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Regional stock market listings near record level

23 December 2024

 

This report also includes: Gulf debt markets make their mark

The Middle East and North Africa (Mena) region’s capital markets got off to a fairly strong start in 2024, with two sizeable listings on the Saudi Stock Exchange (Tadawul) in January. Broadcaster MBC Group’s listing on 8 January raised $222m, while Middle East Pharmaceutical Industries Company (Avalon Pharma) followed up with a $131m share sale on 24 January.

The year ended with a far bigger bang, however, with several multibillion-dollar listings in the UAE and Oman in the final quarter. Among them, grocery chain Lulu Group International raised $1.7bn on the Abu Dhabi Securities Exchange (ADX) in early November. The following month, food delivery and quick commerce business Talabat Middle East raised $2bn when it launched on the Dubai Financial Market (DFM).

Between those bookends to the year there were dozens of other initial public offerings (IPOs) on the region’s stock markets. According to data compiled by EY, there were 29 new listings in the opening nine months of the year, the same as in the equivalent period of 2023 and only just behind the 31 IPOs in 2022.

The final quarter of the year has been the busiest. MEED’s analysis points to the tally reaching 49 IPOs as of mid-December, with several more listings still on the cards for the closing weeks of the year. As such, the previous record for the most IPOs in the region in a year – the 51 seen in 2022 – could well be surpassed.

As has been the case for many years, the GCC bourses have been the dominant focus of activity, with Saudi Arabia hosting 13 IPOs on the main Tadawul market and 24 on the smaller Nomu bourse.

The UAE has had a further seven, with four on the ADX and three on the DFM, while the Kuwait and Muscat exchanges have had one apiece.

Beyond the Gulf, activity has been more limited, but some markets that were dormant for several years have reawakened. There have been two IPOs in Egypt – Act Financial and United Bank of Egypt – and one on the Algiers Stock Exchange, where Credit Populaire d’Algerie’s listing in March was the first in eight years.

Fluctuating activity

IPO activity has ebbed and flowed through the year. According to EY, there were 10 IPOs in the first quarter, the same as in the equivalent period the year before, although this did not include the Algiers listing.

Saudi Arabia saw nine listings in Q1 2024, raising a combined $724m, the most significant being Modern Mills, which raised $314m. That was overshadowed by Parkin Company, however, which raised $429m by listing on the DFM.

In the second quarter, a further 14 companies came to market, raising $2.6bn between them. This was slightly up on the 13 IPOs in Q2 2023 and the proceeds were also up 45%.

Of the total, 11 were in Saudi Arabia, with five on the Tadawul and six on the Nomu. The biggest was Dr Soliman Abdul Kader Fakeeh Hospital Company at $764m, followed by Alef Education Consultancy on the ADX at $515m.

Notably, Kuwait Boursa saw its first listing in two years, with Beyout Investment Group coming to the market in June. The only other IPO outside Saudi Arabia was retailer Spinneys, which listed on the DFM, raising $375m.

Activity slowed in the third quarter, with just five new listings, which raised $930m between them. Almost all of this was accounted for by the listing of NMDC Energy on the ADX, which involved a raise of $877m – the largest of the year at the time, although that figure was overtaken several times in the final quarter.

Saudi Arabia saw three more listings on the Nomu market in Q3, raising $27m in total. During this period, Act Financial also made its market debut, becoming the first new listing on Egyptian Exchange (EGX) in two years.

At the end of Q3, EY estimated that a further 11 companies were planning to list on exchanges in the Mena region before the year was out.

Not all of these listings have gone ahead, but a number of major IPOs have been completed, including OQ Exploration & Production on the Muscat Stock Exchange (MSX), which raised $2bn on 28 October. It was followed by the IPOs of hypermarket chain Lulu Group and food delivery operator Talabat over the next two months.

In addition, there have been five more listings on the Tadawul, including Al-Majed Oud Company and Arabian Mills for Food Products Company, and nine more on the Nomu market.

Other deals have been announced but have so far yet to be completed. These included Oman’s OQ Base Industries, which in November announced plans to sell up to 49% of its shares and seek a listing on the MSX by mid-December.

The huge listings in the fourth quarter of 2024 mean that the downward trajectory of 2023 has been turned around, even if the heights of 2022’s fundraisings have not quite been matched. 

After the $22bn raised in 2022, the total fell to $10.7bn in 2023. In 2024, the total reached about $12.5bn by 10 December, including $8bn raised in the final quarter.

Diverging indices

The wider market performance of regional bourses has been decidedly mixed in 2024. 

There have been a handful of standout performers across the region. The Moroccan All Shares Index (MASI), for example, was up 22.7% between January and the end of November, with Egypt’s EGX 30 Index not far behind at 21.5%, according to data compiled by Kuwait’s Kamco Invest.

In the Gulf region, Dubai’s DFM General Index was up 19.4% over the same period, while Tunisia’s TunIndex also saw a creditable 12.7% gain.

In contrast, Riyadh’s Tadawul All-Share Index (Tasi), the FTSE ADX General Index, Qatar’s QE20 Index and Jordan’s ASE Index all saw their values fall in the first 11 months, with drops of between 1% and 4%.

Other major bourses saw more limited gains, with the Kuwait All Share Index posting a rise of 6.3%, while the Bahrain All Share Index was up 3.1% and Oman’s MGX 30 Index gained just 1.1%.

It is hard to see any clear pattern in these results. To date, five regional bourses have posted a better overall performance in 2024, compared to 2023, but six are faring worse.

This fits in with the mixed performances seen on the global level. The MSCI World Index gained more than 20% in the first 11 months of the year, helped by a strong performance in the US, where the S&P 500 rose by 26.5%. In contrast, the MSCI Emerging Markets Index was up just 5.4% over the same period.

The buoyant market for regional IPOs suggests that many companies and investors feel relatively optimistic, however.

A second IPO is due to take place in Algeria before the end of the year, with the listing of Banque de Developpement Local, and more are pencilled in for 2025. 

In neighbouring Morocco, irrigation specialist CMGP Group is also aiming for a $110m IPO on the Casablanca Stock Exchange in the near future.

However, Gulf markets are likely to continue to dominate in the near future. At least four more listings are planned in Saudi Arabia in the closing weeks of 2024 and the start of 2025, and many more are sure to follow. 

Main image: Food delivery business Talabat raised $2bn with its IPO on the Dubai Financial Market in December. Credit: WAM

https://image.digitalinsightresearch.in/uploads/NewsArticle/13108022/main.gif
Dominic Dudley

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    For two decades, the story of Gulf construction was told upwards, through record-breaking towers and ambitious skylines. Increasingly, it is now being told underground.

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    Riyadh is following a similar path. Metro Line 7 will run 65km between Qiddiya Entertainment City, King Abdullah International Gardens, King Salman Park, Misk City and Diriyah Gate, with 47km of the route underground. Fourteen of its 19 stations will also be below ground, preserving valuable surface corridors that connect some of the kingdom’s most valuable gigaproject developments.

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    A second, less visible tunnelling boom is under way beneath the region’s streets in stormwater and sewerage infrastructure. Dubai Municipality is finalising the first packages of the Strategic Sewerage Tunnels project, an AED80bn public-private partnership divided into three packages terminating at pump stations in Warsan and Jebel Ali.

    The scheme will convert Dubai’s sewerage system from a pumped network into a gravity-based one using deep tunnels and more than 200km of sewer links.

    Qatar is implementing a smaller version of the same concept. Ashghal has recently awarded a $104m contract for a trunk sewer running from Sheehaniya to the Doha North sewage treatment works. The tunnel will extend for about 39km, with diameters ranging from 600mm to 1,800mm, serving a catchment area covering 27,320 hectares of villages, farms, military facilities and a new residential development.

    These projects may lack the glamour of a metro line, but they demonstrate the same underlying principle. Once a city reaches a certain level of density, even routine utility infrastructure defaults to tunnelling rather than trenching.

    Roads and enabling works

    The third strand of the tunnelling boom covers the roads and enabling works that gigaprojects and dense cities increasingly require. Abu Dhabi’s Mid Island Parkway project combines bridges, a causeway and tunnels, including a cut-and-cover section on Bilrimaid Island, linking the emirate’s eastern islands.

    Another scheme currently under tender will connect Hudayriat Island to the mainland through two underwater tunnels feeding a 4.8km highway.

    In Al-Ain, Al-Fahjan Construction is boring a 120-metre tunnel through the Naqfa Mountains as part of a AED291m ($80m) dual carriageway, demonstrating that tunnelling is becoming viable outside the three largest urban centres wherever terrain, rather than density, presents the principal obstacle.

    Sharjah and Riyadh illustrate how the same approach is being adopted across different scales of urban development. Sharjah’s Al-Taawun Tunnel, the centrepiece of a AED750m ($204m) road programme linking Al-Nahda Bridge towards Dubai, and Riyadh’s Thumamah Road package, where Turkish contractor Yuksel Holding’s local subsidiary is constructing three tunnels and three bridges designed to carry 200,000 vehicles a day by 2028, reflect the same need to maximise surface capacity while avoiding disruption above ground.

    Dubai continues applying the same solution to smaller transport bottlenecks. The RTA’s contract to upgrade Umm Suqeim Street, Al-Wasl Road and Al-Safa Street includes bridges and tunnels totalling about 11km in what would once have been a straightforward at-grade junction improvement. The twin tunnels due to open on the Sheikh Rashid Corridor this August serve the same purpose: maintaining traffic flow between Oud Metha and Al-Wasl Club Street without adding a single lane of surface road.

    The contractors that have absorbed the lessons from Riyadh Metro’s earlier phases and Dubai’s Blue Line, rather than simply bidding aggressively to secure a share of a buoyant market, are likely to emerge strongest

    Contractors and technology

    The contractors delivering these projects increasingly move between them. The same firms bid for metro tunnels, sewerage tunnels and road tunnels, while the TBM fleets, grouting crews and tunnelling expertise developed on one project are redeployed on the next, sometimes in a different country.

    Turkish, Chinese, Korean and European civil engineering contractors that built Riyadh Metro’s earlier lines are now bidding for Metro Line 7 and for packages on Dubai’s Strategic Sewerage Tunnels project. Local firms such as Al-Marwan Contracting in Sharjah and Al-Fahjan Construction in Al-Ain also demonstrate that tunnelling is no longer the preserve of a handful of European and Japanese specialists, but a capability that regional contractors can increasingly offer.

    Clients have noticed. Procurement is likely to favour contractors and joint ventures that can demonstrate tunnelling experience across multiple countries, because ground conditions, TBM logistics and underground station construction involve too much risk to entrust to first-time operators.

    What happens next

    The main constraint on the region’s tunnelling boom is unlikely to be client appetite or financing. Instead, it will be the availability of TBMs and specialist subcontractors. Herrenknecht and its competitors cannot manufacture bespoke machines overnight, and every metro, sewerage and highway tunnel competing for the same large-diameter TBMs will continue to push lead times and day rates higher throughout the remainder of the decade.

    The pressure extends well beyond the machines themselves. Waterproofing, grouting, segment casting and ground-freezing specialists remain a relatively small global pool, and a region delivering metro, sewerage and highway tunnels simultaneously across three countries will inevitably compete for the same expertise.

    Day rates for tunnelling specialists are therefore likely to strengthen before this cycle reaches its peak. Clients are also expected to secure framework agreements with preferred contractors rather than repeatedly tendering individual projects, simply to secure access to equipment and specialist crews.

    Ground conditions remain the other major risk. The UAE’s gypsum-bearing and karstic geology, Riyadh’s mixed rock formations and Qatar’s high water table have already generated cost and programme surprises on previous tunnelling contracts. Delivering this volume of work within overlapping construction schedules makes it likely that some projects will experience delays or cost overruns.

    The contractors that have absorbed the lessons from Riyadh Metro’s earlier phases and Dubai’s Blue Line, rather than simply bidding aggressively to secure a share of a buoyant market, are likely to emerge strongest.

    The GCC’s tunnel boom is not a passing trend. The real question over the next decade is not whether governments will continue commissioning underground infrastructure, but which contractors have built the capability to deliver it without the delays and cost overruns that have affected comparable tunnelling booms elsewhere.

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    Yasir Iqbal