With some stock markets in the West hitting record levels in the first quarter of the year, it appears to be a good time to be an investor in publicly listed companies. In the Middle East too there are hopeful signs. The value of initial public offerings (IPOs) climbed last year, from $844m in 2011 to $2bn in 2012, and this year has already seen the largest flotation in the region for five years, when mobile telecoms company Asiacell made its debut on the Iraq Stock Exchange in early February.

Asiacell is one of 10 new entrants to the MEED 100 this year, and it is by far the largest. With a market capitalisation of $5.2bn it enters the table in position 42, putting it ahead of other well-established regional rivals such as Kuwait’s National Mobile Telecommunications Company (Wataniya), which gained four places to reach 49, and Telecom Egypt which dropped back nine places to 58.

Biggest sectors

Asiacell’s entry means there are now 14 telecoms companies in the Top 100, making it the second-largest business sector in the table with a combined market capitalisation of more than $131bn. The largest sector, however, remains the financial services industry, with 47 companies worth a collective $287bn. Indeed, the position of the banking sector has strengthened this year, with six of the 10 new entrants being financial services firms and just three banks dropping out of the list.

The highest new entrant among the banks was Bank Albilad at 78, followed by the UAE’s Union National Bank at 82. Others included Egypt’s National Societe Generale Bank (NSGB), Qatar International Islamic Bank, National Bank of Ras Al-Khaimah and Abu Dhabi Islamic Bank. The strong showing by the three sharia-compliant institutions, including Bank Albilad, is a reminder of their growing influence in the banking market across the region.

In addition, the three biggest climbers of the year were all banks. They include Kuwait’s Burgan Bank, which gained 31 places from last year to reach 65 in the table, followed by Bank Muscat which climbed 25 places and Egypt’s Commercial International Bank which was up 24 places.

All told, 38 companies improved their position in the MEED 100 this year, while 44 companies fell down the table and 8 held on to the same position as last year.

Beyond financial services and telecoms stocks, other sectors of the economy are represented relatively sparingly. There are six companies apiece in petrochemicals, construction, and real estate sectors and just five representatives from the metals and mining industry. They are trailed by companies in the utilities, food, industry, automotive, transport, oil and gas, and retail sectors.

The dominance of financial services firms in the sector breakdown is almost matched by the dominance of Saudi Arabia’s Tadawul when looking at the Top 100 in terms of individual stock markets. A third of the list is drawn from the Saudi market and they have a combined market capitalisation of almost $315bn, equivalent to about 45 per cent of the total market capitalisation of the MEED 100.

The next most important market is the Qatar Exchange in Doha, which contributes 13 companies to the Top 100 with a total market value of almost $106bn. The UAE’s 15 companies are spread across the Abu Dhabi Securities Exchange, Dubai Financial Market and Nasdaq Dubai and between them have a market capitalisation of close to $99bn.

Nine other bourses are represented on the list, led by Kuwait and Tehran. Although the Gulf markets dominate, there are also firms trading on the Amman, Beirut, Casablanca and Cairo stock markets that make it into this year’s list.

Slight dip

The combined market value of the Middle East’s 100 largest companies this year is $704.1bn, slightly down on last year’s figure of $718.5bn and a long way off the high of $863bn in 2008, when the region was enjoying the peak of the boom. However, the cut-off point for inclusion in the list has edged up fractionally over the past 12 months. Last year, the company ranked in position 100 was Abu Dhabi National Energy Company (Taqa), with a market capitalisation of $2.25bn. This year, Taqa is again propping up the list, but this time with a slightly higher market value of $2.27bn.

Asiacell’s consistent profitability and rapid growth along with the expansion of the Iraqi economy in general suggest that it is destined to be a fixture in the MEED 100 for many years to come. One of the other new entrants, however, is likely to slip out of the table as quickly as it entered. NSGB, which entered in position 86 this year with a market value of $2.5bn, is currently the subject of a takeover offer from Qatar National Bank (QNB).

Assuming the deal goes through, it will enhance QNB’s standing on the list and should mean that it will be vying with Saudi Arabia’s Al-Rajhi Bank to be the largest publicly quoted financial institution in the region this time next year. The combined market capitalisation of NSGB and QNB, which dropped one place to 4 this year, is $27.392bn, just $6m behind the $27.398bn valuation placed on the Saudi bank.

Consumer spending

Of the other new entrants, two were from Kuwait and both are thriving on the back of strong consumer spending patterns around the region. Real estate developer Mabanee Company has been buoyed by the recent expansion of The Avenues, the largest shopping mall in Kuwait City, while the Americana Group (Kuwait Food Company) has tapped into higher spending patterns across 13 markets in the Middle East and North Africa. The final new entrant is Yanbu Cement Company, listed on the Tadawul, which entered the list in position 83.

Making way for all these new entrants, the 10 companies that dropped out of the list this year come from a wide range of sectors and countries. They include Saudi-listed Emaar The Economic City, which had only returned to the Top 100 last year, and Bank Aljazira, also from Saudi Arabia. Other relegated companies include Douja Promotion Group Addoha, which is listed on the Casablanca stock exchange, Jordan’s Housing Bank for Trade & Finance and Beirut-based real estate firm Lebanese Company for Reconstruction & Development (Solidere). All these companies were in the lower reaches of the table last year and remain just below the cut-off point this year so could yet bounce back into contention in 2014.

The biggest faller among the companies to still remain in the MEED 100 is Saudi Mobile Telecommunications Company (Zain Saudi Arabia), which dropped 38 places compared to last year’s table, falling from 51 last year to 89 this year. The company successfully sold SR6bn ($1.6bn)-worth of shares in a rights issue in July as part of a financial restructuring exercise, but remains loss-making.

Other big fallers include another Saudi company, Dar al-Arkan Real Estate Development Company, which dropped 36 places to 91. It suffered a 9 per cent fall in revenues last year, from SR1,087.9m in 2011 to SR988.5m in 2012, and a 5 per cent fall in operating profit to SR1,184.4m. Its performance was even worse in the fourth quarter of the year, when revenues dropped by 50 per cent compared with the same period of 2011. The company attributed these disappointing results to an increase in operating expenses and financing costs.

Lafarge Ciments, which fared almost as badly, appears to have suffered as a result of the ongoing economic and political turmoil in Egypt. It lost 29 places and only just remains in the table, in position 99.

Companies such as Lafarge Ciments and others near the base of the table will face tough competition to retain their places in the MEED 100 over the coming year, with a number of other businesses seemingly destined to make the grade in 2014. Among the companies that are likely to gain entry to the Top 100 next year are telecoms firm Zain Iraq, which, following the lead of Asiacell, is expected to list at least 25 per cent of its shares on the Iraq Stock Exchange during the summer. Given that it has a larger market share than Asiacell, it is likely to surpass its rival’s valuation and, as a result, could enter the chart at an even higher position. The third and final mobile company in Iraq, Korek Telecom, is also expected to list its shares this year, but as it is much smaller it may not make it into the list of leading firms.

Real estate

The merger of Abu Dhabi’s two largest real estate firms, Aldar Properties and Sorouh Real Estate, which was approved by shareholders in early March, has produced a company with a combined market capitalisation of about AED10.9bn ($2.97bn). That would place it in joint 69th position in this year’s table, alongside Iranian firm Chadormalu Mining & Industrial Company. The gains made by Emaar Properties – it climbed 16 places from 39 in the 2012 table to 23 this year – points to the returning health of the real estate market in the UAE after four years of sliding property prices. The Dubai market, which Emaar calls home, has been performing better than Abu Dhabi, but it is a positive sign for the newly created Aldar Sorouh Properties nonetheless.

One thing that looks certain is that Saudi Basic Industries Corporation (Sabic) will remain the largest company in the region. The global petrochemicals giant has a market capitalisation of $73.4bn, almost three times larger than the second-placed Al-Rajhi Bank with $27.4bn. For now at least, there appears to be no company that can challenge it for the crown.