Post-Aramco IPO, Saudi market witnesses steady stream of listings

Dubai: One year on from oil giant Saudi Aramco’s record-busting initial public offering in Riyadh, the exchange has continued to enjoy a steady stream of listings. And deals are already lining up for 2021.

For years, the twists and turns leading up to Aramco’s listing dominated Saudi Arabia’s IPO market. The decision to float on Riyadh’s Tadawul exchange and to largely forgo international investors sparked concerns that the $29 billion deal would soak up all the available local liquidity for years. That fear has turned out to be unfounded.

This year, four companies have gone public on the Saudi exchange, raising a combined $1.5 billion, according to data compiled by Bloomberg. That’s more than the $1.3 billion worth of IPOs in Germany, though far behind the Aramco year of 2019.

“There has been a pipeline of companies that have been looking for an opportunity to IPO ever since we’ve had the downturn in oil prices back in 2015,” said Tarek Fadlallah, the chief executive officer of Nomura Asset Management’s Middle Eastern unit in Dubai. Some may have been delayed by Aramco dominating the calendar last year, he said.

Bussiest listing venue in GCC

Saudi Arabia was the busiest listing venue among the Gulf Cooperation Council, whose five other members suffered a near-complete drought with only one firm in Kuwait going public. Still, the Tadawul trails Europe’s most active exchanges by far, with London seeing $10.7 billion worth of listings and counting.

The two biggest companies to step up to the plate in Riyadh this year were Dr. Sulaiman Al Habib Medical Services Group Co. and grocery store chain BinDawood Holding Co. Both deals priced at the top of price expectations and saw demand for multiple times the shares on sale, with Sulaiman Al Habib shares more than doubling and BinDawood’s stock up 23% since listing.

These are large, mature companies, perceived by the market to be of very high quality, said Osama Alowedi, chief executive officer at Value Capital Partners, who bid for shares in both IPOs. “They are in the sectors that investors want to invest in: health care and grocery retail - the right sectors at the right point in time.”

In October, Saudi Arabia’s exchange tripled the daily trading limits to 30% for companies making their debut to boost post-listing liquidity. IPO performance has been supported by a rebound in the Tadawul All Share Index from its low in March, reversing the coronavirus-induced rout to trade up 3.9% this year.

High demand for the new deals should continue as IPOs have been delivering “relative good performance” versus illiquid asset classes like private equity and real estate, said Alowedi.

More to come

Deals for 2021 are already lining up. Saudi Basic Industries Corp., the kingdom’s petrochemical’s giant, is said to be considering an IPO of its multibillion-dollar specialty chemicals unit that could happen next year. And in November, the country’s sovereign wealth fund increased its holding in ACWA Power International, a Riyadh-based energy producer, with an IPO possible as soon as of the end of June.

Also, the country’s biggest telecommunications operator, Saudi Telecom Co., said it plans to spin off and list as much as 30% its internet-services unit late next year. Shatirah House Restaurant Co. is eyeing a listing on the junior Nomu-Parallel market, according to Arab News, while Theeb Rent-a-Car has already received approvals for an IPO.

Further down the line, the Tadawul exchange’s own IPO, which has been in the works for years, could move forward within the next 24 months, Chief Executive Officer Khalid Al Hussan said in an interview with Bloomberg in July.