JEDDAH, 1 January 2006 — As many as 40 non-listed joint-stock companies, which require about SR35 billion in capital funds from the market, have announced their plans of going public.
Dr. Said A. Al-Shaikh, chief economist at the National Commercial Bank (NCB), said 36 companies had revealed the amount of capital funds they required from the market.
These companies, he said, have also indicated the names of lead arrangers and consultants who would be appointed for the initial public offering (IPO).
Al-Shaikh estimated the total capital sought by the 40 companies in the range of SR30 billion to SR35 billion. He added that the cluster of joint-stock companies, which supposedly have already qualified for the first legal requirement by the Capital Market Authority (CMA), consisted of 325 companies by the end of 2005. This is not including the 77 companies currently listed in the Saudi stock market.
He explained that strong oil prices and liquidity growth as banks expand their loans’ portfolios to the private sector have all strengthened corporate profitability, and that this continues to push stocks prices upward.
Meanwhile, the Saudi stock market ended the year with an increase of 103.66 percent.
The Tadawul All-Share Index (TASI) closed yesterday, the last day of trading for 2005, at 16,712.64 points, down 37.31 points from Thursday’s closing. The index gained 8,506.41 points in a year after closing on Dec. 31, 2004 at 8,206.23.
The index failed to break the 17,000 mark but reached an all-time high of 16,988.08 points on Dec. 15, 2005.
The index reached a low of 7,904.50 points on Jan. 18, 2005.
Out of 77 stocks traded, 23 were up and 50 were down yesterday. The value of traded shares reached SR23.29 billion yesterday.
The major Banking and Industrial Indices were down while the Cement, Electricity and Telecom Indices edged higher yesterday.
The Saudi British Bank shares jumped 3.77 percent to close yesterday at SR1,650.
In the industrial sector, shares of Saudia Dairy & Foodstuff Co. (SADAFCO) jumped 9.99 percent to SR674.25 and Filling & Packaging Materials Manufacturing Co. (FIPCO) by 5.64 percent to SR725.75.
Saudi Basic Industries Corp. (SABIC) was in the red yesterday as its shares fell 1.06 percent to SR1,580.75.
In the cement sector, shares of Tabuk Cement fell slightly to SR624.
Shares of Saudi Telecom Co. rose slightly to SR928 while Etihad Etisalat shares declined to SR700 yesterday.
In the agriculture sector, shares of Tabuk Agriculture, Bishah Agriculture and Eastern Agriculture rose by 7.63 percent, 4.27 percent and 3.28 percent, respectively.
Al-Shaikh added that the potential of the market seems limitless if the massive magnitude of oversubscription to companies floated in the last two years is taken into consideration.
The amount of subscribed funds for those flotations was ten times the capital sought by these companies going public.
He also mentioned that the fast growth of newly established companies in the Kingdom: From 372,000 in 1995 to 585,000 in 2004, or a rate of 5.2 percent annual growth. Al-Shaikh added that this growth average still continues and the number of companies is expected to reach around 615,000 by the end of 2005.
Of those 585,000 active commercial establishments, around 88,000 establishments have at least 20 employees. Ninety-two percent of these 88,000 companies are family-owned sole proprietorship businesses.
Al-Shaikh stated that the more lucrative IPO candidates are the second-largest group of limited liability partnerships comprising nearly 5,100 active businesses. These companies have at least 500 employees. The third largest cluster consists of partnerships, which make up around 1.4 percent of the selected total, followed by the cluster of limited partnerships, comprising 0.6 percent.
