Saudi Fransi Capital, the top adviser for initial public offerings in the kingdom since 2012, expects the pace of share issuances in the Gulf’s largest stock market to accelerate as equity valuations improve.
“The Saudi market is looking for new issuances and I think we’re going to have two big years for IPOs,” chief executive Yasir Al Rumayyan said. “Our deal pipeline is really big,” he said, declining to give more details on specific deals.
Saudi Arabian companies are joining counterparts across the Gulf planning share sales as valuations and investor demand improve. The investment banking arm of Banque Saudi Fransi, a lender part-owned by Credit Agricole, has advised on 7 equity offerings worth 8.4 billion Saudi riyals since 2011, surpassing global banks such as JP Morgan Chase & Co and HSBC Holdings on equity advisory work in the kingdom.
The Public Investment Fund, the Saudi pension fund, plans to sell a 15 per cent stake in National Commercial Bank in an IPO. That sale could raise about 16bn riyals, Asim Bukhtiar, head of research at Riyad Capital, the investment-banking unit of Riyad bank, said.
“We really hope to be part of that IPO,” Mr Rumayyan said. “It’s going to be a massive one and there’s a lot of liquidity in the market to take it up.”
Five Saudi Arabian companies offered shares last year, raising 793 million Saudi riyals, compared with 4.77bn riyals of issuances in 2012, according to data compiled by Bloomberg. Saudi Fransi topped the IPO league table both years.
Improving asset prices are key to the renewed appetite for share sales, said Mr Rumayyan, who joined the investment bank as chief executive in 2011 from Saudi Arabia’s stock market regulator.
“Valuations have improved significantly and are still reasonable compared to other markets,” Mr Rumayyan said. “Now is the time for companies to come to the market.”
Saudi Arabia’s benchmark Tadawul All Share Index trades at more than 14-times estimated earnings, compared with about 19-times for New York’s Nasdaq Composite Index.
ACWA Power International, a Saudi Arabian energy producer, hired Saudi Fransi Capital to advise on an IPO that could raise as much as US$1.1bn, according to two people familiar with the matter.
Saudi Arabia’s stock market is the Gulf’s largest, with a market value of about $500bn. Foreign investors cannot trade directly on the exchange, instead they have to invest through swaps or funds.
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