IPOs, REITs and M&As to buoy Muscat Securities Market in 2019

Conrad Prabhu –
Muscat, Jan 15 –
A trio of Initial Public Offerings (IPOs), coupled with the anticipated introduction of the Mandatory Health Insurance scheme as well as the potential for new listings linked to Real Estate Investment Trusts (REITs), are expected to stimulate the share market in the Sultanate in 2019, according to a Muscat-based market analyst.
Hettish Karmani, Head of Research at U Capital — a leading investment banking platform in the Sultanate, said the outlook for the Muscat Securities Market (MSM) is promising going into 2019, in comparison with the relative lacklustre performance of the bourse last year.
Karmani listed a number of factors that he noted would hopefully contribute to this upbeat outlook for the stock market this year. The IPO market is expected to be better this year compared to 2018, with a public listing each from the Oil & Gas, Power, and Insurance sectors anticipated in 2019.
According to the analyst, the companies anticipated to go public this year are Abraj Energy (wholly owned subsidiary of Oman Oil Company), Musandam Power (a subsidiary of Oman Oil Company Exploration & Production —OOCEP), and Oman Reinsurance (the Sultanate’s first reinsurer).
Also boding well for a strong uptick in activity in the MSM this year is the REITs market, says Hettish. “Regulations for REITs were enacted last year, which might result in new listings. We understand that a number of corporate and government entities are working on issuing such instruments.”
Additionally, the formal introduction of Mandatory Health Insurance Services anticipated in the first half of this year is also expected to energise the insurance sector and the market in general.
Aside from these developments, the Muscat bourse itself makes for an attractive investment opportunity, Karmani points out. “A number of stocks are currently available at a deep discount because of the decline registered last year and which has continued thus far, making them attractive for institutions to invest in for capital gains or dividends. Besides, there is the potential for M&A in the financial sector, which will keep the companies involved on the investors’ radar.”
The positive outlook for 2019 contrasts with what has been a challenging year for the MSM in 2018 with the MSM index having declined 15.21 per cent to 4,323.74 points. Karmani attributed the negative performance to a combination of factors. Notable were a lack of liquidity in the market due to funds being parked in other more lucrative investments such as fixed income instruments, as well as lack of depth in the local market.
Adding to the market’s challenges was the upgrading of some neighbouring countries to emerging markets, which prompted the outflow of liquidity from Oman to them. Political uncertainty in the GCC region, as well as the higher cost of equity for Oman, were contributory factors as well.
But with listed companies posting healthier bottom-lines for 2018 in the current financial reporting season, the outlook looks promising going into 2019. “For the full year 2018, we anticipate earnings growth of over 15 per cent, which is largely because of better earnings by banking, insurance and power sector companies,” said the analyst.