Depa listing will test 'Brand Dubai'

There is a big test coming for Dubai and its financial market in the form of the forthcoming listing of the shares of Depa on the Dubai International Financial Exchange. By the time the shares are trading – on DIFX and the London Stock Exchange – towards the end of April, we will be in a much better position to judge the international value of Brand Dubai.

Depa, under its founding Chief Executive Mohannad Sweid, has been instrumental in giving Dubai and the UAE the “wow” factor for which it is now world-famous. The décor of the Burj Al Arab, Emirates Palace Hotel, and numerous other five-star establishments across the Middle East and Asia is there thanks to Depa, as “interior contractor” to these neck-achingly stunning buildings. Its current big project is the world’s tallest building, the Burj Dubai, where Depa is fitting out a mere 900 apartments.

So if any one group can be credited with creating the Dubai “look” it is Depa, and the company has successfully exported the formula to the world. It will be interesting to see how the world values that “look” in terms of cold hard cash once the shares are offered.

At the same time, the listing is an opportunity for the international financial community to test the efficiency of the DIFX. Depa will be only the third primary listing to embark on the market – after Kingdom and DP World – but it is the first true privately owned company to float there. Both Kingdom and DP World were “real” listings, in the sense that they raised “real” cash, but their association with the business elite of Saudi Arabia and the UAE made them rather artificial as indicators of market appetite.

We will have to await the prospectus for the hard financial figures, but the indications so far are that some 40 per cent of company will be floated with a value of around $400 million (Dh1.46 billion). Assuming last year’s rate of growth (35 per cent) in contract income is maintained this time, and this feeds straight through to profits (Dh160.5m last year) that will put Depa on a forward rating of around 15 times earnings. That is demanding enough to make the issue a real test of the UAE market and the ability of DIFX to launch such an issue. Expect huge oversubscription, but watch for the shares’ performance in the after-market as the real indicator.

The process will be closely watched by other private companies in the region. There is a queue of big family businesses currently weighing up the options on capital-raising – the fate of Depa will probably decide whether or not they chose the form of a public listing on DIFX. There is a lot to play for here.