‘Door is open’ to foreign investors in Aramco IPO – NCB Capital

Saudi Arabia put a value of up to $1.71 trillion on energy giant Aramco. (File/AFP)
Updated 25 November 2019

‘Door is open’ to foreign investors in Aramco IPO – NCB Capital

  • Official figures from Tadawul show that foreign ownership of shares in Saudi Arabia almost doubled in the year to the end of October
  • Samba Financial Group, said recently that demand for the offer was ‘unprecedented’

DUBAI: One of the most senior bankers working on the initial public offering of Saudi Aramco told Arab News that the decision to go ahead without international marketing was a rational one in light of unusually strong regional demand for the share sale.

Sultan Moussa, vice president of investment at NCB Capital, said: “It was not an irrational decision. Good sentiments and reasoning came before they made the decision. They did their homework very well before they reached that decision. Given the expressed valuation range reached and the expected demand, it was enough for them to go ahead without international marketing.”

Moussa was speaking in light of criticism from some western bankers of the decision to call off “roadshows” to foreign financial centers like New York and London and concentrate on domestic and regional demand for the record-breaking Aramco IPO.

“The advisers and the banks usually do pre-marketing after the intention to float and the prospectus, before book-building begins. So global investors already have clear visibility on the level of domestic demand. You cannot imagine them taking an irrational decision to halt international marketing when they have that information,” he added.

The NCB Capital executive insisted that foreign investors could still take part in the IPO via the Tadawul’s existing rules for non-Saudi institutions, which have been eased for the IPO. “The door is open for anyone to invest in the IPO,” Moussa said.

“International investors are still allowed to go via the route for qualified financial institutions and they are invited, indeed they are welcome to come into the IPO. If international investors believe in the financials and the fundamentals they do not need to be marketed to further,” he added.

Official figures from Tadawul show that foreign ownership of shares in Saudi Arabia almost doubled in the year to the end of October, now comprising 9.04 per cent of the total.

Another of the Saudi banks working on the IPO, Samba Financial Group, said recently that demand for the offer was “unprecedented” and that the value of orders was touching $20bn, against a top-end target of $25.6bn, with 10 days to go until the offer closes.

Moussa declined to comment on the level of take up. “The local banks are individually responsible for the book and you cannot say where it is in aggregate at the moment,” he said.

Aramco is selling three billion shares in the IPO at around $8.74 per share, making it the biggest share offering in history.


Cathay Pacific to slash workforce, end Cathay Dragon brand due to pandemic

Updated 22 min 23 sec ago

Cathay Pacific to slash workforce, end Cathay Dragon brand due to pandemic

  • Airline to seek changes in conditions in its contracts with cabin crew and pilot
  • Plans to merge Cathay Dragon into Cathay’s main brand earlier this year hit roadblocks

SYDNEY: Hong Kong’s Cathay Pacific Airways Ltd. said on Wednesday it would slash 5,900 jobs and end its regional Cathay Dragon brand, joining peers in cutting costs as it grapples with a plunge in demand due to the coronavirus pandemic.
The airline would also seek changes in conditions in its contracts with cabin crew and pilots as part of a restructuring that would cost $283.9 million (HK$2.2 billion), it told the stock exchange.
Overall, it will cut 8,500 positions, or 24 percent of its normal headcount, but that includes 2,600 roles currently unfilled due to cost reduction initiatives, Cathay said.
“The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the group to survive,” Cathay Chief Executive Augustus Tang said in a statement.
Cathay shares jumped almost 7 percent in early trade and were 4 percent higher at 0430 GMT, with broker Jefferies saying the announcement removed a key overhang on the stock.
Singapore Airlines Ltd. and Australia’s Qantas Airways Ltd. have already announced similarly large payroll cuts, as the International Air Transport Association forecasts passenger traffic will not recover until 2024.
Cathay, which has stored around 40 percent of its fleet outside Hong Kong, said on Monday it planned to operate less than 50 percent of its pre-pandemic capacity in 2021.
After receiving a $5 billion rescue package led by the Hong Kong government in June, it had been conducting a strategic review that analysts expected would result in major job losses.
The airline said it was bleeding HK$1.5 billion to HK$2 billion of cash a month and the restructuring would stem the outflow by HK$500 million a month in 2021, with executive pay cuts continuing throughout next year.
BOCOM International analyst Luya You said she had expected more strategic insight from the airline on its fleet plans and route network as part of the restructuring.
“Had they revealed more on fleet planning for 2021-22, we would get a much better sense of their outlook,” she said.
The decision to end regional brand Cathay Dragon is in line with rival Singapore Airlines’ pre-pandemic move to fold regional brand Silkair into its main brand.
Cathay Dragon, once known as Dragonair, operated most of the group’s flights to and from mainland China and had been hit by falling demand before the pandemic due to widespread anti-government protests in Hong Kong that deterred mainland travelers.
Plans to merge Cathay Dragon into Cathay’s main brand earlier this year hit roadblocks from China’s aviation regulator because of infractions during last year’s pro-democracy protests, two sources told Reuters in May.
Cathay said the airline would cease operating immediately and it would seek regulatory approval to fold the majority of Cathay Dragon’s routes in Cathay Pacific and low-cost arm HK Express.
In the short-term, the closure of the Cathay Dragon brand will result in it being unable to carry cargo to Fuzhou, Guangzhou, Kuala Lumpur and Fukuoka, and it will only send dedicated freighters to Xiamen, Chengdu and Hanoi, it told cargo customers in a memo, indicating the routes were cut for now.
“The reintroduction of service coverage will differ from port to port,” Cathay said.
Like Singapore Airlines, Cathay lacks a domestic market to cushion it from the fall in international travel due to border closures.
In September, Cathay’s passenger numbers fell by 98.1 percent compared with a year earlier, though cargo carriage was down by a smaller 36.6 percent.