Emaar announces indicative price range for malls unit IPO

Final pricing awaits the book- building process by institutional investors over the next two weeks, but at the top of that range Emaar would raise Dh5.8 billion.

Emaar is freeing a minimum of 15 per cent in Emaar Malls Group for public offering. Jeff Topping / The National
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Investing institutions are weighing the value of the Emaar Malls Group (EMG) business following the announcement of the price range for UAE’s biggest initial public offering since 2007.

Emaar Properties, the owner of the malls business, set a range of Dh2.50 to Dh2.90 a share for the sale of two billion shares, representing 15.4 per cent of the shares.

Final pricing awaits the book- building process by institutional investors over the next two weeks, but at the top of that range Emaar would raise Dh5.8 billion, most of which it has pledged to return to its shareholders.

At mid-point in that range, the business is valued at Dh35.bn, Emaar said, rising to Dh38bn at the top.

There is no forward profit forecast in the prospectus published yesterday, sparking a debate among investment professionals about the valuation.

Mohamed Ali Yasin, the managing director of NBAD Securities, said: “By my calculations, at Dh2.9 that comes out to a price earnings (p/e)ratio of about 30 times, which is quite expensive. This is a company being sold at a premium. I think it will be a successful IPO, but the real test is how it trades after the first day.”

The p/e ratio of Emaar Properties itself, based on yesterday’s close, is 24.9.

Other analysts took a different view. Adel Merheb, the director of equity capital markets at Shuaa Capital, said: “We tend to look at other factors than p/e in this kind of valuation. Enterprise value and price compared to net asset value are just as important and those are pretty much in line with comparable international groups. The valuation is on the conservative side, not too steep.”

Tariq Qaqish, the head of asset management at Al Mal Capital, said: “It’s a bit on the high side but it’s a play on the most successful stories in the emirate of Dubai, which is tourism. The free cash flow yield and net asset value are just as important in assessing this.”

The first day of book-building was successful, according to one source close to the process who did not want to be named. “I heard this morning that the whole issue has already been covered 1.5 times,” he said.

Mr Yasin added: “I’m just waiting for the press release in a couple of days that says the whole thing has been covered easily.”

Interest from retail investors in the UAE has been growing. A source at the Dubai Financial Market, where the EMG shares will be listed on October 2, said there had been a spike in the past week in the number of people applying for a National Investor Number, which is mandatory for application for EMG shares.

The prospectus revealed high margins at the malls business in the first half of 2014, with profits of Dh617 million on revenue of Dh1.25bn in the period to June. More than 80 per cent of that revenue came from The Dubai Mall.


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