After only 3 public issuances in the entire 2016 calendar year, GCC region IPOs appear to be picking back up. Local companies raised $700 million amongst 13 initial public offerings (IPOs) during the first-half of 2017, according to consultancy firm EY.
The UAE and Saudi Arabia are set to be the biggest contributors going forward with a number of announced and rumored IPOs that could be on the books for the coming year including Adnoc, Abu Dhabi Ports, Emirates Global, Aramco, Sanaat, and Gems Education.
These two countries have traditionally always been in the driver’s seat when discussing GCC region IPOs. With governments now coming around to the idea of raising capital through the privatization of state-owned assets, the upcoming listings could be exceptionally large compared to historical averages.
This makes it an interesting time to take a look back at some of the GCC region’s biggest IPOs and how they have performed since.
Performance of GCC’s largest IPOs
The five largest GCC IPOs (GULF) by deal size are National Commercial Bank, DP World, Saudi Telecom, Alinma Bank and Saudi Arabia Mining Co. The IPOs of these companies generated investments of $6 billion, $4.9 billion, $4.1 billion, $2.8 billion, and $2.5 billion respectively through their public offers.
Shares of these companies have returned 21%, -15%, 178%, and 81% and 188% since their respective public issues.
National Commercial Bank
National Commercial Bank, Saudi Arabia’s largest bank, raised nearly $6 billion in an IPO in 2014. Shares of the company were listed on the Saudi Arabian Tadawul Stock Exchange making it the largest IPO in the world after Alibaba in 2014 and the largest ever from the GCC region. The IPO was heavily oversubscribed as retail investors applied for 23 times more shares than the bank offered for sale. GIB Capital and HSBC Saudi Arabia were lead managers and financial advisors for the public issue.
National Commercial Bank offered 500 million shares through the IPO, nearly 25% of its capital. Investment in the NCB IPO was restricted to Saudi Arabian citizens only. The 15% retail tranche, available to Saudi citizens, consisted of 300 million shares, while 10% was allocated to the kingdom’s Public Pension Agency. The stock was priced at 45 riyals ($12) and gained 13% on the first day of trade.
National Commercial Bank trades with the stock ticker 1180.SR on the Tadawul stock exchange. Shares of the company gained 13% within five days of trading after its initial listing, but dropped 6% over the next 12 months. NCB has a market cap of $28 billion, and the company’s stock has gained 21% since its public listing on the Tadawul Stock Exchange in November 2014. YTD in 2017, shares of NCB are up 25%.
At a price-to-book ratio of 2.0x, NCB trades at a discount to Saudi Arabia’s broader banking sector.
Dubai-based DP World, the fourth largest port operator globally, raised $5 billion in an IPO in 2007. DP World has operations around the world, but its biggest facility remains the port of Jebel Ali, in Dubai, one of the world’s top 10 container ports.
The company was the first to list exclusively on the Dubai International Financial Exchange. The IPO was 15 times oversubscribed as investors offered $80 billion for the shares on offer. As a result, during the final allocation DP World issued 498 million extra shares on the back of high demand. The company issued 3.8 billion shares in total, representing 23% of the company’s capital. Shares of the company were priced at $1.30, which fell in the higher band of the $1-$1.30 range announced by the company. Following the initial public offering, DP World was valued at $21.6 billion. Currently, the firm has a market cap of $19.3 billion.
DP World trades on the Dubai and Frankfurt stock exchanges with tickers DPW.DU and 3DW.F Shares of the company were delisted from the London Stock Exchange in 2015.DP World’s stock price has declined 16% since its public listing in April 2007. YTD, shares of DP World are up 30%.
Saudi Telecom, the largest telecom company in Saudi Arabia, sold 30% of its equity in an IPO in 2002 raising nearly $4.1 billion. The public offering was heavily oversubscribed with investor applications worth nearly $10 billion, 2.5 times the number of shares offered. The company sold 90 million shares at 170 riyals, of which 60 million were reserved for Saudi citizens, with the remainder being allocated to two public pension funds.
Saudi Telecom trades on the Tadawul stock exchange with the ticker 7010.SR. Shares of the company have nearly doubled since its public listing in December 2002. YTD, shares of Saudi Telecom have declined 0.8% and trade at a PE ratio of 15.7x. Sell-side analysts are bullish on Saudi Telecom and have assigned 2 buy ratings, 1 sell ratings and 14 hold ratings.
Saudi Arabia-based Alinma Bank’s shares were issued to the public in 2007 after several delays. The bank’s IPO raised proceeds of $2.8 billion (10.6 billion riyals) from 5.4 million subscribers. The company offered 70% of its capital through 1.05 billion shares at an offer price of 10 riyals each. The issue was oversubscribed as investors offered $4.9 billion (18.3 billion riyals) 74% more than the value of shares on offer.
As with other Saudi Arabian IPOs, the offer was only open to Saudi nationals for which 70% of the shares were reserved. The remaining 30% were shared equally between The Public Investment Fund and two state pension funds — the General Organisation for Social Insurance (GOSI) and the Public Pension Agency.
Alinma Bank, formed in 2006 was yet to formally begin business activities when its IPO was announced. The bank began operations in 2008 with 15 branches, and today operates 77 branches across the country.
Alinma Bank trades on the Tadawul stock exchange with ticker 1150.SR. Shares of the company have gained 81% in value since its public listing in July 2007. YTD, shares of Alinma Bank have rallied 18.4% and trade at a price-to-book ratio of 1.4x. Sell-side analysts are bullish on Alinma Bank and have assigned 3 buy ratings, 4 sell ratings and 6 hold ratings.
Saudi Arabian Mining Co
Saudi Arabian Mining Co, commonly known as Ma’aden, raised nearly $2.5 billion (9.3 billion riyals) in an IPO in July 2008. Shares of the company were listed on the Saudi Arabian Tadawul Stock Exchange at 20 riyals per share. Following the IPO, the firm was valued at $4.9 billion and currently its value has increased 400% to $16.4 billion.
The IPO was oversubscribed as retail investors applied for 2 times more shares than the bank offered for sale. JPMorgan was the sole book runner while Samba Financial Capital was the lead manager for the public issue.
Saudi Arabian Mining Co offered 462.5 million shares through the IPO, nearly 50% of its capital. The stock was priced at 20 riyals and gained 5% on the first day of trading.
Proceeds from the IPO were used to cover costs related to the company’s projects, namely a 740,000 tonne aluminum smelter with Rio Tinto and a 3 million tonnes phosphate and by-products plant with Saudi Basic Industries Corporation.
Saudi Arabian Mining Co trades with the stock ticker 1211.SR on the Tadawul stock exchange. The company’s stock has gained 188% since its IPO on the Tadawul Stock Exchange in July 2008 but dropped 18% within a year of listing. YTD, shares of Ma’aden are up 33%.
At a price to earnings ratio of 190x, Saudi Arabian Mining shares trade at a premium to Saudi Arabian stock markets. Sell-side analysts have assigned 2 buy ratings, 6 sell ratings and 5 hold ratings to shares of the company.
Going forward, IPO activities will continue to gain momentum in the region, despite proliferating geopolitical uncertainties and subdued oil prices. However, investors will keep a close watch on the length and breadth of economic diversification in the region. As a long term economic objective to reduce reliance on energy exports, countries across GCC are spearheading ambitious diversification plans. These ambitious plans are underpinned by increased investment into infrastructure, logistics, tourism, technology, and human resource development. Subdued oil prices will continue to be a drag on the economy, but if the non-oil component can significantly offset this impact, investor confidence should further pick up.