Dubai's Emaar looks to raise Dh5.8bn from malls IPO

Dubai’s Emaar Properties is seeking to raise as much as Dh5.8 billion ($1.58 billion) from an initial public offer of shares in its shopping malls unit that is expected to be the Gulf's biggest stock sale since 2008.

The planned listing of Emaar Malls Group (EMG) is expected to pave the way for other companies to list on the emirate’s stock markets after a drought of IPOs.

“I believe we are going to see very significant demand for Emaar Malls’ IPO, especially since the market has been in a drought for more than six years which made investors very thirsty for new IPOs,” said Samer Mardini, Dubai-based vice president for fixed income at SJS Markets.

Emaar, the emirate’s largest real estate developer, expects to sell 2 billion shares in EMG, representing 15.4 per cent of the unit’s share capital, in a price range of Dh2.50 to Dh2.90 per share, it said on Sunday.

The share sale starts on Sunday and will end on September 24 for retail investors and on September 26 for institutional investors; Emaar has said it aims to allocate at least 60 per cent of the offer to institutions and no more than 40 per cent to retail investors. EMG shares will then list on the Dubai Financial Market on October 2.

At the mid-point of that range, EMG’s market capitalisation upon listing its shares would be approximately Dh35.1 billion, said Emaar, builder of the world’s tallest skyscraper, Burj Khalifa.

Brokerage firm Naeem Holding said the price range suggested EMG’s valuation in the offer would be “a bit stretched”. It estimated that at the mid-point of the range, EMG would have a price-to-earnings ratio based on this year’s earnings of 28.5 times. That would be above the parent firm’s roughly 25 times and the broader market’s 16, according to Thomson Reuters data.

Nevertheless, investors’ belief in the long-term growth of Dubai’s retail sector may mean there is no shortage of demand for the offer.

Dubai’s government owns about 30 per cent of Emaar Properties, which plans to pay a special dividend related to the IPO of around Dh9 billion to its shareholders: Dh5.3 billion from the IPO proceeds and Dh3.7 billion from a dividend already paid by EMG to its parent.

DUBAI MALL

Emaar Properties shifted its focus beyond housing to the more profitable retail and hospitality business after the 2009 financial crisis resulted in the collapse of the real estate market. The retail sector has benefited from a strong rebound in the emirate's economy on the back of a tourism and trade boom.

All of EMG’s assets are in Dubai with the largest being Dubai Mall, one of the world’s largest shopping malls, which the company claims sells approximately 50 per cent of all luxury goods sold in the emirate.

About 82 per cent of the company’s rental income in the first six months of 2014 came from Dubai Mall, the prospectus said.

“Basically it’s a play on Dubai Mall which has extremely high margins, and on Dubai which has also been very successful recently,” said Sachin Mohindra, senior vice president and portfolio manager at Abu Dhabi-based investment firm InvestAD.

“The debate now is how much more premium we can assign to this stock.”

EMG made a profit of Dh617.2m in the first half of 2014, up from Dh498m a year earlier. Revenue in the six months to June 30 was Dh1.25bn, compared to Dh1.11bn a year ago.

The company said the fair value of its assets had tripled to Dh39.79bn at June 2014 from Dh13.45bn in December 2011.

Dubai retailing and restaurants group Marka has announced plans to list its shares on the DFM on September 25, in that market’s first flotation for five years. More IPOs are believed to be in the pipeline.   

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