GCC IPOs declined marginally to 46 issuances in 2023

Muscat: The total number of IPOs in the GCC declined marginally to 46 issuances in 2023 from 48 issuances in 2022, according to a new report.

“Although issuance numbers were driven by smaller-ticket initial public offerings (IPOs), post-listing performance from larger names was largely positive,” Kamco Invest said in its latest report titled 'GCC IPOs: 2023 - The Year That Was... January-2024.'

Solid performances from larger stocks were backed by clear signalling and IPO pitches from companies and investment bankers about either growth prospects which drove solid price appreciation or strong dividend yields (5 percent to 6 percent). “Dividend yields from recurring revenue generating and utility companies were sought after by investors, as many of these names also included state-owned enterprises previously, as governments in the region divested their stakes to push ahead with their diversification plans,” the report added.

Saudi Arabia continued its leadership position for IPO issuances from the region in 2023, as 35 out of the 46 GCC IPOs debuted on either the Nomu or Tadawul. Within Saudi Arabia, the Nomu–Parallel market dominated the number of issuances with 27 deals, as compared to 8 deals for the Main Market. The UAE continued its domination in terms of IPO proceeds raking in almost 56.3 percent of the issuance proceeds at around $6.07 billion from its 8 listing on UAE exchanges in 2023.

The average listing size of IPOs on UAE exchanges was $759 million and was significantly higher than the rest of the Gulf Cooperation Council (GCC) average listing size of $124 million, the Kamco Invest report said. “The largest IPO from the region was that of Adnoc Gas which supplies around 60 percent of the UAE's natural gas requirements. The company garnered $2.48 billion from the sale of 5 percent of its business via its primary market issuance as per Bloomberg.

Global IPO proceeds plunge
IPO markets globally declined in 2023 despite most equity markets witnessing healthy double-digit gains during the year, as seen from the 21.8 percent year-on-year (y-o-y) gain in the MSCI World index in 2023.

Though secondary market performance typically drives IPO activity, aggressive monetary tightening leading to higher financing costs kept companies away from the public markets on valuation concerns.

This drove global IPO numbers lower by 8 percent y-o-y to 1,298 IPOs and caused proceeds to decline by 33 percent y-o-y to $123.2 billion, as per data from EY.

Pipeline from GCC IPO
The backdrop for IPOs from 2023 such as interest rates, geopolitics, secondary stock market volatility and oil price volatility will continue to remain crucial in 2024, the Kamco Invest report said. “The pipeline for 2024 based on our estimates at the start of 2024 ranges around 28-30 companies between announced, mandated, and rumoured GCC IPO issuances, which suggests that a repeat of 2023 is possible as similar estimates were available the previous year,” the report added.

“However, if trends from 2023 were to repeat, we also believe that it is likely that issuance proceeds will be dominated by a fewer number of larger issues, while several smaller IPOs should debut on the markets such as the Nomu,” the Kamco Invest report said.

ADES Holding Company, owner and operator of offshore and onshore rigs from Saudi Arabia, recorded the second largest IPO from the region with issuance proceeds of $1.2 billion before listing on the Tadawul Main Market. Pure Health from UAE rounded off the top three IPOs from the GCC raising $0.99 billion from its IPO and subsequently listing on the ADX.

Oman (MSX) contributed with the fourth largest IPO in the region with OQ Gas Network which raised $771 million for 49 percent of its stake based on Bloomberg estimates. Fellow energy name, Abraj Energy Services also raised $244.1 million via its IPO and listed on the MSX, as both issues from Oman were significantly oversubscribed.
In terms of sectoral split, Materials (six) and Consumer (six) and Transportation (six) split top honours in terms of deal numbers, across the region. Healthcare & Pharma (five), Financials (five), Technology (four) and Energy (four) were the other broad sectors which saw a higher number of IPO forays. Sectoral participation from the region remained diverse with corporates with unique niche operating models coming to the primary market.