Massar confident Dh576m IPO is good value despite market volatility

The offering, for which the subscription period opens on January 11, will be offered only to Emirati citizens and institutions.

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Executives at Massar Solutions are confident its Dh576 million initial public offering will deliver value for shareholders despite volatility in regional stock markets.

Paul Greenwood, chief executive of the fleet management and vehicle rental group, formerly known as Al Wathba, said the company had taken a “conservative approach” to valuation in the run-up to its market listing. “This is a real tangible business, with a 15-year track record and real profits. It is not a paper tiger.”

He was speaking as Massar announced details of the planned IPO, which will be the first on the Abu Dhabi Securities Exchange in the recent wave of offerings on UAE stock markets.

About 40 per cent of the company will be sold by Massar's two shareholders – energy group Taqa and investment firm Invest AD – in an IPO that would value the company at Dh1.44bn,

The offering, for which the subscription period opens on January 11, will be open to Emirati citizens and institutions only. Approximately 240 million shares will be sold at Dh2.40 each, valuing the 40 per cent stake at Dh576m. Emirati retail investors will be eligible to subscribe to one fifth of the total on offer, with the balance reserved for national investing institutions.

Mr Greenwood explained that advisers Ernst & Young had valued the company in the range Dh1.5 billion to Dh1.7bn, but the company had decided to price the offer below the minimum “in order to ensure there is some upside left for investors”.

He added: “Our roots lie in Abu Dhabi, and the shareholders want to share the success of the company with all Emirati citizens. It is an exercise in wealth redistribution.”

The IPO terms have been specially approved by the UAE regulator, the Securities and Commodities Authority, because they go beyond the standard structure for a UAE offering.

The Dh2.40 per share rating was decided before recent market volatility on UAE markets related to the sharp drop in the price of oil.

“We did the exercise before the markets entered the recent tricky phase. Back then, the market as a whole was trading on a rating of 15 times earnings, and we priced it at 10 times. Now the market is at 10 times, but we think it represents very good value,” Mr Greenwood said.

Massar has been trading in the UAE as Al Wathba since 1999, from its origins as the fleet management business for the Abu Dhabi Water and Electricity Authority. It has recently diversified into car rentals, vehicle tracking and logistics, with about 450 customers.

Its biggest client now is BRF, the Brazilian food processing group known for its Sadia poultry range, which recently opened a $180m facility in Khalifa Industrial Zone Abu Dhabi. Massar has the contract for distribution of BRF products throughout the region.

Financials released with the IPO document show profits rising from Dh93.9m in 2011 to Dh129.4m in 2013.

For the first nine months of 2014, Massar made Dh64.9m. Mr Greenwood said the apparent slowdown in the rate of growth was due to one-off factors, including a delay in construction projects in the Western Region, where Massar was supplying vehicles, and provisions for businesses the group has since exited.

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