Saudi Arabia's IPO market rebounds

28 April 2010

Seven companies closed share sales in first quarter

Riyadh will experience a revival in its initial public offering (IPO) market this year, with nine companies in the process of listing shares on the Saudi Stock Exchange (Tadawul).

Seven companies have closed IPOs in the first three months of 2010, a strong level of activity compared to 2009, which saw a total of 12 companies go public.

Al-Hassan Shaker Company, a cooling systems and home appliances manufacturer, is now in the process of closing its IPO.

The company is looking to raise a total of SR514.5m ($138m) by selling 30 per cent of its shares at an offer price of SR49 a share.  

The company concluded its book building phase for the IPO on 21 April and demand was strong with the institutional tranche of 5.25 million shares oversubscribed by 2.71 times. The remaining 50 per cent of shares opened for subscription to retail investors on 26 April and will close on 2 May.

Meanwhile, Saudi Arabia’s Knowledge Economic City (KEC) will launch its IPO on 24 May, which will be open for one week.

Local bankers predict a healthy issuance of IPOs throughout the rest of 2010.

“We expect the kingdom’s financial regulator, the Capital Markets Authority (CMA) to approve a new batch of IPOs in the next few months, which will then take place in the third and final quarter of the year,” says Hasan al-Jabri, managing director of investment banking at NCB Capital, a subsidiary of National Commercial Bank, which is currently working on six mandates that it will bring to market this year.

“There is a lot of demand for IPOs now,” says Hisham Abo-Jamee, head of asset management at Riyadh-based Bakheet Investment Group. “Trading turnover on the Tadawul has reached roughly SR6bn a day compared to SR3bn a couple of months ago. Generally speaking, local companies’ profits have showed a good increase in the last quarter, which has helped to make the market more stable.”

Saudi Arabia’s IPO market raised a total of $1.03bn from 12 listings in 2009.

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