There has been an increase in initial public offerings (IPOs) on the Muscat Securities Market (MSM), with firms in the financial, utilities and telecommunications sectors moving to broaden their ownership structure.
The government has been keen to encourage local firms, many of them family-owned, to list on the MSM, both to strengthen the base of the private sector and to promote greater involvement from the public in the economy. Although IPO activity has been slow in 2013, with two offerings as of October 1, it is forecast to pick up towards the end of the year, with signs that the coming 12 months may see a more significant uptick.
At the end of September, Al Madina Insurance Company announced it was planning to sell 66.7m shares, representing 40% of the firm’s capital, through an IPO set to be conducted before the end of the year. The float – if fully subscribed – will lift the company’s paid-up capital from its $26m to $43.4m.
Al Madina’s IPO is part of a broader plan to realign the company and move into the provision of takaful, or Islamic insurance. According to sector regulations, all takaful insurers must be publicly listed.
As one of Oman’s largest conventional insurance firms, Al Madina’s IPO is expected to attract considerable interest. Its plan to enter the takaful segment, making it one of the first operators to do so in Oman, could give investors the chance to buy into an area of the market that, globally, is expected to expand strongly in the coming years.
Oman’s Capital Market Authority has already granted its approval for Al Madina Insurance to convert to a takaful firm, subject to the completion of its IPO. The company’s management has said that the rebranded entity – to be named Al Madina Takaful – should begin full operations at the beginning of 2014.
Proven appetite for IPOs
All IPOs conducted recently in the Sultanate have performed well, with offerings frequently oversubscribed, in some cases to a considerable degree. Last year’s IPO of Bank Nizwa, Oman’s first sharia-compliant lender, attracted $1.77bn in bids, 11 times the value of shares on offer. Similarly, Alizz Islamic Bank also drew bids well over the sum it was aiming to raise, floating 40% of its capital at the end of 2012.
Al Madina’s announcement comes shortly after a successful IPO conducted by the Sembcorp Salalah Power & Water Company (SPWC), which saw 35% of the firm’s total share capital offered to the public. The offering raised $138m, which gave the company a market capitalisation of $395m when trading in its shares opened on the MSM.
Prior to the IPO, the brokerage firm United Securities issued a buy note for SPWC’s stock, saying that the company, which provides 100% of Salalah’s water and nearly three-quarters of its electricity, had stable revenue and good earnings backed by long-term contracts.
Busy IPO signals from telecommunications sector
One sector that appears set for an extended period of listing activity is the telecommunications industry. In mid-September, Omantel announced in a statement to the MSM that the government was looking to reduce its holdings in the firm from 70% to 51%. The landline and mobile services operator is expected to launch its limited offer at the beginning of 2014.
Looking further ahead, Connect Arabia International (CAI) – which was granted a licence to provide international voice telephony services in Oman in July – has declared its intention to offer some of its shares on the MSM within the next five years. The sale is one of the requirements of the 15-year licence awarded in July of this year to CAI by the Telecommunications Regulatory Authority.
Other companies, notably Al Maha Ceramics and Oman Arab Bank, have also hinted at the possibility of launching IPOs, although details regarding timing and the extent of their offers are not yet public. A strong take-up on the forthcoming IPOs of Al Madina and Omantel could pave the way for even more firms to make the decision to go public.