The three-year IPO boom in the GCC has witnessed various peaks and troughs. From a COVID-19-led 2020 issuance low of $2 billion to a 2022 high of $23 billion, the primary market issuance trends have reacted vividly to market news.
While this year, issuance is down by 54 per cent (year-on-year basis) to $8.4 billion, November had a flurry of deals, and new possibilities taking on shape in the M&A space. Dubai-based OSN+ and Nasdaq-listed Anghami announced their merger to create one of the Middle East's most extensive entertainment streaming services.
Saudi media behemoth MBC Group announced plans for a stake sale of 10 per cent for its IPO. While the discussions were on quite a few times, the group finally received approval from Saudi's CMA. Dubai Taxi IPO got oversubscribed within just an hour of opening and UAE's largest hospital operator, PureHealth, is readying to list on ADX. The Lulu Group IPO is expected in H1-2024.
What's driving the momentum?
Price appreciation for most new listings
Investors tend to flock to markets that have shown solid price appreciation and income opportunity. While the US and Europe had lacklustre issuances and performance from IPOs listed this year and the las, the GCC has stood out. For instance, in the case of GCC companies with a total IPO issuance of $100 million plus this year, more than 70 per cent have shown price appreciation trends.
And from last year, big Dubai names like Salik and Empower are up more than 40 per cent from their initial listing price.
It is still about dividend play
The new issuances, on average, have come out with dividend yields from 5 per cent. These are from big state utilities with a history of record dividends and substantial equity buffers. A few have, in fact, consistently paid back around 50 per cent and more of their accrued reserves back to their shareholders.
It's not just the primary market that has been a dividend-playing opportunity. On average, the GCC indices components led by Dubai DFM and Qatar DSM have yielded 6 per cent plus in annualized dividends. Compare this with SPX 500, whose dividend yield consistently ranges 2-3 per cent.
Huge diversification bets
Most of the GCC nations have set ambitious growth targets backed by expected flows and activity in the non-oil sector. Saudi's Vision Plan 2030 aims to free up significant parts of the economy. For the UAE, the non-oil sector already accounts for more than 70 per cent of GDP.
The diversification theme could likely see more consolidation and listings from prominent state-owned names with decent track records.
What does 2024 look like for new issuances?
While the diversification theme is intact, the oil and energy contribution to their economies cannot be overlooked. Investors need to watch out for good-quality names with solid financials.
With the overall new primary market issuance already down by 55 per cent from last year, we could see more low-hanging fruits being launched. Any further upticks in the dollar against global currencies could dampen the Middle Eastern investors' appetite.