Nawras takes flight

On September 15, 2010, Omani telco Nawras announced its intention to list on the Muscat Securities Market in a development that has been highly anticipated for much of the year. Representing the first initial public offering (IPO) on the Muscat bourse since the middle of 2008, Nawras’ public offer is generating significant interest not just from Oman but across the region

The announcement of the launch of Nawras’ IPO on September 15 was met with significant enthusiasm in Oman

Interest in Nawras shares in the first three weeks that the offer has been open has been very high, driven by the fact that prospective investors seem to understand this is a one-off opportunity to acquire a stake in a formidable and still-growing organisation.

Nawras has done a remarkable job of bringing competitive dynamics to play in the telecom arena in Oman. In just over five short years commencing March 2005 the cellco established near-parity with the incumbent operator with respect to subscriber numbers, and enjoyed a significant share of overall market revenues. Nawras operations have become synonymous with dynamism and creativity in its use of technology and provision of services.

With customer service standing at the core of Nawras’ proposition, an understanding of its users’ behaviour and preferences has helped the operator forge a special place in the sultanate, not least amongst the innovative and energetic youth segment.

Transferring this record of success to a mass audience is one of the pillars of the IPO process, which opened on September 15 and closes on October 14, allowing interested parties an uncharacteristically long time in which to subscribe for shares. At the end of the process up to 40 per cent of Nawras’ equity will be in public hands, with the operator having initially set aside up to 70 per cent of this public offering to retail investors and the remaining up to 30 per cent to institutional investors.

Interest continues to be strong. Nawras is understood to have run out of application forms towards the end of September, requiring the operator to print a couple of hundred thousand more in order to satisfy demand. Sources close to the IPO process say that demand from institutional investors for Nawras stock is well ahead of expectations, with an expectation by fund managers that at the end of the process the subscription rate is very likely to be higher than the available stock.

The IPO is open to investors of all nationalities and it appears non-residential applicants are travelling to Oman in numbers in order to register their interest. Morgan Stanley Bank Muscat, and Qatar National Bank are the lead managers for the offering and have been giving advice to many interested parties across the Gulf and beyond with respect to procedures and requirements for participating in this exciting development.

Aside from Nawras’ strong fundamentals as an operator – 1.97 million subscribers as of end-June 2010 (two million at the start of August), representing a market share of 45 per cent; most CAPEX requirements already completed in 2010; and net profit of OMR26 million (US$ 67.5 million) for H110 – the price range of the initial offer has also proven to be a draw card. Priced at between Bzs 702 and Bzs 902, the range is perceived to be at a significant discount to the stock’s real value, particularly when compared to IPO processes of other prominent second telecom entrants in the region such as Du in the UAE and Mobily in Saudi Arabia.

At the beginning of August Nawras celebrated adding it two millionth mobile subscriber. The company now operates its own international gateway and is deploying a wireless broadband network

Analyst comparisons indicate that Nawras’ price range translates to a lower EBITDA multiple than the valuations placed on similar telecom transactions in this part of the world in recent years.

Market commentators have suggested the price range could have justifiably been placed as high as Bzs 1 to Bzs 1.2, and the expectation is that such a level is likely to be attained soon after the stock starts trading. Thus Nawras stock stands as a good savings mechanism with respect to capital growth, and an added incentive being reports suggesting Nawras will announce a dividend of between 40-60 per cent of net profit next year, with plans to continue a strong dividend policy in the future. Thus Nawras stock is likely to be considered a savings tool, particularly by residential shareholders.

The IPO and Nawras’ embrace of a broad-based equity ownership ties in well with the celebration of Oman’s 40 years of nationhood, a milestone which is being celebrated this year. The manner in which the public offering is being conducted reinforces the desire to include ordinary Omanis in the success of one of the country’s most successful home-grown institutions.

And should the heavy interest for Nawras stock not be evidence enough in itself, the fact that Nawras’ existing shareholders seem to be set to remain present directly or indirectly following the completion of the IPO process is testament to the continued value they perceive in the operator going forward.

Nawras IPO in brief

• Bzs 902 (US$2.34) upper band of Nawras IPO

• Bzs 702 lower band of IPO

40 per cent of Nawras shares in the IPO

• Nawras could raise up to US$608 million from its stock market listing, receiving between OMR 182 million (US$472.7 million) and OMR 234 million, based on the number of shares allocated and the price finally set

• The final share price for the IPO will be determined on October 24 and the shares will be listed on October 27

• Investors who would like to participate in the Nawras IPO should collect a prospectus and application form from a branch of Bank Muscat, National Bank of Oman, Oman Arab Bank or Ahli Bank, or download a copy from the CMA website

• There are two categories of investors who may apply. Category I investors are Omani and non-Omani investors who may apply for a minimum of 500 shares and in multiples of 100 shares thereafter up to a maximum of 500,000 shares

• Category II investors are institutions and individual investors who may apply for a minimum of 500,100 shares and in multiples of 100 shares thereafter up to a maximum of 26,037,700 shares