Saudi Arabia Leads Middle East ECM Market

EFG Hermes projects 50 new listings, tech and consumer sectors rise

Saudi Arabia is set to dominate the Middle East ECM market through the end of the year, significantly contributing to the region’s best first-half performance since 2008. The country’s pipeline is increasingly diversifying into growth sectors.

At EFG Hermes’ annual investor conference in London, Saudi Exchange CEO Mohammed Al Rumaih projected 50 new listings by year-end, surpassing the 35 achieved in the entire previous year.

EFG Hermes bankers anticipate participating in four substantial Saudi deals, including a dual listing with the UAE, along with smaller deals in the UAE and Oman by the first quarter.

“Deal sizes range between $250 million and $550 million, with one dual listing exceeding $1 billion,” said Mostafa Gad, EFG Hermes’ global head of investment banking. “This is a healthy sign, indicating more private sector engagement and diverse growth stories, moving away from traditional yield plays.”

Technology is gaining traction, highlighted by Saudi fintech Rasan and upcoming IPOs for fintechs Tabby and Tamara. The UAE is also seeing tech and consumer business offerings, such as Alef and Talabat.

Consumer sectors are drawing attention, with Dubai’s Spinneys paving the way for Lulu Group’s anticipated dual listing on Tadawul and Abu Dhabi Exchange.

“We’re working on a tech IPO and another for next year,” Gad added. “There’s strong interest in tech and healthcare, particularly in Saudi Arabia, with significant demand in these sectors.”

Evolving Metrics

As the pipeline diversifies, investor approaches are shifting towards growth metrics rather than yield and P/E ratios typical of oil and gas deals. This sophistication is welcomed by many bankers concerned about “frothy” markets driven by aftermarket plays.

“We’re seeing a more sophisticated valuation approach in Saudi,” said Saud Altassan, CEO of EFG Hermes KSA. “Global asset managers are bringing their expertise to the Saudi market, benefiting issuers with unique competitive advantages.”

As Saudi and UAE markets mature, neighboring markets like Oman are also increasing their issuance frequency. Oman’s OQ is following Abu Dhabi National Oil Company’s lead, with OQ Exploration and Production being a significant $2 billion deal.

“OQ Exploration and Production is a major deal for Oman,” said Ali Khalpey, head of ECM at EFG Hermes. “We expect more issuances from Oman in the coming quarters.”

EFG Hermes also managed Kuwait’s first IPO in nearly two years for Beyout Investment Group, though future issuances may be less frequent.

“Kuwait’s macro environment has changed significantly, and while there’s more interest, it’s progressing slower than in the UAE or Saudi,” Khalpey noted.

Accelerating Change

Secondary market activity is expected to increase, following recent follow-ons like Aramco and accelerated bookbuilds such as BinDawood.

“We closed four secondary deals in the first half, with two in the private sector and one each with Adnoc and Aramco,” Gad said. “We’re in discussions for more deals before year-end.”

These deals offer opportunities for international investors to participate, compensating for reduced involvement during IPOs. However, local investors have struggled to react quickly, and bankers prefer long-term international investors for these stocks to avoid liquidity issues.

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