MENA IPO EyeQ3 2015

Inside Q3 2015 highlights 2

Key trends impacting MENA IPOs 4

Broader outlook 7

Summary of IPOs 8

Key events to look out for 11

Contacts 11

2 | MENA IPO Eye — Q3 2015

The MENA IPO Eye is a quarterly publication covering the MENA IPO markets.

Through the publication, we intend to highlight the latest developments, market trends and outlook of IPO activity in the region, providing valuable insights for companies looking to float in the future.

For feedback, please email mayur.pau@ae.ey.com.

Mayur Pau MENA Strategic Growth Markets and IPO Leader

Q3 2015 highlightsNo IPO activity amid uncertainty in global and MENA markets, compounded by continuing volatility in oil prices

Q2 2015 witnessed a surge in IPO activity, with nine IPOs in the MENA region raising over US$2.1b. However, the same trend did not continue in Q3 2015, with no IPO activity recorded in the quarter.

The lack of IPO activity in the MENA region is driven by the following factors:

Volatility in oil prices returnCrude oil prices had appeared to have started to stabilize at US$60 per barrel toward the end of Q2 2015. However, global market trends, combined with weakening demand and oversupply, have resulted in crude oil prices falling as low as US$42 in the quarter, and standing at US$46 at 28 September 2015. The Energy Information Administration (EIA), an official energy statistic agency in the USA, estimates that the production of oil will continue to exceed consumption through the end of 2016, potentially resulting in further price declines going forward.

Volatility in global markets — a slowdown in the mighty Chinese machineA slowdown in the Chinese economy, primarily due to a decrease in industrial activity and currency devaluation, has contributed to an increase in volatility in stock markets across the globe. China accounts for about 40% of global demand in industrial metals, and concerns over its slow gross domestic product (GDP) growth have therefore led to significant decline in prices of imported commodities.

This slowdown also poses a great risk to MENA oil exporting nations, from which China imports more than half of its oil demand.

The global markets are impacted by the effect of a strengthening dollar and the US Federal Reserve’s plans to increase the interest rate in the future. These factors have led to volatile conditions in the MENA stock markets that are not suitable for IPOs, and encouraged several IPO candidates to defer their plans until market conditions become more favorable.

“ Recent volatility had led several companies to delay their plans, but most were expected to continue to pursue listings when markets stabilize. The current situation of fluctuating markets may delay or prevent some of them from completing the relevant procedures.”

Mr. Al Zaabi, Deputy Chief Executive of the Securities and Commodities Authority (UAE), Arab IPO summit in Dubai, United Arab Emirates (UAE).Source: The National.

Revised government spending Several MENA governments are starting to set out revised spending plans as they seek to balance the books and address government budget deficits, amid continuing low oil prices.

For example, the UAE Government plans to cut spending by 4.2% in 2015. Spending this year will fall to US$125b, down from US$131b in 2014, as the Emirates attempts to shake off the fiscal impact of low oil prices and slowing government revenues.

To address this, many MENA governments are seeking to lift subsidies in relation to petroleum and other consumer products and potentially introduce value added tax. The UAE has led the way with reducing subsidies on petroleum from 1 August 2015, with other MENA countries expected to follow suit.

Ongoing conflicts have also impacted government spending and contributed to volatility in MENA markets.

3MENA IPO Eye — Q3 2015 |

MENA IPO activity (Q1 2011–Q3 2015*)

Capital raised (US$m) Volume

24.1 374.8 218.9 226.1 82.8 1,297.1 252.3 339.8 1,621.0 482.6 150.7 817.7 1,283.81,104.81,671.2 7,426.3

3

6

24 4

6

13

5

9 9

2

10

5

11

3

8

0

2

4

6

8

10

12

0

2,000

4,000

6,000

8,000

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

255.7 2,120.52

0

Q1 15 Q2 15 Q3 15*Q4 14

Volu

me

(num

ber o

f IPO

s)

Capi

tal r

aise

d (U

S$m

)

N/a

Source: Zawya. Note: *updated 28 September 2015.

Q3 2015 — highlights

• Q3 2015 witnessed no IPO activity primarily due to companies deferring IPO plans, given the slowdown in certain global markets, and oil price and capital market volatility.

Highlights from Q2 2015 MENA IPO Eye edition

• Q2 2015 saw an increase in IPO activity, compared with Q1 2015, with nine IPOs across the region, which collectively raised a total capital of US$2.1b. Capital raised through MENA firms increased by 92% in Q2 2015, compared with Q2 2014.

• Saudi Arabia and Egypt had six IPOs in H1 2015, representing 78% of the total capital raised, reflecting strong investor sentiment, given reduced volatility, economic conditions and implementation of market reforms.

• As of 15 June 2015, Tadawul opened up to Foreign Direct Investment (FDI) subject to several criteria and ownership limits.

4 | MENA IPO Eye — Q3 2015

Key trends impacting MENA IPOsMarket fundamentals

MENA GDP growth (%) Crude oil prices Government expenditure (US$b)

2.4

2.6

3.4

2.6

3.8

1.8

3.3

2.3

4.0

3.8

2.8

3.8

0 2 4 6

MENA oil importers

MENA oil exporters

Gulf Cooperation Council(GCC)

MENA

2016f* 2015f* 2014a*

0

20

40

60

80

100

120Se

p 20

14

Oct

201

4

Nov

201

4

Dec

2014

Jan

2015

Feb

2015

Mar

201

5

Apr

201

5

May

201

5

Jun

2015

Jul 2

015

Aug

201

5

Sep

2015

Opec price Europe Brent crude

Oil

pric

es (U

S$ p

er b

arre

l)

1051.0 1022.7 1044.6

629.5 617.2 631.8

0

200

400

600

800

1,000

1,200

2015f 2016f 2017f

US$

b

Year

MENA government expenditureGCC government expenditure

Source: IMF, October 2015. Note: *f — forecast, *a — actual.

Source: OPEC and Energy Information Administration EIA. Source: Business Monitor International (BMI).

• According to the International Monetary Fund (IMF), the MENA region is expected to register a GDP growth of 2.3% in 2015, compared with 2.6% in 2014. The forecast growth for 2015 is a downward revision from the 2.7% forecast in Q2 2015.

• Against the backdrop of declining oil revenues and regional conflicts, MENA countries have revised their GDP projections.

• Crude oil prices have fallen nearly 60% from the peak in July 2014 to US$46 in September 2015. The EIA estimates that the production will continue to exceed consumption through the end of 2016, further resulting in further price decline.

• A slowdown in the global economy, driven by the performance of the Chinese economy, strengthening US dollar and continuing oil supply glut, is impacting oil prices.

• In Q3 2015, government expenditure in MENA is forecast to total US$1,051b and that of the GCC to total US$629b by the end of 2015.

• The IMF has urged the MENA governments to cut total public spending in response to lower oil prices. The countries are expected to moderate their pace of spending to achieve a sustainable fiscal situation.

5MENA IPO Eye — Q3 2015 |

Equity market trends

MENA PE* and DY*

3.3%

16.5x

2.8%

16.4x

2.5%

10.6x

3.1%

14.2x

4.3%

12.1x

5.2%

10.3x

3.7%

14.2x

3.0%

10.7x

4.6%

9.3x

4.0%

10.6x

0 5 10 15 20

DY

PEAbu Dhabi SE

Bahrain SE

Dubai FM*

Kuwait SE

Muscat SM

Qatar SE

Saudi SE

Egypt SE

Casablanca SE

Tunis SE

Source: Zawya. Note: as of 28 September 2015. FM — Financial market PE — Price-to-earnings DY — Dividend Yield

Stock market Market cap (US$b)

Year-to-date (YTD) return to 28

September 2015 (%)

Saudi SE 448.2 –11.5%

Qatar SE 167.8 –6.9%

Abu Dhabi SE 123.2 –0.3%

Kuwait SE 89.0 –11.8%

Dubai FM 96.7 –5.1%

Egypt SE 58.6 –17.0%

Bahrain SE 50.8 –10.4%

Casablanca SE 58.4 –4.8%

Muscat SM 23.5 –9.2%

Tunis SE 21.3 4.2%

Source: Zawya. Note: as of 28 September 2015.

• The regional stock markets have remained volatile due to declining oil prices and the impact of the slowdown in the global economy. All regional markets have witnessed a negative YTD return, except Tunis SE, as the MENA markets reflect current investor sentiment.

• The regional market performances have been sluggish, with an average price-to-earnings (PE) ratio of 12.5x as of September 2015 (13.1x as of June 2015). The average dividend yield (DY) of regional stock markets as of September 2015 was 3.8% (3.7% as of June 2015).

MENA stock market returns — YTD 2015

6 | MENA IPO Eye — Q3 2015

Regional stock market performance — YTD 2015 (%)

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

1 Jan 15 31 Jan 15 2 Mar 15 1 Apr 15 1 May 15 31 May 15 30 Jun 15 30 Jul 15 29 Aug 15 28 Sep 15

Mar

ket r

etur

n (%

cha

nge)

Abu Dhabi SE Dubai FM Kuwait SE Qatar SE Saudi SE

Source: Zawya. Note: as of 29 September 2015.

MENA IPO activity vis-a-vis global IPO trends

The global IPO activity witnessed a substantial decrease of 73% in capital raised, totaling US$17.9b in Q3 2015, compared with the capital of US$67.4b raised in Q3 2014. When compared with a capital of US$70.1b raised in Q2 2015, there was a decline of 74% in the capital raised in Q3 2015.

MENA on the other hand witnessed no IPO activity in Q3 2015, compared with a total of US$2.1b capital raised in Q2 2015.

Global IPO activity (Q1 2011–Q3 2015)*

46.9 65.4 28.7 29.2 18.0 43.8 29.6 37.2 24.4 46.3 25.6 74.9 47.2 72.7 67.4 72.0 39.9 70.1

306

384

293260

203243

192 201163

205202

325262

335 277366

274

424

0

100

200

300

400

500

0

20

40

60

80

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15

17.9

192

Q3 15*

Volu

me

(no.

of I

POs)

Capi

tal r

aise

d (U

S$b)

Capital raised (US$ billion) Volume (number of IPOs)

Source: EY. Note: *updated 15 September 2015.

7MENA IPO Eye — Q3 2015 |

Broader outlookLimited IPO activity against the backdrop of global economic slowdown

The continuing slowdown in certain global economies, imminent interest rate increase in the USA and low oil prices are expected to continue to effect international and MENA markets. The global demand for commodities and oil is expected to be sluggish in Q4 2015, directly impacting the economy and government spending of the largest oil producers in MENA, and continuing to affect IPO activity.

Regulations and UAE Commercial Companies law

The MENA regional markets have witnessed several important reforms in the last two quarters, including the opening of Tadawul to foreign investors and policy reforms in the MENA markets, and the new Commercial Companies Law in the UAE that came into effect in Q2 2015.

The UAE market is awaiting details to be published around several aspects of the new Commercial Companies Law impacting IPOs, in particular around corporate governance, secondary offerings and ownership structure changes.

“ SCA is finalizing the relevant regulations relating to listings, and expects them to be published by the end of the year.”

Mr. Al Zaabi, Deputy Chief Executive of the Securities and Commodities Authority (UAE), Arab IPO summit in Dubai, UAE.Source: The National.

The MENA markets are expected to gain momentum in capital activity through these reforms once the global conditions stabilize and the reforms are refined to achieve a maximum impact on the relevant capital markets.

Firms preparing for IPO amid market volatility

Currently, the companies in the MENA region are very cautious in raising IPOs due to low investor confidence in the regional markets. There are several companies that have plans to issue IPOs but have adopted a “wait and watch” policy due to current global economic conditions.

“ A significant rush of IPOs is unlikely to occur before the start of next year, everyone’s sitting back and waiting for the right time. I don’t imagine anything will happen this year.”

‘Ahmed Ibrahim, Head of Equity Capital Markets Al Tamimi & Company. Source: The National.

According to the Zawya monitor, around 30 companies from the MENA region have plans to go public in Q4 2015. Some of the prominent names include Daman Investments (UAE), Riyadh Cables Group of Companies (Saudi Arabia), Al-Sulaiman Holding (Qatar), Middle East Oil Refinery (Egypt) and Jindal Shadeed Iron & Steel Company (Oman).

Broader outlook — highlights

• The continuing slowdown in certain global economies, and the US Federal Reserve’s imminent decision to increase interest rates, are expected to impact stock markets globally and in MENA.

• The MENA markets are expected to gain momentum in capital activity through reforms once the global and MENA conditions stabilize. Further details around the UAE Commercial Companies Law are expected to be published by the end of the year.

• Several companies have plans to issue IPOs but have adopted a “wait and watch” policy due to capital market conditions.

8 | MENA IPO Eye — Q3 2015

Summary of IPOsSummary of companies listed from Q3 2014 to Q3 2015

Date (quarter)* Issuer Size of offering (US$m)

Sector Exchange

Q2 2015 — 25 June Emaar Misr 298.8 Real estate Egypt SE

Q2 2015 — 9 June Saudi Ground Services Company 751.96 Transport Saudi SE

Q2 2015 — 8 June Phoenix Power Company SAOG 146.28 Power and utilities Muscat SM

Q2 2015 — 15 May Total-Maroc 73.90 Oil and gas Casablanca SE

Q2 2015 — 20 May Universal Automobile Distributors Holding 42.01 Transport Tunis SE

Q2 2015 — 11 May Integrated Diagnostics Holdings PLC 290.22 Health care London SE

Q2 2015 — 28 April Saudi Company for Hardware 134.40 Industrial manufacturing Saudi SE

Q2 2015 — 14 April Middle East Paper Company — Saudi Arabia 119.98 Industrial manufacturing Saudi SE

Q2 2015 — 1 April Edita Food Industries 263.00 Food and beverages Egypt SE and London SE

Q1 2015 — 4 March Orascom Construction Ltd. 185.00 Construction Egypt SE and NASDAQ Dubai

Q1 2015 — 4 January Orascom Hotels & Development 70.68 Leisure and tourism Egypt SE

Q4 2014 — 12 December Cerealis 5.34 Food and beverages Tunis SE

Q4 2014 — 3 December Résidences Dar Saada SA 127.82 Real estate Casablanca SE

Q4 2014 — 30 November Dubai Parks and Resorts PJSC 695.35 Leisure and tourism Dubai Financial Market (DFM)

Q4 2014 — 17 November Electrical Industries Company 194.30 Industrial manufacturing Saudi SE

Q4 2014 — 5 November RAK Petroleum Public Company Limited 2.91 Oil and gas Oslo SE (Norway)

Q4 2014 — 4 November Amanat Holdings PJSC 381.84 Health care DFM

Q4 2014 — 2 November NCB 5,998.08 Financial services Saudi SE

Q4 2014 — 15 October Al Maha Ceramics Company SAOC 20.62 Industrial manufacturing Muscat SM

Q3 2014 — 26 September Emaar Mall Group 1,579.00 Real estate DFM

Q3 2014 — 30 September Délice Holding 67.96 Food and beverages Tunis SE

Q3 2014 — 30 September Zain Bahrain 24.19 Telecommunications Bahrain SE

Source: Zawya. Note: *as of 28 September 2015.

9MENA IPO Eye — Q3 2015 |

Companies planning or in process for public issue during 2015–18

Country Issuer Sector

UAE Al Bayader International LLC Industrial manufacturing

Al Qudra Holding PJSC* Financial services

AlMansoori Petroleum Industries Industrial manufacturing

Alpha Tours LLC* Leisure and tourism

Arabtec Construction LLC Construction

Arqaam Capital Limited Financial services

Daman Investments PSC Financial services

Danube Building Materials FZCO Industrial manufacturing

Emaar Financial Services Financial services

Future Pipe Industries Group Limited* Industrial manufacturing

Habtoor Leighton Group** Construction

Kalyan Jewellers** Retail

Khidmah LLC Real estate

Massar Solutions PJSC* Transport

Mawarid Finance PJSC Financial services

Network International LLC Information technology

Mediclinic International Ltd. Health care

Al Shafar General Contracting* Construction

Avivo Group Health care

Emicool Services

Halalbooking Leisure and tourism

Saudi Arabia National Air Services Ltd.* Transport

Sadara Chemical Company Oil and gas

Al Aqeeq Real Estate Development Company* Real estate

Al-Watania Poultry Agriculture

Arab Paper Manufacturing Co. Ltd. Industrial manufacturing

Riyadh Cables Group of Companies** Industrial manufacturing

Saudi Airlines Cargo Transport

Saudi Aramco Total Refining and Petrochemical Company Oil and Gas

ACWA Power International Power and utilities

Sulaiman Al Habib Medical Group Health care

Al Azizia Panda United Co. Retail

Abdulla Fouad Holding Co. Services

Al Mutlaq Trade & Industries Co. Transport

10 | MENA IPO Eye — Q3 2015

Country Issuer Sector

Egypt Misr Italia Real estate

Arabtec Egypt for Construction Construction

Al Ahly Sporting Club** Education

Arabian Food Industries Company Food and beverages

Beta Egypt Real estate

Cairo for Development and Cars Manufacturing Transport

Food Industries Holding Company Food and beverages

Raya Contact Center Services

Smart Villages Development And Management Company Real estate

Wadi Group Agriculture

Middle East Oil Refinery Oil and gas

Rooya Group Real estate

British Egyptian Co. For General Development Food and beverages

Oman Connect Arabia LLC Telecommunications

Al Khonji Real Estate & Development LLC Real estate

Falcon Insurance Co. SAOC Financial services

Jindal Shadeed Iron & Steel Co. LLC Mining and metals

Kunooz Oman Holding Conglomerates

Oman Reinsurance Company SAOC Financial services

Sama Telecommunications Telecommunications

Orpic (Oman 2020 IPO) Oil and gas

Qatar Al-Sulaiman Holding Conglomerates

Elan Qatar** Services

Barwa Bank QSC Financial services

QIC International LLC Financial services

Qatar Airways* Transport

Kuwait Kuwait Airways Corporation KSC Transport

Lebanon Middle East Airlines Transport

Source: Zawya. Note: *delayed IPO, **rumored IPO.

11MENA IPO Eye — Q3 2015 |

Key events to look out forName of the event Date Theme

DFM IPO Forum 9 November 2015

The third DFM IPO Forum addresses recent regulatory developments creating new opportunities for listing on Dubai’s capital market, family business governance, best practices in the preparation of going public, and key decisions every company must consider.

MENA IPO Retreat, Dubai

(by invitation only)TBC

Strategies for companies going public or raising capital through IPOs — discussions and guidance from a dedicated panel of industry experts and professionals.

Middle Eastern M&A and Private Equity Forum

18 November 2015

This flagship event will give you the opportunity to hear from expert speakers, who will discuss and debate M&A activity in the Middle East and the wider emerging markets. Sessions will also explore future investment opportunities for dealmakers over the next year.

Mayur Pau MENA Strategic Growth Markets and IPO Leader

mayur.pau@ae.ey.com +971 4312 9446

Darrell Traynor Executive Director — Transaction Advisory Services

darrell.traynor@ae.ey.com +971 4312 9446

Gregory Hughes Partner — Transaction Advisory Services — IPO Leader

gregory.hughes@ae.ey.com +973 1751 4838

Shahzad Shaikh Manager — Transaction Advisory Services

shahzad.shaikh@ae.ey.com +971 4701 0858

Contacts

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