Emaar Properties says 2017 net profit was $1.55 billion. Karim Sahib / AFP
Emaar Properties says 2017 net profit was $1.55 billion. Karim Sahib / AFP

New IPO just another part of Emaar's success story



It’s almost exactly 20 years since chairman Mohamed Alabbar rolled out the first $3 billion Emaar Properties initial public offering (IPO), and I remember that landmark press conference very well.

Something remarkable was clearly in the wind. The Dubai stock market then did not even have a trading floor. Foreigners were not actually able to own property. I asked Mr Alabbar what it was all about.

‘We are going to make a huge amount of money for everybody involved,’ he cheerfully told me. ‘This is the future for Dubai, real estate.’

And so it has proved. Still around 30 per cent government owned, Emaar has been a fantastic success story as Dubai’s leading real estate developer. It’s also still having IPOs.

Stakes in Emaar Malls and Emaar Misr have been sold in IPOs. This Wednesday, the IPO for a 20 per cent stake in the Emaar Development division, the builder and developer based in Dubai, will close.

Of this $1.5 billion share issue, some 90 per cent has already been covered by institutional buyers leaving just 10 per cent for the public to buy.

I think the main problem for public buyers will be getting an allocation of stock. Oversubscription looks highly likely and so applications will be diluted. But the price of those shares you do get will likely perform well, if only due to all that excess demand.

For the mothership Emaar Properties, this IPO is all about reinforcing its balance sheet by obtaining a better valuation for its Emaar Development operation. Much of the money raised will be given back to shareholders in dividends in compensation for the asset being sold.

However, I doubt whether the result for the new IPO shareholders will be anything like as spectacular as it was in 1997.

Then you doubled your money in a week and if you could hold on for another 18 months your Dh1 share was worth Dh16, a better performance than bitcoin over the past year.

It was a rollercoaster ride back in those days for Emaar stockholders. When the oil price crashed in late 1999 those same shares slumped to under Dh2.

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They did not really take off again until late 2004. Then there was another huge price run up to Dh31 until another crash in 2006.

Newly minted Emaar Development shares will probably be a more volatile than its holding company Emaar Properties simply because it will not have the same balance of income from shopping malls, hotels and overseas projects.

However, brokers note that Emaar Development has profit margins in excess of 35 per cent and formidable borrowing power in global financial markets akin to Emirates Airline. It is also conservatively managed and has never overborrowed in the past, the usual achilles heel to any property development company.

Emaar Development also has a highly respected global brand, an excellent land bank, a broad spread of projects and outstanding off-plan sales. What is there not to like?

So really this is a pure play investment on the future of Dubai real estate. If you can’t afford a property in Dubai but want to invest now in this sector, this might well be the way to go.

I once bought Emaar shares in 2002 thinking they might take off again and that would eventually repay my mortgage. But I got bored with their non-performance by late 2004.

If only I had been more patient, I would have been able to pay off the whole mortgage just 18 months later as the shares went on to rise fifteen-fold.

Therefore if you do decide to go down this route, try to be a little more resilient than I was back then. Jumping in and out of stocks is not a very good idea. Having the right idea and sticking with it certainly can work, if you let it.

Personally I am quite bullish about the outlook for the Dubai Financial Market over the next few years. The index has never recovered to the highs of 2006 and valuations are less than half the lofty heights seen on Wall Street these days.

And yet the IMF expects GDP growth to triple to 3.4 per cent in the UAE next year and Brent Crude has passed $64 for the first time in two-and-a-half years. Tourism and aviation is also up thanks to the sharply lower US dollar. Dubai World Expo 2020 public spending is just getting going.

Emerging market stocks like those listed on the DFM look rare bargains in a world of over-priced assets, and Emaar Development is nicely positioned to leverage up on the Dubai recovery story.

Its newly appointed chief executive Chris O’Donnell is the man who once built the Palm Jumeirah for rival Nakheel.

Emaar Properties' shares fell 6.1 per cent last week following the Saudi anti-corrruption arrests which might prove an attractive entry point.

Then again global stock markets are overdue for a correction and when that happens even the blue chips like Emaar will be sold to raise cash in an emergency. That might be the better and classic buying opportunity.

Peter Cooper has been writing about finance in the Gulf for more than 20 years

Where can I submit a sample?

Volunteers can now submit DNA samples at a number of centres across Abu Dhabi. The programme is open to all ages.

Collection centres in Abu Dhabi include:

  • Abu Dhabi National Exhibition Centre (ADNEC)
  • Biogenix Labs in Masdar City
  • Al Towayya in Al Ain
  • NMC Royal Hospital in Khalifa City
  • Bareen International Hospital
  • NMC Specialty Hospital, Al Ain
  • NMC Royal Medical Centre - Abu Dhabi
  • NMC Royal Women’s Hospital.
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Why it pays to compare

A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.

Route 1: bank transfer

The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.

Total cost: Dh567.25 - around 2.9 per cent of the total amount

Total received: €4,670.30 

Route 2: online platform

The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.

Total cost: Dh74.10, around 0.4 per cent of the transaction

Total received: €4,756

The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.

The specs
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THE LIGHT

Director: Tom Tykwer

Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger

Rating: 3/5

Director: Laxman Utekar

Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna

Rating: 1/5

The specs

Engine: 2.3-litre, turbo four-cylinder

Transmission: 10-speed auto

Power: 300hp

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Other workplace saving schemes
  • The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
  • Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
  • National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
  • In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
  • Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
Profile of VoucherSkout

Date of launch: November 2016

Founder: David Tobias

Based: Jumeirah Lake Towers

Sector: Technology

Size: 18 employees

Stage: Embarking on a Series A round to raise $5 million in the first quarter of 2019 with a 20 per cent stake

Investors: Seed round was self-funded with “millions of dollars” 

SPECS

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Engine: 3.7-litre V6

Transmission: seven-speed automatic

Power: 363hp

Torque: 560Nm

Price: Dh184,500