Stock surges 1,100% since 100 fils IPO

KUWAIT: Boursa Kuwait surged more than tenfold in its trading debut yesterday as it became only the third publicly traded exchange in the Middle East. Shares in the bourse operator rose as high as 1,210 fils, after being sold at 100 fils in an offering to Kuwaiti citizens last year. Boursa Kuwait (“Boursa”) owns and operates Kuwait’s stock exchange, one of the oldest and largest exchanges in the Middle East.
It has exclusive rights on all local listings and public trading in Kuwait, and therefore has a captive market. Boursa has delivered a strong performance over the last 12 months, with trailing earnings per share (EPS) of 57.1 fils/share and a return on average equity of 39 percent, with no financial leverage and considerable cash flow. This has provided a strong platform for future growth and performance.
Boursa Kuwait yesterday completed its final milestone of its privatization and IPO process through listing on Boursa Kuwait itself. It closed its first successful day of trading at KD 1.055 a share. The current price translates into a trailing price-to-earnings (P/E) multiple of 18.5x.
The Kuwaiti market is in the process of being upgraded to Emerging Market status in the MSCI Reclassification (effective Nov 2020), which has the potential to attract significant inflows from passive and active investors globally. Stock exchanges generally trade at high earnings multiples to reflect captive markets and low competition, recurring/predictive nature of revenues, high margins and strong operating cash flows.
To put Boursa Kuwait’s valuation into perspective, consider the following: Listed exchanges globally generally trade at earnings multiples of between 20.0x and 30.0x, with a median multiple of 26.3x. Emerging market exchanges trade at average (median) earnings multiple of 28.2x. Examples: Dubai Financial Market trades at a P/E multiple of 49.4x and Deutsche Boerse trades at 25.8x.