The leader in Middle Eastern primary market action in August came — as has been the case for several other months of this year — from Saudi Arabia. The initial public offering of Methanol Chemicals Co (Chemanol) was worth $193 million and accounted for 79% of the aggregate amount of $245 million available last month in IPOs around the region. Different to numerous other recent IPOs which were green-field ventures, the Chemanol flotation originated from a company that has a substantial history of manufacturing activity — it was established in 1989 — which sought a flotation to obtain new capital for corporate expansion.
Its area of activity may be less splendorous than Islamic banking, but Chemanol allocated 70% of the offering to retail buyers, demonstrating confidence that it would be able to get retail investors interested in its offering at a price of SAR 12 ($3.2) per share, which included an offering premium of SAR 2 ($0.53). First results of the IPO showed that demand indeed reached high, with subscriptions totaling $1.1 billion.
Last month saw four other smaller IPOs seeking to raise between $7.8 million and $16.3 million in capital, all in Jordan. Two firms in the real estate sector each offered slightly less than half of their equity to investors; the other two offerings came from a credit card and an investment company.
A total of five companies started trading around the region in an environment of traditionally low August volumes, with international markets additionally subdued by worries over volatile energy markets, unending financial crises and recession talk. The five firms are Sohar Power in Oman, Tunisian conglomerate Poulina Group, Astra Industrial Group on the Saudi Stock Exchange, Jordanian real estate firm Amwaj Properties and the UAE’s Dar al Takaful insurance company.
Even as the last month was tough on MENA bourses, all five debutants had a decent or good start, achieving first-day gains of 12% to 437% — the latter feat was accomplished by Islamic insurer Dar al Takaful on the Dubai Financial Market and it underscores the current comparative edge of Arab bourses in the emerging markets theater. The BRIC (Brazil, Russia, India, China) markets’ top summer IPO of China South Locomotive, which raised $1.49 billion in August on the Shanghai and Hong Kong stock markets, managed a 58% gain on its first trading day in Shanghai, but disappointed in Hong Kong with a measly 1% burp. India’s Reliance Power, which has been battered on the bourse since its Jan 2008 IPO, in August scrapped the IPO of a telecoms equipment subsidiary, Reliance Infratel.
Heavyweight Arab IPOs
Although Middle Eastern investors were expected to have their minds a little less on sprinting after shares and a little more on summer diversions, two well-known Arab companies chose August to start large rights issues that will extend into September. Big money was sought by regional telecommunications operator Zain Group through its $4.5 billion rights issue for a 75% capital increase on the Kuwait Stock Exchange, which opened on August 17 and will run until September 18. A second notable rights issue was that of Egypt’s Al Ezz Steel. The company, one of the country’s leading manufacturers and an important player on the regional materials scene, announced on August 7 that it would seek to triple its share capital by offering almost 365 million new shares between August 26 and September 25 in a rights issue worth $341 million.
Also a September timeframe was selected for the $98 million telecommunications industry IPO of Kuwait’s third mobile operator. Kuwait Telecommunications Co, which was formally established in July as a company with 26% stake holding by state entities and 24% ownership by Saudi communications group STC, is offering 250 million shares, representing 50% of its capital, for subscription at a share price of $0.39.
Much more is expected for September and for the fourth quarter of 2008, with travel and tourism related IPOs something to watch for. The National Air Services offering on the Saudi Stock Exchange has been announced with a size of $600 million for 30% in the company, although the subscription period has yet to be set. In October, the Al Tayyar Travel Group will look to raise $320 million, also on the SSE, while Dubai-based retail and real estate group Aswaaq is said to plan offering 55% of its equity for participation in the same month.
Media reports from Kuwait said that the Kuwait Stock Exchange’s technical committee approved listing of four new companies, including Wataniya Airlines (or Kuwait National Airlines Co), which had sold 350 million shares, for $123.5 million, through an IPO in early 2006 and intends to start operating as a luxury carrier in 2009.
