#Saudi Firms Half Million, Deemah, Barn’s Plan IPOs as Oil Price Outlook Pressure - Bloomberg

Saudi Firms Half Million, Deemah, Barn’s Plan IPOs as Oil Price Outlook Pressure - Bloomberg

A list of Saudi Arabian food and beverage firms are readying new share sales in deals that will be exposed to the outlook of consumers in an economy that is grappling with the prospect of lower-for-longer oil prices.

Coffee chain Half Million and biscuit-maker Deemah are among firms speaking to banks about an IPO, according to people familiar with the matter, who asked not to be identified. Other deals in the pipeline include Barn’s coffee and Hashi Basha, which operates a chain of restaurants featuring camel meat on the menu.

Representatives for Half Million couldn’t be reached for comment, and Deemah declined to comment.

The firms’ rush to the market coincides with the kingdom’s efforts to open up its entertainment sector as part of efforts to slash its reliance on oil. That’s given residents more opportunities to fork out money on recreation, where the share of spending grew two-thirds from 2017 to 2024, according to Capital Economics.

That was reflected in the kingdom’s busy pipeline of initial public offerings last year, when listings from food and beverage firms accounted for a major chunk of new deals. Still, while companies are looking to capitalize on the momentum in Saudi consumer spending, some analysts still sounded a note of caution.

“Salaries have not gone up as much as the avenues to spend have in the past few years,” said Nishit Lakhotia, head of research at SICO Bank. Several listed grocery stores and restaurants chains have recently warned of pressure on consumer disposable income, he added.

Americana Restaurants, which operates chains including KFC, Pizza Hut and TGI Friday’s across the Middle East, said consumer demand had started to soften over the past year. The economy could come under further stress if low oil prices persist and force the government to curtail spending.

“An important contributor to the consumption growth forecasts comes from the idea of expats moving to Saudi,” according to Lakhotia. “So, if there is some level of slowdown in things like projects, this could impact future growth in consumption and spending.”

And for IPO hopefuls reliant on consumers opening up their wallets, hitting the right valuation will be key, especially given tepid debuts for some high profile regional listings in the last few months. While recent deals in Saudi Arabia have done relatively well, investors will likely be more discerning.

“With most names trading below or near IPO prices, the strength of business model and valuation is the key now,” said Sanat Sachar, a portfolio manager at Azimut Difc Ltd. in Dubai.