Q1 2015 IPO Eye

MENA IPO EyeQ1 2015

Inside Q1 2015 2

Key trends impacting MENA IPOs 4

Q2 2015 outlook 7

Key events to look out for 11

Contacts 11

2 | MENA IPO Eye Q1 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 [email protected].

Mayur Pau MENA IPO Leader

Q1 2015Q1 2015 saw limited IPO activity, with the majority of the companies continuing to be cautious given the uncertainty over oil prices, which started to stabilize in the quarter.

MENA IPO activity declined in Q1 2015 after an active Q4 2014, with only two IPOs across the region collectively raising a total capital of US$255.7 million.

Capital raised by MENA firms through IPOs decreased by 80%, and the number of IPOs decreased by three in Q1 2015 compared with Q1 2014. Similarly, capital raised by MENA firms through IPOs decreased by 97%, and the number of IPOs decreased by six in Q1 2015 compared with Q4 2014.

Both the IPOs that closed in Q1 2015 were companies based in Egypt, with Orascom Construction opting for a dual listing on the Egyptian Stock Exchange (SE) and NASDAQ Dubai.

Two IPOs in Q1 2015

Company Domicile Sector Amount raised (US$ million)

Listing date Exchange

Orascom Construction Limited

Egypt Construction 185.0 1 March 2015 Egypt SE and NASDAQ Dubai

Orascom Hotels and Development

Egypt Leisure and tourism

70.7 1 January 2015 Egypt SE

Total 255.7

Sources: Zawya IPO Monitor, Mergermarket and ThomsonOne.

Egypt on the slow road to recovery

The ongoing economic recovery and increasing stability in Egypt have encouraged capital market activity. According to the International Monetary Fund (IMF), Egypt’s gross domestic product (GDP) growth rate is expected to reach 4% by 2015, compared with 2% in 2013.

This is supported by government initiatives to stimulate the economy, including a cut in energy subsidies last year, an improved tax regime and new infrastructure projects (Suez Canal development project). Improving relationships with other countries in the region have resulted in several Gulf countries collectively pledging a total of US$12 billion for the economic recovery and growth plans of the country.

These factors have combined with more simplified listing procedures and amended laws, to increase capital market activity on the Egyptian SE. The IPOs of Orascom Construction Limited and Orascom Hotels and Development were oversubscribed by 5.1 times and 3.8 times, respectively, and, according to Zawya, there are around 10 more Egyptian companies planning to raise money through IPOs in 2015.

Oil prices recovering, but uncertainty remains

Brent crude prices have partially recovered in Q1 2015 after a dramatic fall in global oil prices during 2014 and the beginning of 2015, when prices reached a low of US$45.1 on 13 January 2015.

Since then, the declining supply from US producers and increased demand from Asian and Latin American countries have led to Brent crude prices recovering to US$60 on 2 March 2015 and, currently, they around the US$55 per barrel mark.

Continued uncertainty over the future of oil prices in Q1 2015 has resulted in several companies deferring their IPO plans to Q2 2015 and Q3 2015, and it is the key driver for the lack of IPO activity in Q1 2015.

3MENA IPO Eye Q1 2015 |

MENA IPO activity (Q1 2011–Q1 2015*)

Capital raised (US$ million) 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 1,283.8 1,104.8 1,671.2 7,426.3

3

6

24 4

6

13

5

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

255.72

Q1 15*Q4 14

Volu

me

(num

ber o

f IPO

s)

Capi

tal r

aise

d (U

S$ m

illio

n)

Source: Zawya. Note: *updated 22 March 2015.

Insights on the two MENA IPOs of Q1 2015

Particulars Orascom Construction Limited Orascom Hotels and Development

Purpose To separate the company from the Orascom Group and establish it as the parent company of the construction business. In turn, this will allow each Orascom business to participate actively in consolidation opportunities, and value-accretive partnerships and joint ventures in their respective markets.

The IPO offer comes as part of the Orascom Development Holding Group’s strategy to generate value from its subsidiary operations. The proceeds from the IPO will be re-injected to support ongoing operations and deleverage its balance sheet.

Statistics Amount raised — US$185 million (EGP1.4 billion) on Egypt SE

Dual listed in NASDAQ Dubai for trading only

Equity offered — 11% stake: a tranche of 2,360,830 new shares (2% of share capital) allocated to Egyptian qualified institutional buyers or professional high-net-worth individuals and a second tranche of 10,623,735 new shares (9% of share capital) allocated to qualified institutional investors.

Price — EGP108.71 per share

Subscription period — 1 to 4 March 2015

Listing date — 11 March 2015

Amount raised — US$70.7 million (EGP506.1m)

Equity offered — 15% stake: a tranche of 22,196,233 shares (10% of share capital) allocated to qualified investors and a tranche of 11,098,116 shares (5% of share capital) allocated to the general public.

Price — EGP15.2 per share

Subscription period — 1 to 4 January 2015

Listing date — 6 January 2015

Source: Zawya.

Q1 2015 — highlights

• Q1 2015 saw a decrease in IPO activity, compared with Q1 2014 and Q4 2014, with only two IPOs across the region, which collectively raised a total capital of US$255.7 million.

• Both the IPOs closed in Q1 2015 were companies based in Egypt, with Orascom Construction opting for a dual listing on the Egyptian SE and NASDAQ Dubai.

Highlights from the Q4 2014 MENA IPO Eye edition

• Q4 2014 saw a surge in IPO activity, raising a total of US$7.4 billion and was nine times higher than Q4 2013. This was based on strong market fundamentals and investor confidence.

• The National Commercial Bank (NCB), a majority-owned Saudi Arabian bank, was the largest listing in MENA history and the second largest globally in 2014, with a capital of US$6.0 billion raised, and was designed to redistribute wealth to Saudi Arabia’s population.

• Two more greenfield IPOs were launched in Q4 2014 with Amanat and Dubai Parks and Resorts, but with less success than Marka, against a backdrop of volatility, driven by declining oil prices.


Key trends impacting MENA IPOsMacroeconomic fundamentals

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

2.6

2.5

4.4

2.6

3.7

3.9

4.5

3.8

4.2

4.5

4.5

4.5

0 1 2 3 4 5

MENA oil importers

MENA oil exporters

GCC

MENA

2016f 2015f 2014a

0

20

40

60

80

100

120

140

Oil

pric

es (U

S$ p

er b

arre

l)

OPEC price

Mar

201

4

Apr

201

4

May

201

4

Jun

2014

Jul 2

014

Aug

201

4

Sep

2014

Oct

201

4

Nov

201

4

Dec

2014

Jan

2015

Feb

2015

Mar

201

5

Europe Brent crude

1079.2 1092.2 1130.5

560.8 569.9 586.7

0

200

400

600

800

1,000

1,200

2015f 2016f 2017f

US$

bill

ion

Year

MENA government expenditure

GCC government expenditure

Source: IMF, January 2015. Source: OPEC and Energy Information Association (EIA). Source: Business Monitor International (BMI).

• According to the IMF, the MENA region is still expected to register a GDP growth of 3.8% by 2015, compared with 2.6% in 2014.

• Diversification and economic reforms have benefited the MENA economies by enabling the creation of more private sector opportunities.

• Brent crude price appears to have bottomed out at US$45.1 on 13 January 2015 and recovered to US$52 as on 23 March 2015.

• According to the Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), Abdulla al-Badri, “Oil prices have reached the bottom and will see some rebound very soon. There is no need for the OPEC to reverse its policy of allowing the market to correct itself without cutting output.”

• In Q1 2015, government expenditure in MENA for 2015 is forecast to total US$1,078 billion and is a downward revision, compared with US$1,160 billion initially forecast in Q4 2014.

• Volatile oil prices have resulted in adjustments to government spending plans; however, MENA regional governments plan to use the huge financial reserves, if required, to meet domestic spending commitments and support diversification initiatives.


Equity market trends

MENA PE and DY

3.3%

13.6x

2.8%

16.5x

2.5%

12.6x

3.1%

16.3x

4.3%

13.4x

5.2%

10.3x

3.7%

15.3x

3.0%

10.7x

4.6%

10.8x

4.0%

10.1x

0 5 10 15 20

DY

PE

Abu Dhabi SE

Bahrain SE

Dubai FM

Kuwait SE

Muscat SM

Qatar SE

Saudi SE

Egypt SE

Casablanca SE

Tunis SE

Sources: Zawya. Note: as of 22 March 2015.

Stock market Market cap (US$ billion)

Year-to-date (YTD) return to

22 March 2015 (%)

Saudi SE 536.5 12%

Qatar SE 171.8 –6%

Abu Dhabi SE 120.8 –4%

Kuwait SE 97.3 –2%

Dubai FM 91.4 –9%

Egypt SE 65.9 4%

Bahrain SE 53.4 1%

Casablanca SE 52.1 9%

Muscat SM 23.8 –2%

Tunis SE 9.2 4%

Source: Zawya. Note: as of 22 March 2015.

• The SEs of Dubai, Qatar, Abu Dhabi, Kuwait and Muscat have generated negative YTD returns in 2015, as stock markets continue to remain volatile due to oil price fluctuations. However, with oil prices starting to stabilize, some of the Gulf SEs have started to rally with the Saudi SE (Tadawul); in particular, achieving the highest YTD return (12%) as of March 2015.

• Moreover, the regional stock markets remain attractive, with an average price-to-earnings (PE) ratio of 13x as of March 2015. The average dividend yield (DY) of regional SEs at the end of March 2015 was 3.6%.

MENA stock market returns — 2014


Regional stock market performance — YTD 2015 (%)

–15.00%

–10.00%

–5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

1 Jan 15 8 Jan 15 15 Jan 15 22 Jan 15 29 Jan 15 5 Feb 15 12 Feb 15 19 Feb 15 26 Feb 15 5 Mar 15 12 Mar 15 19 Mar 15

Mar

ket r

etur

n (%

cha

nge)

Abu Dhabi SE Dubai FM Kuwait SE Qatar SE Saudi SE

Source: Zawya. Note: as of 22 March 2015.

MENA IPO activity declined in line with global IPO trends

Global IPO activity witnessed a decline of 19% in capital raised, totaling US$38.2 billion in Q1 2015, compared with US$47.2 billion in Q1 2014. When compared with Q4 2014, there was also a substantial decline of 45% in capital raised in Q1 2015, compared with the capital of US$69.3 billion raised in Q4 2014.

MENA IPO activity reflected the performance of global IPO markets, as capital raised declined by 80% in Q1 2015, compared with Q1 2014. Only two IPOs took place in Q1 2015, amounting to a total of US$255.7 million capital raised, compared with five IPOs, raising US$1.28 billion in Q1 2014.

Global IPO activity (Q1 2011–Q1 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 38.2

306

384

293 260203 243

192201

163205 202

325262

335277

367

252

0

200

400

600

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*

Volu

me

(num

ber o

f IPO

s)

Capi

tal r

aise

d (U

S$ b

illio

n)

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

Source: EY. Note: *updated 17 March 2015.


Q2 2015 outlookOil prices expected to stabilize, but uncertainty remains

The demand for crude oil is showing signs of improvement in Asia, Latin America and the USA. It is expected to grow stronger in the second quarter of 2015 as the global economy picks up, helping ‎to absorb excess crude supply in the market and thus enabling prices to stabilize.

According to Reuters’ analyst survey, “Oil prices should stabilize in the second half of this year and rise in 2016 and 2017, as consumers respond to a period of much cheaper fuel. The prices would average US$59.20 a barrel in 2015.”

Against this backdrop, the MENA IPO market is still expected to be cautious, given the recent volatility levels in oil prices and the MENA capital markets. Regional companies are expected to wait and watch the markets closely for the oil price to settle down before launching new IPOs in Q2 2015 and Q3 2015.

Recent regional events; including Saudi-led military intervention in Yemen and the proposed agreement between Iran and the US around Iran’s nuclear program and crude oil embargoes, may have an impact on oil prices and regional stability going forward.

Firms preparing for an IPO in 2015

According to Zawya IPO Monitor, around 30 companies from the MENA region have announced plans to issue IPOs in 2015. There are around 50 more companies planning to go public in the period from 2016 to 2018, with the UAE expected to have the most number of IPOs in this period.

Some of the prominent names expected to be listed in the second quarter of 2015 are Edita Food Industries (Egypt), TruckOman (Oman), Emaar Hospitality Group LLC (UAE), Emaar Misr for Development (Egypt), Massar Solutions (UAE) and Middle East Paper Company (Saudi Arabia).

Growth in foreign investments

Regional markets, particularly Saudi Arabia and Egypt, are encouraging increase in capital inflow from foreign investors by proposing and implementing further regulatory reforms.

According to Reuters, the second quarter of 2015 is expected to see the opening of the Saudi SE to foreign direct investments, thus allowing foreign investors to invest in Saudi stocks. This is currently limited to around 1.2% of the total market capitalization, but is expected to be increased to 20% under draft rules.

Broader outlook — highlights

• Oil prices have started stabilizing owing to growing demand; thus, companies are expected to raise money, as the market fundamentals and valuations improve. However, recent events including the Saudi-led military intervention in Yemen and the potential lifting of embargoes on Iran oil may increase the risk of volatility in oil prices going forward.

• MENA markets are eagerly anticipating the opening of the Saudi SE to increased foreign direct investment in Q2 2015.

• Several IPOs are planned in Q2 2015 and include companies from Egypt, the UAE, Saudi Arabia and Oman, in particular.


Companies listed from Q2 2014 to Q1 2015

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

Sector Exchange

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

Q1 2015 — 4 January Orascom Hotels and 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 FM

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 Dubai FM

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 Malls Group 1,579.00 Real estate Dubai FM

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

Q3 2014 — 30 September Zain Bahrain 24.19 Telecommunications Bahrain SE

Q2 2014 — 3 June Abdul Mohsen Al Hokair Group 219.98 Leisure and tourism Saudi SE

Q2 2014 — 17 June Al Hammadi Company for Development and Investment

167.97 Health care Saudi SE

Q2 2014 — 13 May Arabian Cement Company — Egypt 109.43 Industrial manufacturing Egypt SE

Q2 2014 — 9 June Al Suwadi Power Company SAOG 99.38 Power and utilities Muscat SM

Q2 2014 — 9 June Al Batinah Power Company SAOG 95.11 Power and utilities Muscat SM

Q2 2014 — 24 April Marka PJSC 77.12 Retail Dubai FM

Q2 2014 — 5 May Umm Al-Qura Cement Company 73.33 Industrial manufacturing Saudi SE

Q2 2014 — 30 May Lesieur Cristal SA 70.61 Food and beverages Casablanca SE

Q2 2014 — 16 May Tawasol Group Holding 12.40 Construction Tunis SE

Q2 2014 — 5 June Maghreb International Publicité 4.43 Services Tunis SE

Q2 2014 — 3 April Emirates REIT (CEIC) Ltd 175.00 Real estate NASDAQ Dubai

Source: Zawya. *Date of IPO closing.


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

Country Issuer Sector

UAE Massar Solutions PJSC* Transport

Mawarid Finance PJSC Financial services

Tasweek Real Estate Development and Marketing Real estate

Al Bayader International Industrial manufacturing

Habtoor Leighton Group** Construction

Al Qudra Holding PJSC* Financial services

Alpha Tours LLC* Leisure and tourism

Future Pipe Industries Group Limited* Industrial manufacturing

Kalyan Jewellers** Retail

Virgin Mobile Middle East & Africa (VMMEA)** Telecommunications

Arabtec Construction LLC Construction

Danube Building Materials FZCO Industrial manufacturing

Khidmah LLC Real estate

Arqaam Capital Limited Financial services

Emaar Hospitality Group LLC Leisure and tourism

Al Habtoor Group LLC* Construction

Daman Investments PSC* Financial services

Al Habtoor Motors LLC* Transport

Al Waseet International FZ LLC* Media

Aster DM Healthcare* Health care

Burooj Properties LLC* Real estate

Gulf Capital Pvt. JSC* Financial services

Ithmar Capital* Financial services

Metito (Overseas) Limited* Power and utilities

Rotana Hotel Management Corporation PJSC* Leisure and tourism

Shelf Drilling* Oil and gas

Saudi Arabia Middle East Paper Company — Saudi Arabia Industrial manufacturing

Saudi Airlines Cargo Co LLC Transport

Saudi Aramco Total Refining and Petrochemical Company Oil and gas

Saudi Ground Services Company Transport

Nas Holding* Transport

Al Aqeeq Real Estate Development Company* Real estate

Riyadh Cables Group of Companies** Industrial manufacturing

Arab Paper Manufacturing Company Industrial manufacturing

Petromin Corporation** Oil and gas

ACWA Power International* Power and utilities

Al Sawani Food and Industrial Supply Company* Retail

Al-Ittefaq Steel Products Co.* Industrial manufacturing

Almana General Hospital — Hofuf* Health care

Dr Sulaiman Al Habib Medical Center* Health care

Murabaha Company* Financial services

Saudi Company for Hardware* Industrial manufacturing

Saudi SE (Tadawul)* Financial services

Taajeer Co. For Machinery, Real Estate and Vehicles Trading* Financial services


Country Issuer Sector

Qatar Barwa Bank Q.S.C. Financial services

QIC International L.L.C. Financial services

Qatar Airways* Transport

Qatar Media Services W.L.L.** Services

Al-Sulaiman Holding Conglomerates

Aljasr Takaful Insurance Company* Financial services

Damaan Islamic Insurance Company* Financial services

Kuwait Mezzan Holding Company Food and beverages

Housing Finance Company K.S.C.P. Financial services

Oman Sama Telecommunications Telecommunications

Connect Arabia Telecommunications

Al Khonji Real Estate & Development LLC (Aqar) Real estate

Jindal Shadeed Iron & Steel Co. LLC Mining and metals

Kunooz Oman Holding Conglomerates

Oman Reinsurance Company S.A.O.C Financial services

TruckOman LLC Transport

Alargan Towell Investment Company LLC* Real estate

Barr al Jissah Resort Company* Real estate

Muscat Electricity Distribution Company SAOC* Power and utilities

Oman Merchant Bank* Financial services

Bahrain Istikhlaf Bank Unknown sector

Khalifa bin Salman Port* Transport

Lebanon Middle East Airlines Transport

Patchi* Food and beverages

Egypt Raya Contact Center Services

Smart Villages Development And Management Company Real estate

Wadi Group Agriculture

Arabtec Egypt for Construction Construction

Al Ahly Sporting Club** Education

Food Industries Holding Company Food and beverages

Emaar Misr for Development S.A.E. Real estate

Edita Food Industries Food and beverages

Integrated Diagnostics Holdings PLC Health care

Delta Cement* Construction

Etisalat Misr S.A.E.* Telecommunications

Morocco Marsa Maroc Oil and gas

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


Key events to look out forName of the event Date Theme

Middle Eastern M&A and Private Equity Forum 2014 (Ritz Carlton, DIFC Dubai)

4 May 2015

Mergermarket’s Middle Eastern M&A Forum will provide an in-depth review of the deal activity in the region and consider future investment trends for dealmakers in the Middle East over the next 12 months.

Euromoney Saudi Arabia Conference — Opportunities and Capital Markets (Al Faisaliah Hotel, Riyadh, Saudi Arabia)

5–6 May 2015

The Euromoney Saudi Arabia Conference is the biggest and the best financial event in the Kingdom, and it brings together Saudi Arabia’s policy-makers, financiers, corporate CEOs and international investors.

MENA IPO Retreat — Dubai (by invitation only)

TBC

The MENA IPO Retreat will explore strategies for companies going public or raising capital from IPOs through discussions and guidance from a dedicated panel of industry experts and professionals.

Mayur Pau MENA IPO Leader

[email protected] +971 4312 9446

Darrell Traynor Executive Director — Transaction Advisory Services


Shahzad Shaikh Manager — Transaction Advisory Services


Contacts

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Q1 2015 IPO Eye

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