Saudi broadcaster MBC is world's best-performing IPO
MBC Group’s shares have soared since starting trading
Riyadh: A more than twofold jump in the share price of a Middle Eastern broadcaster has made it the world's best-performing listing this year, highlighting the continued strength in one of the few busy markets for initial public offerings.
MBC Group, the biggest broadcaster in the Middle East, has seen its shares rise 134 per cent since they started trading in Riyadh on January 8 after a $222 million listing, making it the largest gainer among IPOs that raised at least $50 million worldwide, according to data compiled by Bloomberg.
"MBC is a household name in the region and investors are putting faith in their streaming platform, which caters to the MENA region," said Christian Ghandour, senior portfolio manager at Al Dhabi Capital. "As more IPOs come into regional markets, investors finally have a chance to gain exposure to sectors that were never represented on the equity markets."
According to JPMorgan Chase & Co. analyst Alexey Philippov, the stock's gains have since captured that scarcity premium. He initiated coverage with a neutral rating earlier this week. The stock has dropped for three straight sessions amid profit taking.
Still, the Gulf's booming IPO market has stood in sharp contrast to the subdued listing activity seen in Europe, the US and many parts of Asia, where investors have shied away from backing new companies because of uncertainty over the path of interest rates and a persistent gap in valuation expectations between buyers and sellers.
In the Middle East, on the other hand, investors can't seem to get enough, partly because the stakes being offered are often small. MBC Group drew orders worth $14.5 billion from institutional investors, equivalent to 66 times the shares made available to them. It only sold 10 per cent of the company in the IPO.
On Wednesday, Saudi Arabian pharmaceutical firm Avalon Pharma said the institutional order books for its $131 million IPO were 139 times covered, with orders worth 68.3 billion riyals ($18.2 billion).
The strong demand for the Saudi IPOs comes as the Kingdom's benchmark index has risen over 18 per cent from an October low, alongside other global benchmarks amid optimism that the Federal Reserve and other major central banks will shift to cutting interest rates this year.