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Ratings agency S&P Global sees GCC corporate and infrastructure firms standing strong this year despite “soft global economic growth,” surging interest rates, and geopolitical risks in the region, S&P Global Ratings said in its latest GCC Corporate And Infrastructure Outlook 2024 report. The report looks at how S&P feels about the companies it rates across the GCC.
Driving the optimism: S&P Global says many companies will benefit from a cushion provided by strong operating performances since last year. It likes the prospects this year for non-oil, oil and gas, and chemicals players alike. Companies are, on the whole, underleveraged, giving them more room to adapt to changing circumstances — a good sign when many will need headroom to invest in capex programs to grow or short-up their businesses.
Refinancing risk is low: As much as 80% of the debt maturing this year is with “highly-rated government-related entities,” it says.
The EBITDA benchmark: S&P sees operating profitability in the 5-10% range in aggregate for GCC companies through this year and net.
Look for non-oil GDP growth to clock in at a bit under 5% in the Kingdom and UAEon the back of ongoing economic diversification drives and population growth across the GCC, the ratings agency said. It sees non-oil sectors benefiting from a public spending spree and consumer spending growth.
Some pundits see it even lower: Fitch Ratings sees momentum for non-oil GDP in the GCC decelerating to grow at a 3.7% clip this year, slightly down from the 4.2% it penciled in for 2023. The Kingdom’s plan to pace out the implementation of some of its mega projects factors into the revised projection.
REMEMBER- The Kingdom sees non-oil GDP growth coming in at 4.5-5.0% this year, said Economy and Planning Minister Faisal Alibrahim at the WEF in Davos earlier this year.
We’re bound to see more new businesses inflow: S&P Global Ratings expects to see more new businesses being set up here and in the UAE. It attributes the growth in new businesses to the Kingdom’s regional headquarters program, which went into effect on 1 January. It also sees a new premium residency visa scheme launched earlier this year to drive the creation of new businesses and new jobs. The regional HQs program, a cornerstone of Crown Prince Mohammed bin Salman’s economic diversification plan, sees foreign firms moving their regional HQs here or running the risk of losing out on government contracts
A booming M&A + IPO floor: The ratings agency expects GCC telecom operators to continue expanding into new markets after resuming acquisitions last year after several years of hiatus. It highlighted telecom operator stc’s acquisition of a 9.9% stake in Spain’s Telefonica and stc subsidiary Tawal agreeing to buy mobile tower infrastructure worth EUR 1.2 bn from United Group. It expects a “sustained IPO activity” this year with some of the companies announcing listings/potential listings on the main market and parallel market Nomu including: Avalon Pharma, Moderns Mills, Al Modawat Specialized Medical Hospital, Pan Gulf Marketing others.
