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Emaar IPO may encourage more firms to tap market

|By Arabian Post Staff| Emaar Properties announced an IPO, offering 20 per cent of Emaar Development, the company’ development unit to investors. The size off the IPO size is lower than what the market had anticipated, which was at least 10 percent higher. The listing will take place in November on the Dubai Financial Market.
“The IPO of our UAE development business will allow potential investors an opportunity to participate in a pure-play UAE developer offering strong and stable cash flows and an attractive dividend yield,” said Mohammad Al Abbar, Chairman, Emaar Properties, in a statement.
The offering will be made available to qualified institutional investors from November 2 to 15, while the subscription period for individual and other investors is from November 2 to 13.
Emaar Development is targeting the distribution of dividends of no less than $1.7 billion, to be paid over the next three financial years ending December 2020.
“For the dividend declared with respect to the 2018 financial year, the company intends to pay a portion in third quarter of 2018 as an interim dividend, with the remainder expected to be paid in second quarter of 2019,” the company said.
For the nine months to September 2017, the company recorded sales value of Dh15.4 billion, up 32 per cent over the same period last year. Gross profit margin was at 42 per cent from January through September, while the company had Dh10.2 billion till September.
BofA Merrill Lynch, EFG Hermes UAE Limited, Emirates NBD Capital, First Abu Dhabi Bank and Goldman Sachs International are the joint global coordinators for the offering. Emirates NBD and First Abu Dhabi Bank are the lead receiving banks.
This will be the first IPO to be offered on the exchange since 2015 and could encourage more companies to hit the market. The last issue was that of Dubai Parks and Resorts, which has since been renamed DXB Entertainments, in November 2014. ADNOC is said to plan an IPO its retail and shipping business next year.
“Emaar Development coming to the market will encourage more issuers. There are a few IPOs in the pipeline. We have not seen a flurry of IPOs as equity markets have not performed according to the expectations,” said Vrajesh Bhandari, portfolio manager at Al Mal Capital.
The UAE market has not witnessed an IPO since 2015, but regionally the amount raised through primary offerings reached $788 million in the first half, down 21 per cent compared to the same period last year. Most of the value came in from Saudi Arabia’s secondary or Nomu market, which had about nine listings in the first six months to June.
“Increasing stability in oil prices and confidence in the global economy and markets are likely to drive an increased IPO activity in 2017 and 2018 across Mena, with a strong backlog of companies potentially preparing to come to market. The key driver for the MENA IPO market will likely be the privatisation of leading government-owned assets across a number of sectors,” Gregory Hughes, EY Mena IPO Leader, said.

“We have a number of companies, which have submitted applications for IPOs. We will get two of them on the platform by this year,” Obaid Al Za’abi, chief executive officer at Securities and Commodities Authority. The companies are into petroleum distribution, chemicals, aluminium, banking, insurance and retail, Al Za’abi said.
“Global IPO activity should continue to strengthen in the second half of 2017, underpinned by capital markets reaching all-time highs. Investor sentiment has improved and the global outlook is more positive, which should reflect on the IPO market in the MENA region,” Mayur Pau, Mena Financial Services IPO Leader, Ernst and Young, was quoted as saying.

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