Dubai Investments closes in on sale of two factories

Dubai Investments is considering the sale of two factories, which would boost the company’s cash pile to Dh1.6 billion.

Dubai Investments, with stakes in 40 companies, is close to selling two factories to foreign buyers for a total of Dh600 million.

The partial exits would boost the company’s cash pile to Dh1.6 billion, said Khalid bin Kalban, the chief executive, declining to name the businesses targeted for sale until the deals are signed.

“We will have a huge surplus on our balance sheet,” he said on the sidelines of an annual investor meeting at the company’s headquarters in Jebel Ali. “We are just negotiating now to finalise it.”

The conglomerate – whose manufacturing lines span drugs, food and construction materials – reported a 22 per cent boost in revenue to Dh2.8bn last year, and a doubling in net profit to Dh822m from Dh321m in 2012.

Shareholders at the meeting approved a proposal to raise the foreign ownership limit to 35 per cent from 20 per cent. Foreign shareholders hold less than 15 per cent of the company’s stock as of early this year.

“Definitely it will help the company and help the shareholders,” said Mr bin Kalban, adding that he saw the company as 50 per cent undervalued. “The investment banks understand the structure of Dubai Investments and they understand there is a huge hidden value in the company.”

The company’s shares on the Dubai Financial Market closed 1.86 per cent higher yesterday at Dh4.39.

The two trade sales are the only exits Dubai Investments has planned this year. It has put on hold any initial public offerings while it awaits a hoped-for change to local market regulations that currently require 55 per cent of a company to be traded publicly.

“It’s very difficult to build something for 18 years and then you sell 55 per cent of it,” said Mr Bin Kalban, “Even in Saudi Arabia you can sell 5 per cent of your company and two years later you can sell another five.”

The bulk of the company’s cash is invested in the property sector, including a planned Dh2.6bn in real estate development over the coming two years. It also owns land surrounding the Expo 2020 site and factories for construction materials such as glass.

“We feel that the Dubai economy will grow by almost 6 per cent and the UAE economy will grow over 7 per cent, and out of that definitely we feel that the growth will be mainly in two sectors, real estate and construction,” said Mr bin Kalban. “The construction projects have not really started yet but we believe in 2015 we will witness the start of the construction boom.”

Follow us on Twitter @Ind_Insights