Number of IPOs in the Gulf region on decline

What's Down: Initial public offerings in Gulf region drop by half, according to a report by PwC yesterday.
Plans for Al Noor hospital to go public have been delayed until next year. Ravindranath K / The National
Plans for Al Noor hospital to go public have been delayed until next year. Ravindranath K / The National

Gulf initial public offerings (IPOs) have fallen by half in the first six months of this year as civil unrest and a global economic slowdown discouraged investors and delayed transactions.

PricewaterhouseCoopers (PwC) said deal values in the region, which includes Saudi Arabia and the UAE, have plunged by 57 per cent to US$358 million from $830m a year earlier.

Three out of the only four IPOs in the region in the first half were from UAE companies. Financial markets were rocked this year by the Arab Spring that ousted leaders in Tunisia and Egypt, followed by a US downgrade and worsening European debt crisis.

The Dubai Financial Market General Index has dropped 10 per cent this year, while the Abu Dhabi Securities Exchange General Index has dropped 5 per cent.

Al Noor Hospital in Abu Dhabi was slated to go public by May, and then delayed to September.

Those plans have now been postponed to next year due to unfavourable market conditions and muted investor interest, according to inside sources.

A consortium of investors had named HSBC and JPMorgan to assist in the process.

UAE valuations are the lowest in the Middle East relative to earnings, apart from Egypt, trading at 7 times earnings while the GCC trades at 9 to 11 times.

"To take a company public, the company's valuation needs to be cheaper than the valuations of publicly listed companies in the market for investors to participate," said Mohammed Ali Yasin, the chief investment officer at CAPM Investment in Abu Dhabi.

"With current valuations in the market so low, and our markets price to earnings being the lowest in the region, it is extremely unattractive for private investors to sell their stake at these valuations."

Steve Drake, the head of PwC capital markets Middle East, said: "The three IPOs in the UAE during the first half have brought a much-awaited end to the drought of IPOs on the UAE exchanges.

"The IPO by Eshraq Properties, a company in the recession-hit real-estate sector, is a major confidence booster for both the investors as well as other companies looking to IPO in the near future."

Eshraq Properties raised $225m in May in the first IPO by a UAE property developer since 2007.

Insurance House and National Takaful, also known as Watanaya, two insurance firms based in Abu Dhabi, raised $18m and $22m respectively during the first half, PwC said.

halsayegh@thenational.ae

Published: August 19, 2011 04:00 AM

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