Middle East stock markets set to continue strong run of IPOs

February 1, 2023, 9:29 AM

People, Person, Man — Improving economic conditions in Saudi Arabia are driving confidence for future business activity over the next 12 months

Forthcoming IPOs include Lulu Group, Dukhan Bank and Abraj Energy
Last year saw 143% increase in listings when compared to 2021

The stock markets in the Middle East and North Africa are preparing for a strong pipeline of initial public offerings (IPOs) in the coming months.

Bourses across the region are looking to build on the success of 2022 when it saw a record number of 51 IPOs and combined proceeds of $22 billion.

Abu Dhabi National Oil Company’s gas business is among those planning listings this year, according to Reuters, and Lulu Group, the Abu Dhabi-headquartered supermarket chain, is also planning a listing on the Abu Dhabi Securities Exchange.

Dubai state-linked IPOs could include energy company Enoc and airport services provider Dnata after Dubai Financial Market saw listings during Q4 of school operator Taaleem Holdings and Emirates Central Cooling Systems Corporation, better known as Empower.

Dukhan Bank, Qatar’s fifth-largest bank, is planning to go public and list on the Doha stock exchange while Oman’s oil and gas drilling services firm Abraj Energy Services plans to list up to 49 percent of its shares on the Muscat stock exchange in March.

And Egypt’s government intends to unveil the plan for offering state-run companies on the Egyptian Exchange this year.

Last year witnessed a 143 percent increase in the number of listings when compared to the 21 announced in 2021, and a 179 percent hike in value, according to the EY Mena IPO Eye Q4 2022 report.

The strong run across the Mena region’s markets included 20 IPOs in Q4 that raised $7.3 billion in proceeds.

The number of IPOs was the highest of the year although Q2 marked the largest proceeds following the listing of Dubai Electricity and Water Authority (Dewa) on the Dubai Financial Market which raised a record $6.1 billion.

Brad Watson, EY Mena strategy and transactions leader, said “interest and liquidity in the region is continuing to defy global trends with “a healthy IPO pipeline across the region against the backdrop of a challenging and volatile global economic environment.”

Globally, 2022 saw a 45 percent decrease in volume and 61 percent decrease in value year-on-year, with the strongest downward trend observed in the Americas.

However, while the Mena region bucked the trend, equity performance experienced volatility throughout 2022 due to rising interest rates, inflation, and geopolitical unrest, which impacted investor sentiment.

As a result, 24 out of the region’s 51 IPOs had a negative return compared to their IPO price by the end of the year.

Saudi Arabia continued to dominate listing activity in Q4 in the region with seven IPOs on the Tadawul main market, raising $4.7 billion, and six IPOs raising $65.2 million on the Nomu parallel market.

Highlights included a first-time dual offering and concurrent IPO on Abu Dhabi Securities Exchange (ADX) and the Tadawul by Americana Restaurants International. In total, the company offered 30 percent of the equity to raise $1.8 billion.

The fourth quarter of 2022 saw an increase in IPO activity across the wider Mena region with smaller listings in Oman, Morocco, and Tunisia.

The IPO of Pearl Real Estate Investment Fund raised $60.7 million on the Muscat Stock Exchange, Akdital Holding raised $75.6 million on the Casablanca Stock Exchange and Assurances Maghrebia Vie raised $14.6 million on the Tunis Stock Exchange.

Despite a lower number of IPOs and trading volumes, the Egyptian Exchange outperformed the largest GCC markets in 2022 with an annual gain of 22.2 percent.

Gregory Hughes, EY Mena IPO and transaction diligence leader, said: “The region is coming together with the recent first-time regional dual listing and concurrent IPO of Americana Restaurants on ADX and Tadawul, and announced collaborations with regional and international exchanges, as well as a unified set of ESG disclosure metrics by the GCC Exchanges Committee.

“The question remains whether the global economic outlook and lower GDP forecasts for the Mena region will impact expected listings despite the pipeline of large government-backed and private company IPOs.”