ADVERTISEMENT

Investing

Gulf IPOs See Soaring Demand as Economies Diversify From Oil

(Bloomberg)

(Bloomberg) -- Investors flocked to initial public offerings in the Middle East, where a variety of businesses from retail to beauty and health care are preparing to list, as local economies diversify away from oil. 

On Monday, Lulu Retail Holdings Plc increased the number of shares on offer in its Abu Dhabi IPO amid high demand, and now targets raising as much as $1.72 billion in the United Arab Emirates’ biggest listing of the year.  

That deal, as well as Saudi financial services firm United International Holding Co.’s $264 million IPO, are likely to price at the top of a planned range, Bloomberg News reported hours earlier. Like Lulu, United International had demand for all shares on offer hours after books opened on the deal.

While share sales in the Middle East have been dominated by state assets in recent years, the new listings point towards more diversification. The UAE and Saudi Arabia, home to the main Gulf bourses, are investing heavily to build new businesses.

“As the scale of offerings extends to a widespread sector base, we do look positively at the diversity of exposure that is being offered to investors,” according to Azimut Portfolio Manager Ahmed Kamal. “This is indeed sign of market maturity and falling risk premiums.” 

The high levels of demand have also been driven by performance, with many new stocks surging in the early days of trading. While some like Oman’s OQ Exploration & Production have declined on debut, that hasn’t dimmed broader investor interest.

On average, stocks that went public via IPOs in the Gulf this year rose 7% in their first day of trading, and their shares are up 15% on average, according to data compiled by Bloomberg.

“We are seeing continued appetite in the primary market, deals are attracting good demand,” said Joice Mathew, head of equity research at United Securities in Muscat.

The rush of listings is expected to continue in the final quarter. Delivery Hero is teeing up a listing of its Middle Eastern food delivery unit Talabat in Dubai, while Alpha Data is weighing a share sale in Abu Dhabi. In Saudi Arabia, the capital markets authority recently green-lit IPOs for cosmetics retailer Nice One and hospital operator Almoosa.

Other big-ticket deals in the pipeline over the next few months include a share sale of Abu Dhabi’s Etihad, while Saudi Arabia’s Public Investment Fund looking to list medical procurement firm Nupco.

Even Oman’s state energy company OQ SAOC’s decision to list its methanol and liquefied petroleum gas subsidiary is not the region’s typical privatization story since the focus is on LNG rather than crude.

“OQ Base Industries looks more like a utility play rather than the typical petrochemical peers,” United Securities’ Mathew said. 

(Updates with quotes from Azimut)

©2024 Bloomberg L.P.