The chairman of Aabar Investments says 80 per cent of the UAE's publicly traded companies are unfairly valued and that his firm has little choice but to go private. "It is better for this company to be delisted than trade for 20 to 30 per cent of its book value," Khadem al Qubaisi said yesterday. He added that the market valuation of his company was "not fair" and said "this applies to 80 per cent of companies listed on Abu Dhabi and Dubai stock markets".
Mr al Qubaisi's comments came at a meeting in which shareholders voted unanimously to convert Aabar to a private joint stock company. Aabar shares will continue to be traded on the Abu Dhabi Securities Exchange until the Ministry of Economy approves the decision. Company officials said they expected the ministry's ruling by September 1. Aabar is one of the UAE's most high-profile investment firms, with stakes in prominent global companies including Daimler, Virgin Galactic and Tesla Motors.
Aabar also reported a first-half profit of Dh202 million (US$54.9m) yesterday. The company did not release second-quarter figures. Ali Khan, the head of brokerage at Arqaam Capital, said based on Aabar's first-quarter results, it appeared the company lost more than Dh1.3 billion in the second quarter. He noted that the firm's bottom-line profits were not always a complete picture of its financial health because of complex derivative contracts tied to its investments. The earnings "may not necessarily accurately reflect the health of their underlying investments", he said.
Mohammed Badawy al Husseiny, the chief executive of Aabar, said at the shareholders meeting there was a "massive misunderstanding" about the company's earnings, particularly regarding the performance of the derivative contracts. He criticised those whom he said "choose to interpret the financials as they see fit. To some shareholders it appears Aabar has made a loss when Aabar has not made a loss."
Mr al Husseiny declined to comment after the meeting. If the Ministry of Economy approves Aabar's conversion to a private company, as is expected, the company will no longer be required to release earnings to the public. Mr al Qubaisi said not having to file regular earnings reports was one of the biggest attractions of going private, adding that Aabar was focused on long-term performance. He also expressed frustration with the current regulatory regime, however, which he said was "not mature". He said he was open to the idea of listing the company's shares again in several years when "we hope it will be much better than before".
Aabar's largest shareholder, the Government-owned International Petroleum Investment Company (IPIC), in June offered to buy out minority shareholders for Dh1.45 per share, the market price at the time. The company later raised the offer to Dh1.95 per share. After buying out most shareholders, IPIC now owns 86 per cent of Aabar. About 50 shareholders and other observers attended yesterday's meeting and several questioned why the company offered minority shareholders only Dh1.95 for their shares when Mr al Qubaisi said they were worth more than Dh4. He replied that the company agreed to the price in consultation with the Ministry of Economy.
When a shareholder asked whether Aabar's retreat from the Abu Dhabi bourse would discourage international investors and damage local equities markets, Mr al Qubaisi said the suggestion was "baseless". "The economic situation in Abu Dhabi is good. This does not affect Abu Dhabi or the country," he said. Companies going private "happens on a daily basis in the United States and Europe", he added. After the meeting several investors said they were holding on to shares in the hope of getting a better price for them in the months ahead. The company's registrar, the National Bank of Abu Dhabi, will co-ordinate future transactions between buyers and sellers of Aabar shares.
Ingmar Burgardt, a German banker, said he was at the meeting on behalf of several Aabar shareholders, including individuals and institutions. He said Aabar's choice to go private was "probably a logical thing for an investment company to do" because it would give the company more flexibility. But he also said Aabar's exit from the public markets was discouraging to international investors eyeing the UAE. "The fundamentals are very promising. The question is whether it is possible to even make money on the listed exchange," he said.