Financial professionals expect more initial public offerings on UAE markets over the next few months, with buoyant conditions for capital markets activity extending into 2015.
The new optimism for IPOs – especially on the Dubai Financial Market – comes in the wake of successful market debuts for Marka, the upmarket retail business, and Emaar Malls Group, the owner of The Dubai Mall.
In a recent study, Ernst & Young, the international accounting firm, said: “Expect a rush for fourth quarter returns” in global capital-raising markets, adding that “investor confidence in the Middle East is returning, driven by improving economic conditions, better liquidity and higher valuations. This is being translated into more and higher IPOs.”
There have been more IPOs in the first nine months of 2014 compared to a year earlier, E&Y said, while the amount raised has surged by 53 per cent, to US$3.5 billion. “The most significant deal has been Emaar Malls,” the firm added.
Emaar Malls debuted successfully on the DFM last week, with its shares jumping 21 per cent on opening before easing back to close 12 per cent ahead at Dh3.25. The parent company, Emaar Properties, has said it is also going to float its hospitality business on the DFM within months.
One corporate lawyer, who did not want to be identified, said he was aware of nine IPOs being lined up for market between now and the end of next year’s first quarter.
He said the new enthusiasm among corporates to tap public markets reflected a greater flexibility by the regulators on the rules governing IPOs on the DFM, the renewed attraction of “greenfield” IPOs, and increasing foreign interest in UAE stocks. Emaar Malls attracted big interest from foreign institutions.
A greenfield listing is one in which the company has no trading track record or significant assets, with investors backing the business strategy and reputation of the founders.
Marka, which was heavily oversubscribed and leapt 59 per cent in first-day trading, was the first greenfield for many years, but it has since been followed by Amanat, a healthcare and education start-up run by Dubai-based private equity group Ithmar Capital.
Amanat plans to come to market this month in a flotation that will value it at Dh2.5bn, of which Dh1.375bn will be new money raised in the markets.
Meraas Holding, the property company owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, is also planning a DFM listing before the end of the year. It has hired big-hitting advisers like Goldman Sachs, HSBC and Emirates NBD to help complete a sale of up to 40 per debt of its as yet unbuilt parks and resorts business.
Al Habtoor, the family-owned conglomerate big in the property and automotive sectors, is considering plans to revive an IPO plan which could involve it being listed on the DFM early next year.
In the capital, there is also renewed interest in IPOs on the Abu Dhabi Securities Exchange (ADX). Rashed Al Baloushi, the ADX chief executive, said he expected two companies to come to market by the end of the year, with two more also in discussions about listings.
One of these is believed to be Gulf Capital, the private equity firm that earlier this year floated Gulf Marine Services on the London Stock Exchange. Gulf Capital executives are believed to be weighing options as to how much capital to sell down in a possible IPO.
In addition to these planned and potential IPOs, there is also the prospect of a groundbreaking privatisation by a Dubai government-owned company. Mohammed Al Shaibani, chief executive of the emirate’s flagship Investment Corporation of Dubai, said recently he could see the potential for IPOs in “one or two” government-owned subsidiaries.
E&Y said downside risks include geopolitical tensions in the region and the possibility of over-inflated valuations. “Many equity markets around the world are at their highest level since the financial crisis and some market watchers say the IPO boom has recently attracted less mature companies, particularly in hot sectors such as technology and health care,” it added.
fkane@thenational.ae
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