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GCC Capital Markets Watch Q3 2018
USD 484mraised from IPOs in Q3 2018across KSA, Kuwait and Oman (Q2 2018: USD 463m).
3 IPOsin Q3 2018 in GCC, across a wide range of sectors.
USD 3.3bnof sovereign bonds issued by the Kingdom of Saudi Arabia.
www.pwc.com/me/capital-markets-watch
Steve Drake PwC Middle East CapitalMarkets Leader
As typically seen, the third quarter has been less active than the previous quarters in terms of volume, but proceeds have improved. However, some interesting trends have been observed. Firstly, REIT IPOs did not dominate the market activity during this quarter, with all three GCC IPOs from different sectors. Secondly, unlike the first two quarters, IPO activity was not confined to KSA only. Boursa Kuwait, one of the region’s oldest stock exchanges, welcomed its first IPO in more than ten years, after a thorough infrastructure restructuring and reconfiguration, raising USD 214 million. Overall, the equity markets activity remained subdued due to the economic slowdown and increase in interest rates driven by the US Federal interest rate hikes in the year to date.
In debt markets, the oil price surge has reduced GCC governments’ borrowing needs. However, the corporate debt issuance activity has largely maintained pace, driven by the general consensus that there will be further interest rate increases in the near future. This encouraged a number of companies to issue their debts towards the end of the quarter, and we expect this trend to continue into the fourth quarter.
Overall, the Capital Markets activity in the region is progressing at a cautious pace. There are signs of recovery, but it remains to be seen whether they are enough to counter the escalating pressure from increasing geopolitical uncertainties and interest rate hikes.
2GCC Capital Markets Watch Q3 2018 |
Continued slowdown in IPO activity seen this quarter
Initial Public Offerings (IPOs)
3GCC Capital Markets Watch Q3 2018 |
Overview
Affected by the macroeconomic conditions, including fluctuating oil prices, 2018 has been a slow year for IPOs, with a number of issuers putting equity transactions on hold. Despite this, the 12 IPOs in the year to date have generated total proceeds of USD 1.4 billion, compared to USD 845 million from the 20 IPOs in the first three quarters of 2017. Q3 2018 welcomed two listings of more than USD 200 million each.
Tadawul’s fresh issuance activity slowed during Q3 compared to the same period last year. Leejam Sports Company was the only IPO on Tadawul during this quarter, compared to three listings during the equivalent
period of last year. Proceeds were not however negatively impacted, with USD 218 million generated – a seven percent increase compared to the USD 204 million raised from the three IPOs in the same period in 2017.
Boursa Kuwait has been in the spotlight with its infrastructure upgrade that reconfigured and restructured the stock exchange and its announced plan to privatise. The Kuwaiti exchange’s first IPO in over 10 years raised USD 214 million.
Looking forward to the next quarter, with the subdued economy due to global geopolitical uncertainties, it remains to be seen if this quarter’s activities are the early signs of recovery.
Whilst Tadawul experienced a decline in IPO activity, Boursa Kuwait welcomed its first IPO in over ten years - a healthy diversification from the REIT IPOs that dominated the region in Q1 and Q2
IPOs by country
Figure 2: GCC IPOs in Q3 2018 by money raised
Figure 1: GCC IPOs during Q3 2018
Integrated Holding Co. KCSC
Sector: Industrial
Money raised (USD): 214 million
Stock Exchange: Boursa Kuwait
No. shares offered: 88 million
Leejam Sports Company
Sector: Sports and fitness
Money raised (USD): 218 million
Stock Exchange: Tadawul
No. shares offered: 16 million
1 Dhofar Generating Company
Sector: Energy
Money raised (USD): 52 million
Stock Exchange: MSM
No. shares offered: 89 million
32
Kingdom of Saudi Arabia (KSA)
Number of IPOs: 1
Sultanate of Oman
Number of IPOs: 1
Republic of Kuwait
Number of IPOs: 1
4GCC Capital Markets Watch Q3 2018 |
GCC IPO trends
5GCC Capital Markets Watch Q3 2018 |
Q3 experienced the lowest quarterly IPO volume for the year to date, although proceeds have continued to increase
702 4,000 1,439 782 3,300 1,377
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337 48 138 179 953 902 1,603 2,500 185 1,152 0 101 471 274 0 37 400 210 234 2,455 430 463 484
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Figure 3: GCC IPO activity since 2013
Figure 4: GCC quarterly IPO activity since 2013
Source: Bloomberg terminal, PwC analysis
35
845
20
10,500
11,000
7,000
7,50014
2013 2014 2015 2016 2017 2018
Launch of NOMU
Parallel Market
National
Commercial Bank
and Dubai Parks
and Resorts IPOs ADNOC and Emaar
Development IPOs
2017
YTD
2018
YTD
Q3 2018 reconfirms the trend that has become apparent since the beginning of the year – markets of two fortunes
Market performance
Figure 5: GCC equity market performance by cumulative total return since 1 January 2017
Source: Bloomberg terminal, PwC analysis
2017 2018
Figure 6: Share price performance of GCC sector IPOs* relative to the respective all share index, from date of
IPO to 30 September 2018
Source: GCC stock exchanges, PwC analysis
* The IPOs of Integrated Holding Co KCSC, National Building and Marketing and Al Nefaie Umm Alqura REIT have been excluded
due to insufficient data.
-16%
-8%
-4%
-1%
-18% -16% -14% -12% -10% -8% -6% -4% -2% 0%
Real Estate
Financials
Energy
Consumer Discretionary
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
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15%
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% c
hange s
ince 1
January
2017
Tadawul MSM
DFM ADX
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
6GCC Capital Markets Watch Q3 2018 |
At USD 7.5bn proceeds, China Tower is the largest IPO in two years globally
Global IPOs
Figure 7: Global IPO activity
Source: Dealogic as at 30 September 2018
Figure 9: Top 3 global IPOs in Q3 2018 by proceeds
Meituan DianpingExchange: HKEX
Pricing date: 13 Sep 2018
Money raised: USD 4.2bn
Free Float: 8.7%
2China TowerExchange: HKEX
Pricing date: 1 Aug 2018
Money raised: USD 7.5bn
Free Float: 27.1%
1 Viva EnergyExchange: ASX
Pricing date: 11 Jul 2018
Money raised: USD 2.0bn
Free Float: 54.5%
3
Figure 8: Top stock exchanges by proceeds
Typical of the third quarter, summer trading was thin –only Asia-Pacific saw increased activity, driven by jumbo IPOs on the HKEX. Global IPO activity in Q3 2018 suffered compared to last year - proceeds fell by 5% and volume by 24% – although year to date proceeds still exceeded the same period last year. In total, 261 IPOs raised USD 46.8bn compared to USD 49.2bn from 344 IPOs in Q3 2017.
Asia-Pacific led this quarter, accounting for 56% (USD 26.2bn) of the global proceeds and 57% (150) of the number of deals in Q3 2018. In second place, the Americas accounted for 34% (USD 15.9bn) of proceeds and 28% (72) of the number of IPOs. Trailing behind is EMEA, suffering disproportionately from geopolitical unrest and the summer lull in financial markets, accounting for only 10% (USD 4.7bn) of IPO proceeds and 15% (39) of the number of deals in the quarter. Year-to-date, Asia-Pacific is also leading, as the region accounted for 41% (USD 66.4bn) of proceeds and 53% (461) of the number of IPOs.
NYSE, 16%
NASDAQ (Global),
16%
HKEX, 17%Shanghai
SE, 6%
LSE Group, 6%
Others, 38%
7GCC Capital Markets Watch Q3 2018 |
Nasdaq Dubai hosted the largest UAE debt issue by value
GCC bond and sukuk issuances
Proceeds generated from sovereign bonds decreased to USD 3.9 billion in Q3 2018 compared to USD 22.8 billion in Q2 2018. In contrast, corporate bond and sukuk proceeds increased to USD 3.5 billion (Q2: USD 2.0 billion), predominantly attributable to DP World. The company completed its seventh debt listing on NASDAQ Dubai, raising USD 2.3 billion from corporate bond and USD 1.0 billion from sukuk issuance in the current quarter, which together with their past issuances take the aggregate value of total debt issuances to USD 6.7 billion.
Looking back at the past quarter, the higher oil price, together with the increased output, have reduced the pressure on governments’ expenditure reform programmes. Consequently, sovereign bond issuance activities have slowed down.
Highest value of sovereign bond issued in Q3 2018 by the Kingdom of Saudi Arabia
The Kingdom of Saudi Arabia issued a sovereign bond that is intended to be used for the Kingdom’s external funding for the year. It consists of three tranches: a USD 1.9 billion five year tranche, a USD 0.8 billion seven year tranche and a USD 0.6 billion ten year tranche.
Total value of corporate bond issued by DP World in Q3 2018
The UAE based global port operator issued three corporate bonds raising USD 2.3 billion with varying maturity dates, carrying coupon rates ranging from 2% to 5%.
Total value of DP World sukuk issuance in Q3 2018
DP World listed its fourth debt of the quarter on Nasdaq Dubai as sukuk for USD 1 billion.
$3.3 billion
$2.3 billion
$1.0billion
8GCC Capital Markets Watch Q3 2018 |
Contacts
About PwC’s GCC Capital Markets Watch
GCC Capital Markets Watch surveys IPOs on GCC’s principal stock exchanges and market segments in addition to conventional bonds and Sukuk issuance on a quarterly basis. This survey was conducted between 1 July 2018 and 30 September 2018 and captures the relevant data based on their transaction date. GCC Capital Markets Watch is prepared by PwC Middle East (www.pwc.com/me). All market data is sourced from publicly available information and has not been independently verified by PwC.
© 2018 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of
PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
Steve Drake
Partner, PwC Middle East Capital Markets Leader
Direct: +971 (0) 4 304 3421 Mobile: +971 (0) 50 451 4661Email: [email protected]
Muhammad Hassan
Partner, PwC Capital Markets, Middle East
Direct: +971 (0) 4 304 3443 Mobile: +971 (0) 50 174 2472Email: [email protected]
Sergiu Gherasim
Partner, PwC Capital Markets, KSA
Direct: +966 (11) 2110400Mobile: +971 (0) 56 417 6719Email: [email protected]
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