IPO of OQ Gas Networks potentially worth $700 – 800m

MUSCAT: A keenly anticipated Initial Public Offering (IPO) by OQ Gas Networks (OGGN), the exclusive owner and operator of Oman’s gas transportation system, could be potentially worth between $700 – 800 million, according to a key stock market analyst.

Neetika Gupta, Vice President and head of Research at Ubhar Capital, a leading brokerage and investment advisory firm, also pointed out that, given the strong fundamentals of the state-owned gas transporter and the low-risk nature of its business, investor interest in the IPO is expected to be strong.

“The OQGN IPO is set to be the biggest IPO to be listed on the Muscat Stock Exchange (MSX) in the past decades, post-Omantel, which raised $748 million in 2005. The potential size of the OQGN IPO is expected to be between $700 - $800 million,” said Gupta.

“OQGN is the second company, after Abraj Energy Services, to undergo an IPO within the framework of the exit plan led by Oman Investment Authority (OIA), the parent holding company. The listing comes as a unique opportunity for investors to have access to a company that has a natural monopoly over critical gas transportation in the country,” she stated.

OQ Gas Networks – part of OQ Group – announced last week that it intends to float 49 per cent of its share capital via an IPO sometime this month. In remarks to the Observer, the Ubhar Capital executive said the public offering will help boost the local stock market by attracting fresh capital into Oman.

“This IPO will help in economic diversification, especially since this offering is expected to attract many investors from inside and outside the Sultanate of Oman. This listing would contribute to empowering MSX and enhance the performance of the Omani economy through the diversification of financial instruments. The gas sector is one of the priority sectors, and after the upstream oil & gas company, Abraj Energy Services, this IPO gives opportunity to investors to gain exposure to a midstream oil & gas company.”

Importantly, interest from local investors in the IPO is expected to be very high, says Neetika.

“There is increasing awareness among local investors around IPOs. It is an incredibly attractive business investment on offer. OQGN itself is a unique opportunity as an investment choice. It is a monopoly business, and unique in the sense that its valuation and business does not depend on hydrocarbon pricing. It is low-risk and very well-managed business.”

Also boding well for the strong performance of the IPO is the current bullish sentiment in the region, which has benefited from the geopolitical crises of the past year.

“The price of oil has rallied and investors are in search of a relatively safe haven, which has ensured new money flows to the region,” the market analyst explained. “The Middle East is rife with IPOs and the increase in investor attention has led to setting up new asset managers in the region adding to what were already present. There is strong momentum being generated by state-based enterprise IPOs. OQGN ticks all the check marks of being an attractive sentiment in the current macro – low-risk monopolistic business which should offer reasonably high dividend yield.”