UAE IPO market set for major upswing

Also driving the IPO activity surge in the UAE after a lull 2020 across the GCC will be the Dubai Expo in the second half of this year, analysts at Kamco Invest said.

The number of IPOs across the GCC, both on regional and international exchanges, declined to seven issuances in 2020, from 12 issuances in 2019. Proceeds for 2020 from GCC issuers both on regional and international exchanges reached $1.87 billion from $29.04 billion in 2019.

Analysts said the Nasdaq Dubai Growth Market, a new market under the umbrella of Nasdaq Dubai launched in October 2020, is a landmark initiative seeking to help young businesses and SMEs achieve the next phase of their expansion by raising capital through an IPO.

The Growth Market is set to play a key role in the future of capital-raising and the channeling of investment to enterprising companies to enable them to succeed during all phases of the business cycle supported by their Dubai listing, according to market experts.

“In terms of sectors, issuances of newer consumer linked businesses, and asset light models that focus on digitization, technology disruption and healthcare that gained market share in 2020 from the impact of Covid-19, could continue to warrant higher valuations. Nevertheless, higher activity in 2021 would still depend on secondary market performance and volatility, the unwinding of the impact of Covid -19 including the effectiveness of the vaccine, and global geopolitics,” analysts at Kamco said.

A similar upswing in IPO activity is anticipated across the GCC. After witnessing the landmark IPO of Aramco in 2019, the GCC IPO market remained active in 2020, despite the Covid-19 led market sell-off witnessed in early 2020, as issuances picked up in the second half of 2020.

In the GCC, catalysts galore for IPOs going forward, said analysts. “We expect IPO markets in the GCC to remain active in 2021, given the number of catalysts that could support primary markets from within the region. Saudi Arabia is expected to lead the regional IPO market in 2021 as well, with the Capital Market Authority of the kingdom reportedly mentioning that it is reviewing over 15 applications for listing whether in the main market or the Nomu market -- an alternative equity market with lighter listing requirements compared to the main market.

Kamco said the IPO market in the GCC could have witnessed higher activity in 2020, particularly in H1-2020, as issuers chose to defer their primary market entrances, until secondary markets recover from the impact of Covid-19. “This led to the backend loaded issuances in 2020, while other issuers pushed their ambitions into 2021.

In terms of GCC IPOs listed regionally, Saudi Arabia continued to provide leadership for primary markets in 2020, as four out of the seven GCC IPOs debuted on the Tadawul.

Saudi Arabia also dominated in terms of IPO proceeds, raking in 78 per cent of issuances at $1.45 billion. Qatar was the other incumbent market that witnessed a primary issuance, with the IPO of QLM Life & Medical Insurance Company, as the company raised $178 million in December 2020.

The UAE re-entered regional IPO markets with the issuance of Al Mal Capital Reit worth $95.3 million. Healthcare operator Dr. Sulaiman Al Habib Medical Services from Saudi Arabia witnessed the largest IPO in the region in 2020, with proceeds of $698.6 million, followed by retailer – Bin Dawood Holding (Saudi Arabia) with proceeds of $585.1 million.

Globally, IPO volumes increased 15 per cent year on year from 2019 to reach 1,322 issuances in 2020, as per EY. According to EY, IPO proceeds rose by 26 per cent y-o-y in 2020 to $263 billion, and witnessed the highest proceeds since 2010.

— issacjohn@khaleejtimes.com