Emaar Malls IPO to boost investor appetite in UAE

Analysts are looking at it as defining moment that will mark the completion of Dubai’s economic recovery process, and the beginning of a new boom as Emaar Properties and the Dubai Financial Market (DFM) gear up for one of the largest equity sales in the Middle East since 2008.

Emaar Properties will launch the initial public offer (IPO) of its shopping malls and retailing unit on September 14, and will list the subsidiary on Dubai's main stock market on October 2, the master developer said in a statement to the Dubai Financial Market on Sunday.

Shares in the Emaar Malls Group (EMG) will open for subscription for both the individual tranche (not more than 40 per cent) and qualified institutional tranche (at least 60 per cent) on September 14 and run until September 24 for individuals and until September 26 for institutional investors.

Business confidence and investor interest in Dubai is surging, with the DFM general index up more than 50 per cent year-to-date. The DFM is at a six-year-high, and reached 5,193.03 points on Thursday, September 4, before closing at 5,120.75 points. 

Shares in market benchmark Emaar Properties made a fresh 52-week-high of Dh12 a day earlier, on Wednesday last week after announcing in the statement to the Dubai bourse that it would pay a dividend of approximately Dh9bn ($2.45bn) to its shareholders thanks to the forthcoming IPO.

“The announcement by Emaar Properties that it would divest 15 per cent or more in a public equity issue in its mall subsidiary is boosting investors’ risk appetite in UAE stocks,” Arjuna Mahendran, Chief Investment Officer, Emirates NBD, said in his latest weekly report on GCC markets. 

“There is a strong likelihood [that Saudi Arabia’s] largest lender National Commercial Bank will announce an even larger IPO in October 2014,” he added. 

“The estimated value of the Emaar Malls IPO is Dh5bn ($1.36bn), which is sizeable for the UAE market, which has a capitalisation of Dh789b ($215bn),” said Mahendran. 

The share capital of the new company to be listed is determined at Dh13.014 billion divided into as many shares of Dh1 each, Emaar said in its note to DFM on Sunday, making the IPO one of the largest equity sales in the Middle East since 2008.

At least 1.95 billion shares will be on offer, representing not less than 15 per cent of the share capital by way of sell down of a percentage of the founders’ shares through a book-building process, it said.

“The share price range will be announced on September 14, 2014, in two local daily newspapers and in the prospectus available at the receiving banks, the company’s headquarters, the company’s website and Dubai Financial Market in light of the qualified institutional investors’ education process before the subscription period,” Emaar noted.

“According to an independent property valuation undertaken by Jones Lang LaSalle, the fair market value of the company’s properties was Dh39.8 billion ($10.6 billion) as at June 30, 2014,” it said. “Based on a net debt of Dh6.566 billion ($1.79 billion) as of September 4, 2014, this means that the net asset value of the company will be Dh33.2 billion ($9 billion),” Emaar added.

The subscription will be open to UAE, GCC and non-GCC individuals and institutional subscribers and to governmental authorities as described herein.

In order for the subscription to succeed, the subscription percentage of qualified investors must not be less than 60 per cent and the subscription percentage of individuals must not be more than 40 per cent of the percentage offered for sale by the selling founders.

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