Saudi Arabia’s NCB Seen Surging After IPO Is Discounted

Investors in the $6 billion initial public offering of Saudi Arabia’s National Commercial Bank (NCB) may see the shares surge after the government discounted the offer.

The bank closed the sale of 300 million shares priced at 45 riyals each to Saudi Arabian retail investors on Nov. 2, with trading to start tomorrow.

The government typically sells stakes in state-owned companies to the public at below market value as part of efforts to redistribute the country’s wealth.

“Most IPOs in Saudi Arabia are sold at a discount, and in this case it was quite a deep discount,” Asim Bukhtiar, a vice president and head of research at Riyad Capital, said by phone from the Saudi capital.

“NCB shares could up end up rising to between 80 to 85 riyals, so investors should do very well.”

The sale of the 25 percent stake in NCB, as the bank is known, is the year’s second biggest IPO after Chinese e-commerce company Alibaba Group Holding Ltd. raised a record $25 billion.

The Saudi sale was restricted to local retail investors and the public pension fund, which bought 200 million shares. Larger investors can only buy once trading starts.

“Local and regional institutions will be the number one buyers as they were kept away from the IPO process,” said Yazan Abdeen, lead fund manager at Jeddah-based Sedco Capital.

Fair value for the bank is between 60 and 65 riyals, while demand for the shares could cause the price to rise above that.

Previous Offerings

Previous offerings have surged on their debut. Alinma Bank, a Shariah-compliant lender based inRiyadh, climbed 60 percent on its trading debut in June 2008.

Saudi Arabian Mining Co. also soared as much as 60 percent after its IPO that year.

NCB attracted 311 billion riyals ($83 billion) of bids. The offering overtakes the $5 billion raised by Dubai’s DP World Ltd. in 2007, which was formerly the largest IPO in the Middle East’s history, according to data compiled by Bloomberg.

Still, NCB will not go through the same rapid rise as previous listings in Saudi after the introduction of new rules that limit daily share price moves to 10 percent.

The Capital Market Authority, which regulates the Saudi Stock Exchange, introduced the regulations in January.

“During the first three to four days the stock will simply close limit up everyday,” said Abdeen.