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More IPOs on the way to Saudi Tadawul, despite index’s below average turnover performance

Tadawul is seeing more IPO interest, and it could use the influx of cash

Several Saudi Arabian companies are planning to list shares on the Riyadh exchange in coming months Shares listed on the Saudi Tadawul market are currently trading with a price-to-earnings (PE) ratio of around 18 times Turnover on the Tadawul exchange in Riyadh has averaged 3.6 billion riyals ($960 million) a day over the past year

Saudi Aramco’s IPO last December may have opened the floodgates for more public listings on Saudi Tadawul.

The index couldn’t be happier to hear about that.

It’s seen its share of struggling.

IPO bandwagon

Several Saudi Arabian companies are planning to list shares on the Riyadh exchange in coming months in the wake of oil giant Aramco’s record IPO, Reuters reported.

The Saudi regulator has relaxed the traditional IPO requirement to list at least 30% of a company.

Last year was highlighted by Arabian Centers’ 4321.SE $660 million IPO, according to Refinitiv data.

Saudi Aramco raised $29.4 billion by listing about a 1.7% stake on the Tadawul in December, prompting concerns from some analysts that it would drain liquidity from the market. 

Read: Saudi Aramco’s IPO players revealed: Tadawul shares cringe

Aramco’s listing has sent the Tadawul, already the Middle East’s largest bourse, to the 9th place globally in terms of market capitalization.

The Sulaiman al-Habib Medical Group, one of the Middle East’s biggest hospital operators, is among the first companies seeking a Riyadh listing after Aramco, planning to raise around $500 million. 

Saudi retailer BinDawood Group aims to raise 1.5 billion Saudi riyal ($400 million) by end of the first quarter 2020 and hired Goldman Sachs, JP Morgan Chase, NCB Capital and GIB to organize the deal, according to Reuters the sources.

Supreme Foods, which produces processed and cooked meat in three factories, plans to list in the second quarter and raise 300 to 400 million riyals, according to two more sources 

Tadawul performance 

Shares listed on the Saudi Tadawul market are currently trading with a price-to-earnings (PE) ratio of around 18 times after foreign inflows into the kingdom’s exchange and the listing of Aramco.

New market entrants could come at a discount of 20% to 30%, around 12 times PE 

But stocks took a hit lately.

Read: $16 billion in passive income to flow to Saudi Tadawul

Saudi Arabia stocks were lower after the close on Wednesday, as losses in the Telecoms & IT, Real Estate Development and Petrochemicals sectors led shares lower.

At the close in Saudi Arabia, the Tadawul All Share declined 0.54% to hit a new 1-month low.

Turnover on the Tadawul exchange in Riyadh has averaged 3.6 billion riyals ($960 million) a day over the past year, which is 16% below the gauge’s five-year average, according to the Economic Times.

That’s despite Saudi stocks being promoted to emerging-market status by MSCI Inc. and FTSE Russell in 2019 and oil giant Saudi Aramco’s $29.4 billion listing in December.

“The level of activity is significantly down” in the past six months, Hasnain Malik, Dubai-based head of equity strategy at Tellimer, said in an interview with Bloomberg TV on Wednesday. “What it really shows is the lack of confidence within the local investor base.”