Equity listings activity in the sultanate has been muted in recent years. After having steadily risen in number from two in 2012 to four in 2014, only one public offering took place in 2015 – though the listing, of Phoenix Power Company, was the largest in recent years, raising OR563.1m ($1.5bn), more than double the combined value of all initial public offerings (IPOs) over the previous three years. In 2016 there were no IPOs, although eight private placements took place. The fall was in line with a general decline in public offerings across the GCC region, which witnessed three IPOs in 2016, compared with 17 in 2014, according to figures cited by Oman’s Capital Markets Authority (CMA).
However, the year 2017 saw a revitalisation of listing activity, with a total of five IPOs launched, of which four were completed and one listing was pushed into 2018. The total amount raised in these offerings was OR169.2m ($439.4m).
Further IPOs are expected in 2018. Recent offerings and those in the pipeline are being driven largely by the state, mostly in the form of companies obliged to float shares as part of regulatory requirements, although the government also has plans for privatisations of state-owned entities via IPOs.
A revision of the country’s insurance law in 2014, among other changes, obliged all national insurers to hold the status of public joint-stock companies and to be listed on the Muscat Securities Market (MSM) by mid-2017. To support the process in March 2017 the CMA reduced the minimum equity stake required to be listed from 40% normally to 25% for insurance firms seeking to float on the MSM under the new requirements.
When the requirements were brought in there were seven unlisted domestic insurance firms operating in Oman. However, two of these – sister companies Muscat Insurance and Muscat Life – were merged in early 2017 into their already-listed parent company Muscat Holding (subsequently rebranded as Muscat Insurance Company) in July 2017, meaning the underwriters themselves did not have to list.
Of the five remaining firms, Vision Insurance and Al Ahlia Insurance were the first to hold IPOs, beginning in early July 2017, followed by Oman Qatar Insurance in September. National Life and General Insurance (NLGI) followed suit in late October 2017, while Arabia Falcon Insurance is expected to launch its offering shortly (see Insurance chapter).
Sameer Kattiparambil, associate vice-president for research at stockbroker EFG Hermes, said that investor appetite for the insurance listings had not been very strong, which he partly attributed to low market liquidity. Vision Insurance failed to meet its subscription target, with 50% of its offering being taken up. The Al Ahlia and Oman Qatar Insurance IPOs performed better, achieving subscription rates of 2.43 and 1.4, respectively. The OR21.2m ($55.1m) IPO of NLGI, which closed on November 20, 2017, was 1.01 times subscribed. Price performance for these stocks has been mixed, with Vision Insurance and Al Ahlia Insurance’s share prices remaining more or less flat on their opening prices, while Oman Qatar Insurance’s price was slightly down. Industry figures attribute the slow take off of the stocks so far to poor general market performance and the floats having been offered at high valuation multiples.
Utility Sector Offerings
Another sector currently witnessing high levels of IPO activity is utilities, again driven by regulatory requirements. Independent power projects and independent water and power projects are now obliged to list a 40% stake on the MSM (increased from 35% in 2014) within four years of their establishment. This requirement has given rise to a fairly steady supply of IPOs in the sector, including one in 2013 of Al Sharqiyah Desalination, two in 2014 (Al Sawadi Power and Al Batinah Power) and one in 2015 (Phoenix Power).
The IPO of Phoenix Power, which was well received by the investment community, was oversubscribed by a factor of 18.9. The firm, which operates the country’s largest power plant, sought to raise OR56.3m ($146.2m) by offering a 35% stake.
The latest IPO came in December 2017 when Muscat City Desalination Company (MCDC), the operator of the country’s largest desalination plant, launched an IPO for a 35% equity stake in the company. Three of its shareholders, Sumitomo Corporation of Japan, Malaysian firm Malakoff International and Spain’s Cadagua, reduced their holdings in the firm through the offering. The company offered an 8.3% yield on dividends for the first five years of the listing, relative to the offer price, well above the sector average of 5.9%. MCDC closed its OR6.5m ($16.9m) offering on December 18, 2017, raising OR122m ($316.8m). Local media reported that in the first category, small investors and those who applied for a maximum of 500,000 shares, would get a minimum of 1000 shares and 3.1% for all additional share applications, while institutional investors would receive 4.14% of the shares they applied for in category two.
More IPOs are also in the pipeline, with as many as six power generation and water desalination companies expected to launch their IPOs by 2021, local media reported in early January 2018.
The government is set to further spur IPO activity through the partial privatisation of state-owned assets via the stock market. In late 2016 the government said it would divest a 49% stake in Muscat Electricity Distribution Company, via a combination of an IPO and a private placement, though in June the following year officials said that the sale was being reconsidered due to “regional economic conditions”. However, in April 2017 the authorities announced that they also planned to float stakes in several state-owned downstream oil and petrochemicals companies, including Salalah Methanol Company and an unnamed drilling firm. Oman Oil Company, through which the government owns its stake in some such firms, had previously been reported to be seeking advice from investment banks on floating some of its assets. The plans do not cover the main oil and gas producer in the country, Petroleum Development Oman. Hettish Karmani, head of research at Ubhar Capital, said he thought that such offerings would likely start to take place towards the end of 2018 or in 2019.
Another firm seeking to list in the near future is the newly established mining company Mining Development Oman. The company is a joint venture between the State General Reserve Fund, Oman Investment Fund, Oman Oil Company and the Oman National Investments Development Company, all state-backed entities. In March 2017 Sheikh Abdullah bin Salim Al Salmi, executive-president of the CMA, told media that the firm plans to sell a 40% equity stake in itself to the public via an IPO. The offering has been delayed, with the company initially planning to conduct the offering by mid-2016.
Younis Mohammed Al Belushi, investment manager at Al Madina Investment, said that he thought the MSM, which is a government entity and which was converted to company status, as well as the sultanate’s capital market depository, will go public in the future. He told OBG that in his view both would likely to be able to pay good dividends and should therefore perform well. He added that privatisations of government entities more generally would be positive for the development of the market, subject to pricing, telling OBG they would help to bring in liquidity from the retail market in particular.
Beyond Government-Driven Listings
The authorities have also been encouraging other companies to consider public offerings. However, industry figures say that market performance is weighing on the likelihood of IPOs for the time being. That said, market conditions appear set to improve in 2018, offering hope for a new wave of listings of companies beyond those being privatised by the government or mandated to list by the authorities.
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