Growing investor confidence is being credited for February’s rise in the number of initial public offerings (IPOs) throughout the Middle East and North Africa, relative to both the previous month and the same period in 2009.
According to analysts, the rising tide in regional markets in early 2010 is gradually reviving market confidence.
Market experts say they expect the markets to move from “recovery to stability” and are encouraging companies which have already shown solid financial performance to try their luck in the capital markets.
“Overall, I see that the market is in relatively good shape, everything is fairly under control, such as inflation rates, and the financial results of publicly listed companies have been better than expected. I am optimistic about the market,” said Adnan Abu Ghazaleh, a senior financial analyst at Zawya.
Experts also say that private equity sponsors will be committed to forging ahead with a steady flow of portfolio companies, particularly with debt maturities closing in and results looking better as recessionary periods end.
In addition, investors should expect several large IPOs in the form of carve-outs or spinoffs of government assets.
The pipeline
Recent IPO announcements include Saudi perfumer Arabian Oud Company, which plans to offer a substantial portion of its shares to the public.
The company said it is now awaiting the final approval from the market authority to launch its IPO in the second quarter of 2010.
The perfumer, which operates a franchise across the Middle East and Africa, expects to open a new factory in Riyadh in March. Abdullah bin Mohammed al-Duwaish, the company’s vice chairman, said his firm had weathered the financial crisis well and was able to acquire “entire forests in Indonesia” during the downturn. Arabian Oud Company will be listed on the Saudi Stock Exchange.
Also in Saudi Arabia, City Cement Company, which was established in 2005 with initial capital of 550 million Saudi riyals ($147 million), will float 275 million shares — half of the company — in an attempt to raise around $74 million to fund its expansion strategy. The company has appointed Riyadh Capital as the financial advisor and plans to launch the IPO in the second quarter.
Tunisia will witness two IPOs in the first half of 2010, as the stabilizing capital market is encouraging companies to brave the local bourse and raise funds.
Government owned Compagnie Tunisienne de Navigation, a chartering and freight forwarding firm, will go public in early June as part of the government’s plan to privatize state assets. The company will be listed on the Tunis Stock Exchange.
Tunis-based Assurances SALIM, a provider of life and non-life insurance services, said it will float 25 percent of the company — 660,000 shares — and is seeking to raise around $7.1 million. The IPO will be launched March 1 and close March 12.
The region’s youngest bourse, the Damascus Securities Exchange, also launched its all-share index ‘DWX’ in February. The DWX will be displayed in the bourse’s daily bulletins. It is a market-value-weighted index and one of a multitude of measures the Syrian government is undertaking to develop the exchange.
Meanwhile, Aman Syria for Takaful Insurance plans to sell 51 percent of its shares in an IPO in the early part of the second quarter.
Aman Syria, which was licensed in 2008, has capital of $28.5 million, is 44 percent owned by Dubai Islamic Insurance and Reinsurance Co. and 5 percent owned by Al Salam Bank-Sudan.
Return to growth for IPOs
Analysts agree that 2009 was largely a “transition year.” Looking forward, several market developments are in place to allow a return to growth for IPOs in 2010.
The pace of IPO filings and announcements has picked up, with more than 150 IPOs planned for 2010, including a number of profitable, fast-growing regional airlines, high-profile real estate companies, and interestingly, a number of financial services firms.
The common theme experts see with the stronger deals is that investors are looking for opportunities to invest in growing companies. A quick analysis of the regional IPO pipeline as well as the broader backlog suggests that there is a significant supply of growth companies waiting to tap the markets, and the “decent” returns of 2009’s quality growth IPOs demonstrates that there is adequate demand to support it.
Even if broader equity market returns are mediocre, 2010 could nevertheless mark the beginning of a strong IPO cycle.
