later date. The shares are expected to list on the Dubai International Financial Exchange (DIFX).
In Saudi Arabia, Dar Al Arkan Real Estate Development Company, which offered 59.45 million shares or 11.01% of its stock at SR 56 ($14.90) each was oversubscribed 423%, attracting more than SR 14 billion, according to lead manager, Samba Financial Group. The offering’s retail tranche was expanded from 30% to half the total offering upon strong demand from almost 2 million individual investors and the stock has been scheduled to start trading on the Saudi bourse on December 29.
In North Africa, two IPOs are of note in Tunisia despite a shortage of information: the Société de Production Agricole de Téboulba (SOPAT) and Automobile Reseau Tunisien et Services (Artes). SOPAT, which produces and distributes frozen chicken products, offered on December 3 around 26% of its shares in effort to raise around TND 5.75 million ($4.65 million). Although the offering closed on December 15, there hasn’t been any announcement by the company in terms of the success of the IPO. Artes, a local distributor of Nissan and Renault cars, announced on December 7 that it will offer 30 to 35% of its shares on the Tunisian Stock Exchange, without providing further information. Moving west to Morocco, Microdata, a distributor of computers and information technology equipment, has announced in early December the offering of 30% of its shares on the Casablanca Stock Exchange. Looking to raise around MAD 121 million ($15.4 million), the Microdata IPO set December 26 as closing date.
A long awaited privatization measure in the Levant was implemented through the IPO for 71% of Jordanian flag carrier, Royal Jordanian (RJ). Its IPO raised JOD 184.5 million ($260 million) between November 21 and December 7. RJ has a market capitalization of JD 260 million. Over 29,000 subscribers, including regional and international institutional investors, participated in the offering.
Although the dollar’s slide and the debate over a possible revaluation has created some concerns in the IPO market, analysts believe this concern is not wide-spread and that 2008 is expected to be another record breaking year for IPOs. In the first nine months of 2007, the six Gulf countries raised $5.9 billion according to a report by the Abu Dhabi-based private equity firm Gulf Capital. In another step to open up the Middle East’s markets to the rest of the world, the region’s largest stock market, the Saudi Stock Exchange, announced in December that it plans to allow foreigners to subscribe to IPOs. Without stating the projected date for the move, Abdul Rahman Al-Tuwaijri, chairman of the kingdom’s Capital Market Authority, said in an interview that foreigners would gain permission to invest through domestic funds which will be established by licensed firms.
