Dubai’s Action Hotels joins London’s Aim market

The developer of budget hotels, in which the Kuwaiti ruling family member Sheikh Mubarak Al Abdullah holds a majority stake, raised £30.5 million (Dh183m).

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The Dubai-based Action Hotels joined the London Stock Exchange’s market for smaller companies on Monday.

The developer of budget hotels, in which the Kuwaiti ruling family member Sheikh Mubarak Al Abdullah holds a majority stake, is now the first Middle East company to list on the LSE’s Aim market.

Action, begun in Kuwait in 2005, raised £30.5 million (Dh183m), placing 47.6 million shares at 64 pence each.

The offering comprises 32 per cent of shares in the company, and values the company as a whole at £94.5m. The money raised would help to develop its pipeline, said Alain Debare, Action Hotels’ chief executive.

“Currently, 80 per cent of the revenues come from the Arabian Gulf and the rest from Australia,” Mr Debare said. The company’s key markets include the UAE and Saudi Arabia.

The average development cost of a mid-market room for Action Hotels is around US$130,000 per room, “which is substantially lower than luxury and upper scale segments”, Mr Debare said.

A subsidiary of the Kuwaiti conglomerate Action Group Holding Company, with interests in energy and property in the Middle East, Australia and Europe, Action Hotels became the first company from the sector in Middle East to list on the London Stock Exchange’s Aim.

Action Hotels’ gross profit touched $21.2m in 2012 and $11.6m in the first half of this year.

It has six properties, with two each in Kuwait and Oman and one each in Jordan and Australia, with a total of 1,004 rooms. Five of these operate under Accor’s Ibis Hotel brand and one under InterContinental Hotels Group’s Holiday Inn.

Two more hotels are expected to open in Sharjah and Bahrain by the end of next year, which will add 470 rooms.

The group also has a pipeline of six hotels that will add a further 1,032 rooms by 2016. These are in Dubai Health Care City, Abu Dhabi, Bahrain, Saudi Arabia, Oman and Australia, under brands such as the British budget hotel chain Premier Inn and InterContinental Hotels’ Staybridge Suites.

“There is a lot of demand in this undersupplied market,” Mr Debare said, referring to the mid-market hotel segment. “Expo 2020 will bring an additional focus to the region.”

Part of the attraction of the middle and economy hotel market in Arabian Gulf is that it reflects the underlying economy, which is faster growing than other markets such as Europe and North America, said Paul Hickman, a supervisory analyst at London-based Edison Investment Research.

“That economic activity will be reflected by major events such as Expo 2020 as well as other commercial events throughout the Middle East, which will clearly work to the benefit of hotel companies operating in the region, such as Action Hotels,” he said.

“We are positive on the company and we think the shares are attractively priced. Although the London market was extremely quiet [on Monday], the shares moved up 2 per cent from the initial price of 64 pence to [a closing price of] 65 pence, which therefore is directionally in line with what we expected, but leaves further to go.”