New offerings and regulatory reforms encourage capital market activity in Bahrain

The Bahrain Bourse (BHB) has seen a slowdown in initial public offerings (IPOs) and equity listings over the past decade. However, in 2017 the kingdom launched its first real estate investment trust (REIT), which was followed by the successful completion of an IPO in late 2018. As of early 2019 discussions for a second REIT were under way, while several firms were seeking listings on the Bahrain Investment Market (BIM), an alternative board for growth-stage companies. Various reforms being worked on at the bourse, including a revision of its listing rules and efforts to boost liquidity, also appear set to bolster activity in coming years.

Listings Revival

Part of a growing trend in the region, guidelines for listing REITs were approved by the BHB in April 2015. In 2016 the sharia-compliant Eskan Bank Realty Income Trust offered 144m units for sale at a price of BD0.10 ($0.27) per unit; the issue was more than 95% subscribed, raising BD13.8m ($36.6m). Although only one REIT was listed on the bourse as of January 2019, both the BHB and Eskan Bank said discussions were under way to launch at least a second. According to the regional media, in October 2017 there were nine listed REITs in the GCC, with the segment predicted to continue expanding as it grows in popularity.

In November 2018 APM Terminals Bahrain – an 80:20 joint venture between international ports manager APM Terminals and local holding firm Yusuf Bin Ahmed Kanoo that operates Khalifa bin Salman Port – put up 18m shares at BD0.66 ($1.75) per share in an IPO, which represented 20% the firm’s total issued share capital. Following the listing, APM Terminals’ and YBA Kanoo’s respective holdings in the company fell to 64% and 16%. Local investment bank SICO acted as the leader manager and underwriter for the IPO, which was open to investors of all nationalities. In an early December 2018 ceremony the firm was officially listed for trading on the BHB. The IPO was noteworthy for its level of success – generating BD11.8m ($31.3m) and 97.4m shares applied for, resulting in an oversubscription of 5.4 times – as well as being the first to use Bahrain Clear’s new eIPO platform, which captured 90% of the subscriptions received. Bahrain Clear is a full subsidiary of the BHB, which manages such things as the settlement of market transactions.

The listing was a requirement of APM Terminal Bahrain’s port concession agreement with the government, which is looking to encourage investment in local infrastructure. “It will be good to have an IPO of a successful public-private partnership with a well-established asset that has a long track record of good results,” Mark Hardiman, managing director of APM Terminals, told OBG. The move also underscores the role capital markets can potentially play in infrastructure development at a time when regional government budgets are tight. “The IPO will play a big part in expanding the activities of APM Terminals and accommodating increasing cargo traffic,” Fawzi Ahmed Kanoo, deputy chairman of Bahrain Operations at YBA Kanoo, told OBG. APM Terminals will join several other listed port operators in the region, including DP World of Dubai.

Attracting Issuers

Several firms are also undergoing due diligence as part of plans to list on the BIM, and new listing rules for the bourse currently in development should further strengthen the IPO pipeline. “The draft rules include clear timelines and guidelines on approvals for potential listers, which should have an impact on listings,” Narjes Farookh Jamal, chief officer of operations at the BHB, told OBG. Work by the exchange to strengthen ties with stakeholders could further boost listing activity. “We have been focusing a great deal on engaging more with market participants, following a survey we developed in 2017 to engage more with issuers, in particular by listening to their concerns and suggestions to facilitate market processes,” Jamal told OBG. “One idea that we have taken up is to hold a regular workshop with issuers, the first of which will take place once we have received approval on the new listing rules from the central bank,” she said.