The initial public offering (IPO) activity in the Middle East rose significantly in the first quarter raising $420.5 million from six IPOs compared to $83.6 million in the same period last year, according to Ernst & Young.

The regional IPO market recorded a fivefold increase in the funds raised during the period from the six IPOs - five in Saudi and one in Qatar, the E&Y said in its 'Middle East Q1 2010 IPO Update.' Of these, three were in insurance/takaful sectors, it added.

The Saudi and Qatar issues made up the geographical composition of the regional IPO market for the first quarter. Mazaya Qatar Real Estate Development Company, with an offer size of $144.21 million was the largest regional IPO, the report added.

Phil Gandier, head of Transaction Advisory Services for E&Y Middle East pointed out that the trend mirrored the performance of the global IPO markets in the first quarter.

'The regional upturn in number and size was largely based on the performance of the Saudi and Qatari markets,' he noted.
 
The regional markets, Gandier said, also performed better than the last quarter which raised $91.6 million in the fourth quarter of 2009 from five IPOs.

'While it’s too early to decree that markets have rebounded, this could potentially signal the return of normalcy to the markets, which had a very difficult 2009,' he remarked.

'Five Saudi IPOs and one in Qatar dominated the regional scene for the first quarter with Qatar's Mazaya topping the list with a $144.2 million IPO followed by Saudi’s Herfy Food Services ($110.2 million) and Alsorayai Trading Industrial Group ($64.8 million),' he added.

Solidarity Saudi Takaful, Amana for Co-operative Insurance and Wataniya Co-operative Insurance were the other three with offer sizes of $59.2 million, $34.1 million and $8 million respectively.

Saudi Arabia also led the IPO tally in the previous quarter – 3 out of the 5 Middle East IPOs were in the Kingdom, the Ernst & Young said in the report.

Commenting on market appetite and investor confidence cautiously picking up, Gandier said: “The largest oversubscription in the first quarter was received by Herfy Food Services at 4.6 times offer size. This could be symptomatic of the caution with which new IPOs will be greeted in 2010.'

'We may not see the hundreds or even tenfold oversubscriptions that were witnessed during the boom years. Firms will need to invest more time and resources in preparing their institution for an IPO and ensuring they have a compelling equity story,' he pointed out.

'While challenging markets will come and go, it’s the companies that are fully prepared that will best be able to leverage IPO opportunities when they open,' he added.

Out of the six IPOs this quarter, three were in the Insurance/Takaful sectors. This trend was also observed in the previous quarter, when the regional markets went through a difficult phase, according to E&Y report..

In the fourth quarter of 2009, three out of five IPOs were for insurance firms, Gandier pointed out.

“Insurance licensing procedures in Saudi Arabia, which opened up the sector to new entrants in 2005, oblige newly licensed firms to offer a percentage of their shares to the public within a set timeframe. This is why we see a disproportionate number of IPOs in the Kingdom’s insurance/Takaful sector,” he explained.

Global IPO activity in the first quarter of 2010 showed substantial improvement over last year. Results were driven by a ongoing robust Asian market and the revival of European listings. There were 267 deals globally in the first quarter worth $53.2billion, compared to the 52 deals which raised $1.4 billion in the first quarter of 2009 (which had the lowest IPO activity in the past decade), the report said.

Asia continued to experience significant IPO activity in the quarter, with 166 IPOs raising $35.1 billion, 66 per cent of the quarter’s total IPO fund raising. Nine of the twenty largest IPOs were from Asia (China, Japan and South Korea).

Commenting on global IPO activity, Samar Obeid, partner at E&Y Jordan, said: 'Major IPO markets across the world including London, Paris, Tokyo and Frankfurt have witnessed significant recovery during the first quarter of this year. Other developing markets across the world also grew despite investor cautiousness.'

'We are expecting that the IPO market will continue to grow in European and North American Markets, especially as economic conditions improve,' he noted.

According to Obeid, the forecasts for Asian, North American and European IPO markets during the second quarter of 2010 were high.

'Forecasts for global IPO activity in 2010 are positive as a result of the returning stability to global capital markets, a strong IPO pipeline and improved market liquidity. Issuers are currently waiting for the right window of opportunity to complete their listings to generate better IPO pricing,' he added.-TradeArabia News Service