Is Aramco pulling the trigger on its secondary offering today?

Aramco looks ready to pull the trigger any moment now on blockbuster secondary sale. The Wall Street Journal expects the oil giant to go ahead with a USD 10-20 bn sale “as soon as this week” while Bloomberg claims that it will be a USD 10 bn sale and that the formal launch of the transaction will come on Sunday.

The prospect of a sale has already attracted “informal interest” from investors, Bloomberg notes. Aramco will boost its dividend this year by as much as 30% over 2023 thanks to a performance-based payout despite a 14% year-on-year drop in net income in 1Q 2024, making the company an attractive dividend play.

The oil giant’s shares + Tadawul are down ahead of the offering: A strong pipeline of IPOs and expectations that the Aramco sale will absorb market liquidity has seen Tadawul investors holding onto cash for fresh paper. Less liquidity in the market coupled with expectations that Opec+ will extend voluntary oil cuts when it meets next week pushed Aramco’s shares to their lowest level in over a year, Bloomberg reported. Aramco shares are down just about 12% YTD, closing at SAR 29.05 yesterday, which is below its 2019 offering price of SAR 32.00.

What the pundits are saying: “Saudi Aramco’s share price has been under pressure from an oil production level that is limited around 9 mn barrels a day due to the ongoing OPEC+ cuts,” said Salih Yilmaz, senior industry analyst at Bloomberg Intelligence. “It continues to demand a higher price-to-earnings valuation versus international oil major peers.”

BACKGROUND- Reuters reported last week that Aramco could proceed with the sale in June, with the newswire seeing the oil giant put on a full roadshow to market the offering rather than doing an accelerated book build. The PIF increased its stake in Aramco to 16% in March as news of the potential sale surfaced. If the offering goes ahead, it would be one of the world’s largest offerings in recent years. Aramco raised USD 29.4 bn on Tadawul in 2019 in what remains the biggest IPO in history.

ALSO WORTH NOTING FROM PLANET FINANCE-

• The International Monetary Fund sees China’s economy growing 5% this year, up from its previous forecast of 4.6% growth for the world’s second largest economy. However, the Fund warned that growth would slow to 4.5% next year, and to 3.3% by 2029 due to “an aging population and slower expansion in productivity.” (Reuters)
• All 82 economists in a Reuters poll see the European Central Bank cutting interest rates in June, with a majority also forecasting further cuts in September and December.

MARKETS THIS MORNING-

A global bond selloff yesterday saw investors dump equities as jitters set in, with stocks in the US, UK, and Europe closing the day in the red. Asian markets are playing catch-up this morning, with all major benchmarks in negative territory (led by the Nikkei’s nearly 1.7% dip at dispatch time). US and European stock futures are down sharply this morning after yesterday’s selldown and Salesforce’s downbeat forecast. Revenue at the software giant fell short of Wall Street expectations for the first time since 2006.

THE CLOSING BELL-

The DFM fell 0.7% yesterday on turnover of AED 723.2 mn. The index is down 2.5% YTD.

In the green: Drake & Scull International (+24.0%), Salik (+2.9%) and Watania International Holding (+2.7%).

In the red: Agility(-9.9%), Union Properties (-3.7%) and Al Firdous Holdings (-3.3%).

Over on the ADX, the index fell 0.4% on turnover of AED 1.1 bn. Meanwhile Nasdaq Dubai closed down 1.1%.

CORPORATE ACTIONS-

Agility’s board approved a dividend payout of 10 fils per share for 2023, equivalent to 10% of its share capital, according to a DFM disclosure (pdf).

WATCH THIS SPACE- Agility will issue fresh shares for its employee stock ownership plan (ESOP) after obtaining regulatory approval. The ESOP will be under 10% of the company’s total capital within a decade from its implementation.

Bahrain’s GFH was granted approval by the Central Bank of Bahrain to kick off a share repurchase program, according to an ADX disclosure (pdf). The company is set to commence the buyback today, aiming to acquire a maximum of 10% of the group’s total issued shares.