Developer Eshraq considers first UAE IPO in two years

Abu Dhabi property firm may offer as much as 55 per cent of the company to the public as analysts warn investors are likely to be sceptical.

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The Abu Dhabi developer Eshraq may become the first UAE company in nearly two years to test the market with an initial public offering (IPO).

Eshraq is reportedly planning to offer up to 55 per cent of the company in public shares as early as next month, a source familiar with the deal confirmed.

Any IPO in the UAE is likely to face sceptical investors, analysts say. The telecommunications retailer Axiom cancelled an announced offering last month, citing "market conditions and liquidity" concerns.

Chet Riley, an analyst with Nomura Securities. said: "In this market, for a UAE company without a strong prospectus and a growth story, it is going to be quite difficult. It will be pretty tough in this market to get away with a property IPO."

Eshraq lists three projects in the early stages of development: Marina Rise, a cluster of residential and office towers on Reem Island, first announced in 2007; a mixed-use project called Gateway between Al Maqta and Zayed bridges in Abu Dhabi; and Jumeirah Rise in Dubai.

Company executives did not return calls seeking comment.

Analysts feel investors will be wary of a property company without completed projects and established revenue. "Any IPO related to real estate would have to be offered at a significant discount" to the book value of the company, said Majed Azzam, an analyst with Alembic HC Securities.

The failed Axiom offering illustrated that it is "still early for UAE companies to go public", Mr Azzam said. "There is still a lot of uncertainty here."

Property was the "least preferred sector" among investors, he said. The established Abu Dhabi property companies Aldar and Sorouh Real Estate have been struggling recently. Aldar, the capital's largest developer, posted a Dh731 million (US$199m) loss in the third quarter last year and is working to restructure more than Dh10 billion of debt.

Public markets around the world have shown little interest in property stocks in the past year. In September, Emaar MGF, the Indian branch of the Dubai property company Emaar, put an announced IPO on hold.

Amer Group Holding, an Egyptian property company, raised $200m through an IPO in November, the most recent attempt by a regional property company to raise funds through a public offering. The stock was trading at 2.84 Egyptian pounds yesterday, compared with a high of 2.89 pounds on November 30, after its launch.

"Egypt is a different story," Mr Azzam said. "The demand story [in Egypt] is very clear." Eshraq executives have publicly discussed a possible IPO since 2009. Sulaiman Mohammed al Dhalaan, its general manager, said during a Cityscape conference in 2009 that the company has a "strong desire" to become a public joint stock company.

"We were about to do it last year and almost finalised the shift procedures, but circumstances of the global financial crisis affected us. Now circumstances are improving, and we might shift into a public joint stock company next year," Mr al Dhalaan said at the time.

Saleh bin Nasrah, the company's chairman, said in an interview with the Arabic newspaper Al Bayan this week that Eshraq planned to offer 820 million shares and that the National Bank of Abu Dhabi (NBAD) would lead the offering.

NBAD officials declined to comment. "We don't have any comment until the Emirates Securities and Commodities Authority has given final approval for the timing for an IPO," a spokesman at NBAD said.