Initial public offerings from Saudi Arabia have been the star performers in a string of recent share sales in the Middle East, where some high profile regional listings have had tepid debuts in the last few months.
Two Saudi companies, Almoosa Health Co. and Nice One Beauty Digital Marketing Co., both posted strong early returns in their trading debuts in January and remain above the offer price.
While not all Saudi listings have done well over the past 12 months – including three flour millers and a real estate investment trust which are still below offer price – stocks that went public in the kingdom have seen more first-day pops and better after-market performance than in any other Gulf bourse, data compiled by Bloomberg show.
It’s a contrast with three of the region’s largest listings last year. Talabat Holding Plc and Lulu Retail Holdings Plc from the United Arab Emirates as well as Oman’s OQ Exploration & Production SAOG all saw disappointing starts. Today, only Talabat is slightly above offer price out of the trio. Aside from Parkin Co.’s blowout Dubai IPO, all other newly-listed stocks in the UAE have seen more muted gains.
“The bullish euphoria surrounding the primary listings in Saudi Arabia shows no signs of stopping,” said Vijay Valecha, chief investment officer at UAE-based broker Century Financial, pointing to a “glaring contrast” between newly-listed stocks in Saudi and elsewhere in the region.
The average performance of stocks that listed over the past year in the UAE has been 17%, but in Saudi Arabia, the average post-listing gains were 37% over the same period, Valecha said.
Saudi Arabia, which has a much larger population of over 35 million than the UAE’s roughly 11 million, also has much deeper and liquid capital markets, both in the institutional and retail space, analysts say. According to ratings agency Fitch, Saudi Arabia has the largest asset management industry in the Gulf Cooperation Council, with over $250 billion in assets under management as of June 2024.
“Saudi IPOs benefit from a much broader domestic investor base to absorb supply, and a larger market capitalization overall,” said Ashish Marwah, director and chief investment officer at Neovision Wealth Management.
Companies listed in Saudi Arabia are worth around $2.7 trillion, and although more than half of this is made up by oil giant Saudi Aramco, it still dwarfs the roughly $1 trillion value of the stocks listed on the UAE’s two bourses, according to data compiled by Bloomberg. A larger population also translates into a bigger consumer market, which coupled with growth outside of the oil sector, has benefitted retailers and health-care providers among others.
To be sure, analysts have said stretched valuations, as well as last-minute increases in the deals, are partly to blame for the tepid debuts of Talabat and Lulu Retail.
Those IPOs were among the region’s largest in 2024, requiring more demand to fully subscribe to the offering. In Saudi Arabia, listings have tended to be from small to mid-sized players, Valecha pointed out.
Dubai’s benchmark index has broadly performed better over the last year than Tadawul’s, partly driven by some newer listings like Parkin that saw outsized returns as well as a December rally in the stock of developer Emaar Properties PJSC. Still, when it comes to new share sales, Saudi Arabia has proved a better bet for investors on average.
“In the UAE, markets have handsomely rewarded some listings by government-owned entities, whereas others, particularly private players, have suffered miserably or have seen lackluster gains,” Valecha said. “In the case of Saudi Arabia, the gains have been much more broad-based.”
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