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Strong demand for Oman’s biggest IPO in two decades

Muscat Stock Exchange will offer Oman's biggest IPO Reuters
The IPO will be offered on the Muscat Stock Exchange in a bid to enter the Emerging Markets Index
  • OQ Gas Network selling 49% of shares
  • Largest IPO for almost 20 years
  • Could raise $750m

Oman’s joint-biggest initial public offering is attracting huge interest among retail investors, despite subdued recent activity on Muscat’s bourse, a senior financial industry executive told AGBI.

OQ Gas Network (OQGN), a subsidiary of national oil company OQ, will sell 49 percent – or 2.12 billion – of its shares in an IPO.

The company this week announced a price range of OMR0.131 to 0.140, so could raise up to about OMR288 million ($747.5 million), according to AGBI calculations.

Subscriptions will be open from September 26 to October 9, and OQGN is slated to list on the Muscat Stock Exchange (MSX) on October 24.

Like most Omani IPOs, OQGN’s flotation will probably price at the top of its range, said Hunaina Banatwala, vice president for institutional sales at Muscat’s Ubhar Capital. Retail investors will get a guaranteed 10 percent discount on the price paid by institutions. 

If OQGN does raise the maximum amount it would equal Oman’s previous largest IPO, the flotation of Oman Telecommunications (Omantel) in 2005.

“The IPO is generating a very strong buzz,” said Banatwala. “We’re receiving calls every day from people wanting to open an account to be able to participate in the IPO.”

Hani Abuagla, a senior market analyst at XTB Mena brokerage in Dubai, had a similar view.

“The response from investors will be good, especially from institutional investors,” he said. “Gulf investors will join as well as foreign investors and Omanis themselves.”

The strong investor appetite is similar to that seen for the IPO of another OQ subsidiary, Abraj Energy Services. It sold 49 percent of its shares in March, raising $244 million, and received orders of $2.05 billion.

Abraaj’s stock ended Thursday at OMR 0.293, up 17.7 percent on its IPO price of OMR0.249 per share, outperforming Muscat’s main index, which had fallen 3.7 percent this year as of September 21. 

“The success of Abraaj’s IPO, where many retail investors made a quick profit, is helping attract a lot of people who had never bought stocks before to this new listing,” said Banatwala.

Anchor investors

For OQGN – Oman’s monopoly gas transporter and owner of the country’s gas pipeline network – retail investors can buy 30 percent of the shares sold in the IPO, with 40 percent reserved for institutions.

Three so-called anchor investors will each buy 10 percent of the IPO shares – Saudi Omani Investment Co, which is wholly owned by Saudi Arabia’s Public Investment Fund; Falcon Investments, a Qatar Investment Authority subsidiary; and Belgium’s Fluxys International.

“Strong anchor investors such as these give other investors the confidence that this is a good IPO to participate in,” said Banatwala.

Foreign institutions will be allocated shares on a discretionary, rather than pro rata, basis as is the case with the retail investor portion.

“There’s a real effort to get more visibility and obtain a wider participation from different types of investors,” said Banatwala.

Expanding the bourse

In March 2022 the CEO of Muscat’s bourse said Oman aims to list 35 state-owned companies in the following five years.

“In terms of the MSX’s ability to absorb these new listings, it will rely a lot on regional and foreign participation – these are all good government assets which will be divested,” said Banatwala.

Bourse turnover in the first six months of 2023 totalled $1.1 billion, down 25.7 percent year on year, while the number of shares traded plunged 44.5 percent over the same period to 1.53 billion.

“The IPO programme is a means to attract foreign investment and make the MSX more representative of Oman’s economy, bringing greater diversification to the bourse and making it less dominated by banks and insurers,” said Banatwala.

Institutional investors will buy OQGN for its dividend, rather than as a growth stock and so are likely to buy and hold rather than speculate in the shares.

However, Banatwala added: “There’s still a sizeable retail allocation, so there will still be a lot of trading in the stock after listing.”

As well as raising money for the government, Oman’s part-privatisation is also aimed at gaining the country entry to MSCI’s emerging market index. To be eligible, a country must have at least three stocks that meet certain thresholds in terms of size and stock liquidity.

Currently, only Bank Muscat qualifies but August’s merger of HSBC Bank Oman and Sohar International Bank will create a second and OQGN will become the third, said Banatwala.

Joining MSCI’s emerging market index is a multi-year process so could be achieved by the mid-to-late 2020s, she explained.

“Oman needs to diversify its economy,” added XTB Mena’s Abuagla. “Oman’s stock market is very good in terms of management, but it needs more institutional investors (to) increase the market value.”

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