Stampede for $10 billion Emaar malls unit listing at DFM

Emaar is likely to price the flotation of its mall unit at Dh2.90 a share on the Dubai Financial Market. Kamran Jebreili / AP Photo

The upcoming listing of Emaar Properties' malls unit is attracting high demand from both retail and institutional investors with the business, which includes The Dubai Mall, likely to be valued at more than US$10 billion, at the high end of estimates.

Emirates NBD, one of the lead banks for the IPO, said yesterday that it had received more than 50 per cent of its retail subscriptions via the banks' ATM and online banking channels – the first time digital services have been used for an IPO – with sources indicating that the value of the 5,600 applications received by the bank in total was around Dh1.5bn. Dubai's largest listed developer is likely to price the flotation at Dh2.90 a share, the top of its range, two sources familiar with the matter said, according to Reuters.

The price would give the unit a value of Dh37.7bn, one of the sources said.

Strong demand has resulted in the institutional tranche being subscribed at 7.5 times at the top end of the Dh2.50-2.90 range, while the retail tranche is subscribed 20 times, two further sources said.

The final price will probably be set on Monday and the shares will list on the Dubai Financial Market on October 2.

Individual investors can together buy as much as 30 per cent of the shares in the initial public offering of Emaar Malls Group, with the rest earmarked for institutions. Demand for the UAE’s biggest IPO since 2007 is high: Emaar received orders for all the stock allocated to institutional investors two days after the sale began.

The company plans to sell 15 per cent of equity and is seeking as much as $1.58bn from the IPO on the second-best performing bourse this year, after the benchmark DFM General Index climbed 52 per cent. The emirate has not attracted such a large turnout by individual investors since before the local stock market fell 72 per cent in 2008.

After seeing a newspaper ad for the share sale, Haidar Al Hadrani jumped in his car and drove the 120 kilometres from Abu Dhabi to Dubai to register as an investor at the stock exchange.

“I have never invested before,” Mr Al Hadrani, a 28-year-old engineer, told Bloomberg News as he filled in application forms at the DFM. “Everybody worries about losing money, but as long as I don’t invest too much I am not worried about it.”

Mr Al Hadrani and hundreds like him queued for hours at the DFM to register as investors and apply for stock.

“For the first two or three days, there were long queues at the exchange to get National Investor Numbers so they could subscribe to the IPO,” Nayal Khan, the head of institutional sales and trading at Naeem Holding brokerage in Dubai, told Bloomberg News. “It reminds me of 2006.”

Investor appetite for Dubai was near its peak at that time in anticipation of a wave of IPOs by Dubai-based companies. The bonanza of share sales failed to materialise after some high- profile IPOs misfired and the financial crisis brought the emirate close to default within three years.

The ports operator DP World raised $4.96bn from investors in 2007 in a share sale that was 15 times oversubscribed. The stock tumbled after trading started, prompting the company to consolidate its shares in 2011. Depa, which fits out building interiors, slumped 61 per cent since selling stock on Nasdaq Dubai in 2008.

Those experiences, coupled with the financial crisis, led to a decline in trading that deterred companies from holding IPOs. Now with the economy accelerating, Dubai companies are once again planning share sales to take advantage of renewed investor appetite.

“This seems like a good opportunity to start getting into the market,” said Rashid Mohammed, a 26-year old graduate who said he was registering to invest for the first time. “Emaar is a big company and everyone knows Dubai Mall. I have a little money and maybe I can make a lot more.”

Trading reached 12 billion shares in July, up from 1.4 billion in July 2010, as Dubai recovered from a slump in real estate prices and as government-controlled companies restructured billions of dollars of debt. The DFM was the best-performing market in the world last year, when the UAE's exchanges were upgraded to emerging market status by the index provider MSCI.

Individual investors are being feted by banks with overdrafts and the option of subscribing through automated teller machines. Mashreq, Dubai’s third-largest lender, is offering account holders loans of about $2,700 to order stock.

While Mr Al Hadrani is investing for the first time, the boom and prospect of gains once trading stats is also drawing more experienced hands back to the fray. Since Emaar began the offer period for the IPO of its malls unit, 2,868 new investors registered with the exchange, the DFM told Bloomberg News, while 1,912 updated their accounts.

Some analysts say individual investors are relying too much on sentiment and not putting enough analysis into stocks.

“Retail investors don’t analyse companies,” Naeem’s Mr Khan said. “All they see here is Emaar, the jewel in Dubai’s crown, so why not invest since there is all that euphoria around this offering?”

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