Selling Like Hot Cakes

Qatar

Economic News

22 Jul 2010
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The launch of the Qatar Gas Transport Company's IPO this week provoked a mad rush for subscription forms across country. In Doha's Grand Hamad Avenue, the location for several bank headquarters, sharp-elbowed subscribers jostled for their chanced to buy into the offer, jamming up traffic. Meanwhile, inside the banks, staff appealed to the multitude to use the full one-month period of the subscription offer.



"The issue is open for a month, so relax. You can come back next week; the forms won't run out in a day," implored one senior local banker.



However, hoarding was commonplace as Qataris were desperate to buy into the offer. Enthusiastic citizens were even carrying off whole bundles of forms, despite the protests of bank staff, some of whom had recently been busy issuing loans for the issue to the same subscribers who mobbed their branches.



Although the true number of forms snapped up is not known, estimates put the figure at nearly 50,000 in the first two hours of bank opening. More of the 420,000 pre-printed forms have since been distributed to those banks which ran out but needed more for the remaining three weeks of the issue, which closes on February 16.



The issue was only open to Qatari individuals including women and children; expatriates can trade shares already floated but not participate in IPOs on the Doha Securities Market (DSM).



A system of proxy trading had previously been a feature of other issues, but one that the government and the DSM were keen to prevent in this case. Non-Qataris had to buy and sell shares on behalf of Qataris by using a power of attorney. By law this could only be done if the relevant Qatari citizen was unable to be physically present. In the wake of complaints last year, the DSM announced that for this IPO, careful scrutiny of all applicants would be exercised.



The offer will put 280m shares worth QR2.8bn at a nominal value of QR10 each into the market. This represents half the capital to be mobilised for the QR4.6bn venture, with the other 50% of the amount coming from the founding companies in an equity partnership. They are made up of the Qatar Shipping Company (Q-Ship) (20%), Qatar Navigation (20%), Qatar Petroleum (5%), the Qatar Foundation (2%), the General Pension and Retirement Authority (1%), the ministries of health and education (1%) and Qatar Fuel (Woqod) (1%).



With eventual plans to own, operate and lease out the world's largest fleet of specialised liquefied natural gas (LNG) vessels, the Qatar Gas Transport Company (QGTC) is also mandated to build a huge dry-dock facility at Qatar's Ras Laffan industrial city port.



The first of the 57 huge LNG tankers were ordered from ship-builders in the Far East during the second week of November last year. Three South Korean shipyards were commissioned to build eight of the state-of-the-art tankers that will be 50% larger than conventional LNG ships. Daewoo Shipbuilding and Marine Engineering will produce four 210,000 cu metre tankers at a cost of around $875m, while Hyundai Heavy Industries and Samsung Heavy Industries took orders worth around $450m to build two vessels each.



The interest in the IPO comes as no surprise as many realise the potential of anything connected with Qatar's natural gas wealth. However, more IPOs are expected from local firms and not just those connected directly to hydrocarbon deals.



"The amount of oversubscription seen in IPOs is very encouraging," said Murad Mahmoud of local finance house, Amwal, speaking to OBG recently. "The market is great for IPOs and this is hopefully more substance than hype. It's important because it brings in small investors and means small firms and start ups can go to the market for their capital needs."



Indeed, Mahmoud anticipates great demand among those wishing to list or use other instruments to raise capital from the market. The company's investment banking arm is in the process of helping a local company go public and has been mandated by others to help raise cash through bond and sukuk (Islamic bond) issues.



One local firm that is hoping to raise capital to benefit from the huge gas-to-liquids (GTL) operations coming online soon is the Qatar Lubricants Company (QALCO).



"Base oil is one of our primary inputs," explained Fawad Rana, managing director, when speaking to the OBG recently. "One of the GTL plants alone will produce 500,000 tonnes annually as a by-product. Our annual consumption blending last year was 11,000 tonnes."



With sales up and increasing demand around the region for QALCO's brand, the firm is planning to either make an IPO or private placement to raise capital for expansion to make the most of the abundant feedstock that will hopefully mean their input costs are reduced. This is coupled with the firm's plans to continue its expansion of oil service stations and invest in a used-oil processing facility.



"We may have an IPO or a private equity placement," Rana continued. "It will be decided in March. The board of directors will decide that. We hope we can bring in more Qataris to support the firm, and this is a significant step towards that."



So, whilst huge multi-billion dollar offers may be causing traffic jams on Grand Hamad Avenue, there look likely to be a series of smaller offers and placements coming from small- and medium-sized enterprises in Qatar that offer ways for small investors to buy into the state's booming economy - hopefully without needing to use their elbows.

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