Burj Khalifa, the world’s tallest tower owned by Emaar
|By TAP Staff| Emaar Properties said it’s seeking to raise as much as $1.58 billion from the initial public offering of its malls unit in the UAE’s biggest IPO since 2007.
Emaar Malls Group PJSC plans to sell 2 billion of its founders’ shares, or about 15 percent of its equity, in a price range of 2.5 dirhams to 2.9 dirhams apiece, according to a company statement to the Dubai Financial Market. The final price will be determined through a book-building process and will probably be set on Sept. 29., Dubai-based Emaar said.
“The company has top-quality assets in a high-margin business with strong growth and cash-generation ability,” Taher Safieddine, an analyst at Shuaa Capital PSC in Dubai, said by phone. “Even at the top end Emaar is leaving some upside.”
A retail boom spurred by an increase in tourist arrivals is helping propel growth in Dubai and underpinning investor demand for the largest IPO in the U.A.E. since port operator DP World Ltd.’s (DPW) $4.96 billion offering seven years ago. About 75 million visitors passed through Emaar’s flagship Dubai Mall last year, while the emirate’s economy is set to expand about 5 percent this year, the International Monetary Fund said in May.
The share sale, which began yesterday and ends on Sept. 24 for individual investors and Sept. 26 for institutional investors, could raise 5.8 billion dirhams ($1.58 billion) at the top of the range. The mid-point will value the company at about 35.1 billion dirhams, Emaar said. The shares will list on the Dubai Financial Market on Oct. 2, Emaar said last week.
Emaar Malls’ profit increased 24 percent in the first half to 617 million dirhams, while revenue climbed 15 percent to 1.26 billion dirhams, according to a company statement.
The parent company plans to distribute 5.3 billion dirhams of the IPO proceeds as a dividend, it said last month, and will make the payment as part of plans to distribute about 9 billion dirhams to its owners, including the Dubai government.
Shuaa’s Safieddine, who rates Emaar Properties buy, expects both revenue and profit at the company’s malls business to grow at more than a 10 percent in 2015 and 2016.
The company charges mall tenants the higher of base rent or turnover rent, according to Safieddine. Tenants pay Emaar around 15 percent of all sales, compared with 2 percent to 8 percent charged by global peers, he said. Stores operating in the Dubai Mall sold 15 billion dirhams worth of goods last year.
Still, “at the upper end of range, this IPO would be very expensive,” Mohammed Ali Yasin, managing director of NBAD Securities LLC in Abu Dhabi, said by phone yesterday. “Emaar Malls would be priced at about 30 times 2014 earnings.”
Emaar Properties is focusing on recurring hotel and mall revenue to cushion itself from property market shocks. The Dubai Mall features hundreds of stores as well as an aquarium, a skating rink and some of the world’s most expensive cupcakes and is the world’s sixth largest mall by gross leasable area.
Emaar Malls’ assets include four shopping malls and 30 community-shopping and retail centers with a total gross leasable area of around 5.9 million square-feet (548,127 square-meters). The properties had 95 percent occupancy during the first half of 2014, according to Emaar.
Bank of America Merrill Lynch, JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS) are the joint global coordinators and bookrunners for the IPO. HSBC Holdings Plc (HSBA), EFG-Hermes Holding SAE, National Bank of Abu Dhabi PJSC (NBAD) and Emirates Financial Services PSC are the joint bookrunners, while Emirates NBD PJSC (EMIRATES) and National Bank of Abu Dhabi are lead receiving banks. Rothschild is the financial adviser.
(With Bloomberg)
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