GCC IPO markets in 2020 could see healthy activity, given that corporates who were waiting for state-owned enterprises to provide leadership in primary equity markets could enter the market. However, secondary equity markets would continue to be key for valuation in our view, along with stable geopolitics in the backdrop of impending US elections and a resolution to Brexit, according to KAMCO Research.
Government initiatives and regulatory reforms like easing foreign strategic ownership limits of 49 percent would be welcome for both primary and secondary markets, as seen in 2019. Initiatives and policies that support and encourage SMEs and family business to take the IPO route would also aid primary equity markets and investors to tap into entities with a wide variety of business models and product offerings.
Apart from privatised state-owned issuances, other corporates witnessed lower IPO issuances, despite most GCC secondary markets witnessing gains in 2019 (MSCI GCC: +5.9%). IPO ambitions for these corporates were potentially deferred for higher investor participation in future, given that most of primary market liquidity was taken up by the IPOs of the aforementioned state -owned enterprises.
Country level participation in the GCC was lower in 2019 than in 2018, when all countries saw representation in IPO activity. Qatar and Oman were the other participants in the region with Qatar’s IPO of dairy company – Baladna, and Oman witnessing the IPO of Musandam Power ($23.1m), as per Bloomberg.
Industry participation of IPOs in the GCC which was dominated by REIT IPOs from 2017 onwards saw more wider representation in 2019. Apart from Energy, Real Estate, Financials and the Consumer sector, Technology and Commercial & Professional Services sectors also participated in the region’s IPO market, with the listing of Al Moammar Information Systems ($57.6m) and Maharrah Human Resources Co. ($207m).
The Education segment which remains one of the most preferred investment sectors in the GCC, with very few listed names saw the listing of the private school operator - Ataa Educational Company, as the company raised $92.8m from a regional market. In IPOs and listings on foreign exchanges, the payment solutions company Network International Holdings listed on the London Stock Exchange and raised a total of $2.69bn through primary and additional offerings.
The GCC IPO market witnessed a landmark year in 2019, despite a lower number of primary market issuances y-o-y from 2018. Total number of corporate IPOs in the region declined to 9 issuances in 2019 from 17 issuances and 28 issuances witnessed in 2018 and 2017, respectively.
