The final quarter (Q4) of 2015 echoed the sluggish IPO performance in Q3 proving that 2015 was a volatile year for IPOs in the GCC countries. The theme of uncertainty and negative market sentiment materialised in the second half (H2) of 2015 on the back of fluctuations in oil prices and ongoing regional and global political and economic instability, according to PwC Middle East Capital Markets and Accounting Advisory Services team.
The Kingdom of Saudi Arabia (KSA) witnessed the only IPO in Q4 2015 by Alandalus Property Co. which raised USD 101 million from the deal. The IPO was oversubscribed and well received by investors and marked the first real estate sector offering on the Saudi Stock Exchange in five years. Q3 of 2015 saw no IPOs while Q2 proved to be the strongest quarter in terms of the number of offerings (4) and the money raised (USD 1.2 billion).
Looking at IPO performance in Q4 2015 compared to the same quarter in the previous year (Q4 2014), the number and money raised was considerably higher in the prior year with USD 7.3 billion from a total of 5 floats, mainly driven by the largest IPO in the GCC in 2014 by the National Commercial Bank.
With no IPOs in Q3 of 2015, the total money raised in H2 2015 was USD 101 million from one offering while USD 1.3 billion was raised from 5 IPOs in H1 driven by a stronger Q2 performance during the year. In terms of performance in H2 2015 compared to the prior year, a total of 7 IPOs raised USD 8.9 billion in H2 2014. Therefore, in many ways Q4 2015 was a disappointing quarter for IPO performance.
Total proceeds in 2015 stood at USD 1.4 billion from 6 deals compared to USD 10.8 billion raised from 16 deals in 2014, USD 702 million from 9 deals in 2013, USD 1.7 billion from 9 deals in 2012, USD 789 million from 9 deals in 2011 and USD 2.0 billion from 12 deals in 2010, proving that although 2015 was the lowest year in terms of number of offerings over the past 5 years, the total value of offerings improved. Furthermore in the same period, excluding 2014, the average offering value of IPOs in 2015 was the highest. The Saudi Ground Services offering back in June marked the largest IPO during 2015 raising USD 752 million.
In the GCC, Saudi Arabia dominated the IPO market in 2015 in terms of number of offerings (6) accounting for 67% of the total proceeds raised (USD 1.1 billion), accounting for 77% of the total. The two other offerings were in the Sultanate by Phoenix Power and on Nasdaq Dubai, United Arab Emirates by Orascom Construction Limited.
Global IPO issuance in 2015 was reasonably strong despite increased volatility (among others due to China-related concerns and the fear of a US Federal Reserve rate hike) and substantial M and A and private market transaction activity. Particularly in Q4, the IPO market was driven by large privatisation IPOs.
As compared to a very active 2014, total money raised via IPOs fell by 26% from USD 272.5 billion to USD 200.7 billion in 2015 while the number of IPOs decreased by only 1% from 1,154 to 1,144 in 2015. Nonetheless, both in terms of money raised and number of IPOs, global issuance in 2015 was reached its second highest level since 2010.
Global IPO money raised stood at USD 69.0 billion via 305 deals in Q4 2015, compared to USD 75.2 billion via 342 deals in Q4 2014 and USD 77.5 billion via 327 deals in Q4 2013.
Debt market activity in the GCC in Q4 2015 continued to be muted mirroring performance in the previous quarter and underlying the recurring theme witnessed in the equity markets. During H2, we started to see the effects of the prolonged decline in oil prices and the anticipated U.S. interest rate hikes and regional liquidity constrains beginning to manifest in the debt market with investors anticipating and closing positions before the end of November.
The Kingdom of Bahrain acting through the Ministry of Finance was one of the predominant issuances this quarter issuing a five-year bond priced at 5.875% in the amount of USD 700 million and a ten-year bond priced at 7.000% in the amount of USD 800 million. The National Bank of Oman issued a USD 300 million perpetual bond carrying a coupon of 7.875%.
On the Sukuk front, Nasdaq Dubai welcomed a ten-year USD 500 million Sukuk by Majid Al Futtaim carrying a coupon of 3.5% and the Government of the Sultanate, represented by the Ministry of Finance issued its first five-year sovereign Sukuk issued by the Sultanate in the amount of USD 649 million carrying a coupon of 3.5%.
Steve Drake Partner, Head of PwC’s Capital Markets and Accounting Advisory Services in the MEA said that the capital markets Watch GCC surveys conventional bond and Islamic issuance and new primary market equity IPOs on the GCC’s principal stock markets and market segments (including exchanges in Kingdom of Saudi Arabia, Kingdom of Bahrain, Kuwait, the Sultanate, Qatar and the United Arab Emirates) on a quarterly basis. This survey was conducted between 1 October 2015 and 31 December 2015 and captures the relevant data based on their transaction date.