The combined value of the Middle Easts 100 largest listed companies this year has increased to $912bn, compared with $863bn in 2008 at the peak of the financial boom
Qatar National Bank (QNB) has leapfrogged Saudi Arabias Al-Rajhi Bank to become the largest listed lender in the Middle East and North Africa, and the second-largest company in the region, with a market capitalisation of $37.1bn.
In 2008, the state-owned bank sat at 23rd position in the MEED 100 table. But, buoyed by the strong Qatari economy, state support and low exposure to Dubai, the lender has been steadily climbing up the ranking, reaching 7th place by 2011. A period of aggressive expansion followed as QNB bought up banks in Egypt, Iraq, Libya and Indonesia. In 2012, it agreed a $2.5bn deal to buy Egypts National Societe Generale Bank from Frances Societe Generale, giving it a foothold in the Arab worlds most populous country.
Growth story
At the end of 2012, the value of QNBs assets hit QR366bn, making it the first bank in the Middle East to see assets surpass $100bn. It also became the regions most profitable lender, with net income of $2.3bn. QNB reported continued strong growth in profitability in 2013, with net profit rising 13.7 per cent to $2.6bn. Its assets totalled $121.8bn at the end of December.
The phenomenal growth story of QNB, whose assets have grown from $41bn in 2008, will be a difficult one for rival firms to replicate. Indeed, Al-Rajhi Bank has slipped to 5th place this year, after having always featured in either 2nd or 3rd place since the MEED 100 was launched seven years ago.
Saudi Telecom Company moved back into the top 3 this year after returning to profit in 2013. Its market capitalisation has jumped from $21.3bn in last years table to $33.2bn.
The changes at the top come during a strong period for the regions capital markets, which in November saw confirmation that the UAE and Qatar would be upgraded to emerging market status from May. The pipeline of initial public offerings (IPOs) has also swollen to levels not seen since 2007. Stock markets worldwide have risen to new highs in 2014, with some of the strongest performances registered in the GCC as the economies continued to recover from the global recession of 2009. Registering a yearly increase of about 9.5 per cent, the collective profit of GCC firms witnessed the highest growth in more than four years. Petrochemicals and banking the MEED 100s largest sectors made the highest contributions to the jump in earnings and could continue to do so next year.
Dubai stood out this year, with its general share index more than doubling amid the euphoria surrounding its Expo 2020 win. Abu Dhabi followed, increasing more than 60 per cent. That is mirrored in this years Top 100, with Dubai and Abu Dhabi-listed companies posting the highest gains, as investors regained confidence in their economies.
Dubai Financial Market rose 40 places to 39th, and the emirates construction and finance firms, which are set to profit from increased infrastructure spending, also rose rapidly. Dubais massive jump can be explained by the recovery from low valuations in the years following the financial crisis. First Gulf Bank (ranked 9th) entered the top 10 for the first time, while Dubai Islamic Bank and Abu Dhabi Islamic Bank rose to 41 and 49 respectively.
With a market capitalisation of $15.1bn, Dubais Emaar Properties, ranked 14th, has overtaken Qatars Ezdan Holding Group (22nd) as the regions largest developer. Emaar has had a year of strong property sales and recorded a net profit of AED2.6bn ($699m) in 2013, an increase of 21 per cent compared with 2012.
Next year is unlikely to witness similar results by UAE companies, however, as analysts argue that some stocks are no longer reflective of company fundamentals and question whether it is justified that the overall market has become even more expensive than Saudi Arabia the regions largest stock market.
Soaring value
Reflecting this turnaround in the markets, however, the combined value of the Middle Easts 100 largest listed firms this year has soared to $912bn, compared with $704.1bn last year and $863bn in 2008 at the peak of the boom. The cut-off point for inclusion in the list this year is also significantly higher at $3.2bn, compared with $2.3bn last year.
Thirteen bourses are represented on the list, with the Gulfs largest exchanges dominating and only a few firms trading in Muscat, Manama, Casablanca, Baghdad and Amman. Saudi Arabia remained the MEED 100s largest contributor, with Tadawul-listed companies accounting for nearly half of the lists combined market capitalisation, followed by Qatar (15.3 per cent), Abu Dhabi (10.5 per cent), and Iran (7.4 per cent).
The financial services industry continues to be the dominant sector in the list, with 45 firms worth a collective $384bn or 42 per cent of the total market capitalisation. The second-most important segment is now petrochemicals, buoyed by the entrance of major Iranian players following stock market flotations. Saudi Basic Industries Corporation (Sabic) continues to top the list, with a $91.2bn market capitalisation, two-and-a-half times that of the runner-up, QNB. Its market capitalisation has increased from $73.4bn in last years MEED 100, but is still some way off the $111bn of 2008. The third-largest sector is the telecoms industry
More than a dozen companies are new to the Top 100 this year, led by privatisation efforts in Iran. Persian Gulf Petrochemical Industry Holding was the highest entrant at 17, with a market capitalisation of $13.5bn. About 5 per cent of shares in the state-controlled firm were floated on the Tehran Stock Exchange in April 2013, and it now accounts for about 10 per cent of the total capitalisation of the bourse. Bandar Abbas Oil Refining Company, Parsian Oil & Gas Development and Tamin Petroleum & Petrochemical Investment Company were also recent flotations in the country, with the latter planning to offer more shares to the public at a later date.
The second-highest new entrant was Abu Dhabis Aldar Properties, which entered the MEED 100 at 37, with a market capitalisation of $7.2bn, following its 2013 merger with fellow developer Sorouh Real Estate. Also entering the list for the first time is Dubais Arabtec Holding, which debuted at 70th position, with a market capitalisation of $4.2bn. The company is in the midst of a massive expansion as it aims to become one of the regions largest contractors.
Irans Gol-e-Gohar Iron Ore Company and Tadawul-listed Emaar the Economic City are reentrants to the table.
The companies that dropped out of the list include Jordans Arab Potash Company, Al-Ahli Bank of Kuwait, Oman Telecommunications Company, Kuwaiti developer Mabanee and three regional cement producers. Orascom Construction, meanwhile, moved its listing to Amsterdams stock exchange amid increased political uncertainty in Egypt, while Bank Audi had to scale back growth plans as Syrias war continues to affect Lebanon. National Societe Generale Bank in Egypt was acquired by QNB and has rebranded as QNB Ahli.
All told, 40 companies improved their position in the MEED 100 this year, while 38 fell down the table and four held on to the same position as last year. A flurry of IPOs launched over the past couple of years has significantly influenced the table this year and this trend can be expected to continue.
Flotation plans
More than 20 GCC firms are now preparing to launch IPOs, after a seven-year drought in listings, and up to three are looking to raise at least $1bn each. While many of these firms will be too small to feature in the MEED 100, there are likely to be several new entrants, which will push out companies at the lower end. In particular, Saudi Arabias largest lender, National Commercial Bank (NCB), is preparing an IPO of 15 per cent of its capital. It is expected to seek regulatory approval in the third quarter of 2014.
NCBs assets were estimated at about $96bn at the end of 2013 and its net income at about $1.6bn, meaning it would likely enter straight into the top 10. Also in the kingdom, Saudi Airlines Catering Company entered the list in 98th place this year, following its stock market debut, and another Saudi Arabian Airlines business unit, Saudi Cargo Airlines Company is looking to list in 2014. An IPO for the carriers maintenance business is set to follow in 2015.
In Qatar, Barwa Bank is in the process of obtaining regulatory approval for an IPO, while Qatar First Bank is said to be exploring the option to list existing shares. Elsewhere, Abu Dhabis General Holding Corporation (Senaat) is rumoured to have appointed advisers ahead of launching an IPO at the end of 2014 or in early 2015. State-owned Senaat is one of the largest industrial groups in the UAE, owning several of the countrys leading manufacturers. Another big name considering a listing that would be certain to attract attention is Nakheel. The Dubai developers chairman told MEED in late March that it is working on plans for an IPO, but this would only happen after its debts had been repaid, which is expected to be achieved by September 2015. Iraqi mobile operators Zain Iraq and Korek Telecom have also yet to list in order to comply with the terms of their licences.
The pipeline of IPOs will help to broaden and deepen the regions capital markets in the years ahead.
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