(MENAFN- Khaleej Times) IPO activity in UAE has remained subdued for the last few years given the unfavourable market conditions as the region witnessed declining oil prices and economic uncertainty. Most of the prospective companies decided to either defer or abandon their IPO plans given the deteriorating market conditions and poor performance of the other IPOs - Of the 8 companies to have sold shares in an IPO since 2010, only one of them is currently trading above its offer price.
However, after almost three years of drought in the UAE IPO market, we have a swing of companies that have been lining up its initial public offerings ahead of Saudi Aramco's IPO. This can be attributed to the fact that the economy has diversified away from their dependence on natural resources and as states in the region have made their stock exchanges more liquid.
Moreover, when it comes to timing, Saudi Aramco's IPO seems to be a key consideration. The companies in UAE planning their IPOs would be raising around $11 billion, slightly higher than 10 per cent of what Saudi Arabia could generate from $100 billion Aramco IPO in 2018. Companies don't want to come to the public market after all the liquidity has been sucked up by Saudi Aramco.
Emaar Properties has already laid the stepping stone in ending UAE's IPO drought. The company that headed a construction boom in the emirate over the past 15 years is selling part of its business in an initial public offering in the UAE. Investors have been keenly eyeing this IPO as it will be the first IPO in the last three years in the UAE capital markets, except Orient UNB Takaful, which hasn't traded since it was listed in June.
The IPO is similar in size compared to its Emaar Malls offering, which raised about $1.58 billion in 2014 and was the leading share sale in the UAE in the past 9 years.
The developer of the world's tallest skyscraper in Dubai has offered 800 million shares (20 per cent of its real-estate development business) in Emaar Development at a price range between Dh5.7 ($1.55) and Dh6.9 per share.
The offering opened on November 2,2017 with about 10 per cent of the shares available to retail investors and 90 per cent to institutions. The offering to retail investors were closed on November 13 and to institutional investors closed on November 15. Shares are listed on Dubai Financial Market. Emaar Development is aiming at the distribution of $1.7 billion in the form of aggregate dividends to be paid over the next three years ending December 2020.
Annual dividend payments post 2020 are expected to increase further given Emaar's lower leverage and higher expected cash flow from operations. Given its dividend plans, Emaar Development may price at the top end of the range, though the overall price range could move depending on demand.
The key question as to how attractive would this IPO be, would finally depend on it offer price, but when it comes to valuation, Emaar Development seems to be fairly valued with net asset value of Dh24.1 billion at the end of September 2017, or Dh6.025 per share.
Moreover its business has continued to perform well despite an economic slowdown with their offplan sales growing at double-digit rates, which reiterate the strength in it brand.
The company has a delivery backlog of about Dh40 billion ($11 billion), which will be realised over the next four years, which clearly suggests sound earning potential. The other companies in the Emirates that are planning an IPO are as follows: (However the decision is not final and the company may decide against a listing)
Abu Dhabi Ports
Abu Dhabi Ports Co, the government-run ports operator, is planning an IPO and could raise at least $1 billion from its offering on the local exchange.
Adnoc's service stations
Abu Dhabi National Oil Co, the largest producer of the crude oil in the UAE, is planning an IPO of its service stations that could fetch a valuation of about $10 billion and may raise around $3 billion from its listing which is likely to happen in Abu Dhabi.
Emirates Global Aluminium
Emirates Global Aluminium, the largest producer of aluminium in the Middle East is considering an IPO in Dubai as well as Abu Dhabi since the company is owned by Abu Dhabi's sovereign fund Mubadala Investment Co and the Investment Corp of Dubai. This could potentially be the first company in UAE to be represented on both exchanges. The dual listing could raise as much as $3 billion from the offering.
Senaat
Senaat, the company which holds stakes in Abu Dhabi's National Petroleum Construction Co and Emirates Steel, is considering an IPO after putting it on hold for three years. The company plans to raise about $1 billion from its listing mostly likely to happen on the Abu Dhabi stock exchange.
Gems Education
The private-school operator, which is backed by private equity firms Blackstone Group LP and Fajr Capita l Ltd and wealth fund Bahrain Mumtalakat Holding Co, is planning an IPO in London as early as next year and could fetch a valuation of about $4 billion or more. Overall, regardless of various constraints and market risks, the prospects for IPO activity in the UAE seems positive, where a bounce back in new listings can be expected in the next six months and beyond.
The writer is chief executive of Century Financial Brokers. Views expressed by him are his own and do not reflect the newspaper's policy.
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