GCC bourses set for robust IPO activity in 2021

Companies in Saudi Arabia and the UAE are likely to dominate issuances in the region, Kamco Invest says

Four out of the seven GCC IPOs in 2020 debuted on the Tadawul Stock Exchange. Saudi Arabia also dominated in terms of IPO proceeds, accounting for 78 per cent of issuances at $1.45bn. Photo: Bloomberg

The number of companies set to debut on Gulf markets is expected to increase this year as businesses queue up to list on markets in Saudi Arabia and the UAE, according to a research report by Kamco Invest.

“We expect GCC IPO markets to remain active in 2021, and there are a number of catalysts for believing so,” Thomas Mathew, assistant vice president of investment strategy and research at Kamco Invest, said in the report.

“In terms of sectors, newer consumer-linked businesses, with asset-light models that focus on digitisation, technology disruption and healthcare that gained business market share in 2020 from the impact of Covid-19, could look at raising capital for further growth and could warrant higher valuations. Government support is also driving a higher pipeline,” he added.

The GCC IPO market remained active in 2020 despite the Covid-19-led market sell-off seen in early 2020. However, issuances picked up in the second half of the year.

The number of IPOs from the GCC on regional and international exchanges declined to seven in 2020, from 12 in 2019. Proceeds from GCC issuers both on regional and international exchanges slumped to $1.87 billion in 2020, from $29.04bn in 2019, according to Kamco Invest. The prior-year figure included the $25.6bn IPO of Saudi Aramco – the world's biggest stock market debut.

The IPO market in the GCC could have witnessed higher activity in 2020, particularly in the first half, but issuers chose to defer their primary market entrances until secondary markets recovered from the impact of Covid-19. This led to the backend-loaded issuances in 2020, while other issuers pushed their ambitions into 2021, the research note said.

Four out of the seven GCC IPOs debuted on the Tadawul Stock Exchange, the biggest Arab bourse. Saudi Arabia also dominated in terms of IPO proceeds, accounting for 78 per cent of issuances at $1.45bn.

Qatar registered a primary issuance, with the IPO of QLM Life & Medical Insurance Company, which raised $178 million in December. The UAE re-entered regional IPO markets with the listing of Al Mal Capital Reit worth $95.3m.

Saudi Arabia's healthcare operator Dr Sulaiman Al Habib Medical Services' public offering was the largest IPO in the region last year, with proceeds of $698.6m, followed by retailer Bin Dawood Holding, which raised $585.1m through its share sale.

"Saudi Arabia should continue to the lead the way, with the number of IPO applications in the pipeline reportedly in double digits," Mr Mathew told The National.

“For the UAE, the most important catalysts in 2021 are the launch of the Nasdaq Dubai Growth Market for SME companies, and the impact of the Dubai Expo in H2 2021.

“UAE issuers who deferred their market debut in 2020 are likely to consider 2021, but will be monitoring secondary market performance and volatility, and the unwinding of the impact of Covid-19, including the effectiveness of the vaccine.”

Global IPO volumes increased 15 per cent annually to reach 1,322 issuances in 2020, according to Ernst & Young. IPO proceeds rose 26 per cent in 2020 to $263bn, the highest level since 2010. The increase in IPO proceeds was driven by a 69 per cent annual growth in amounts raised by US companies at $86bn, while the number of new issuances rose 32 per cent year-on-year to 222.

Issuance proceeds in China, including Hong Kong, jumped by 51 per cent annually to $116bn. The number of IPOs in the market grew 41 per cent to 514, EY said. Europe clocked 9 per cent growth in terms of IPO proceeds at $27bn and 17 per cent in the number of transactions, to 176.

Technology raked in 35 per cent of proceeds from IPOs globally, and accounted for 24 per cent of all deals. Healthcare companies came in second with 16 per cent of proceeds and 15 per cent of volumes, EY said in its report.

Special purpose acquisition companies were an increasingly popular IPO route in 2020 and witnessed a jump from 60 listings totalling $13.7bn of proceeds in 2019 to 230 listings garnering total issuance proceeds of $75.8bn in 2020, according to EY.

Globally, the two largest issuances were from secondary public offerings, with Semiconductor Manufacturing International raising $7.5bn from its debut in Shanghai. JD.com followed with its Hong Kong listing and raised $4.5bn.