Emaar market cap jumps nearly Dh3bn on plan to sell retail unit

Among Emaar's mall assets include the Dubai Mall, above. Sarah Dea / The National

The value of Emaar Properties jumped by almost Dh3 billion yesterday as investors scrambled to be part of the sale of its retail unit, which includes The Dubai Mall.

A share-buying frenzy boosted Emaar’s market capitalisation to Dh59.23 billion.

Investors yesterday rushed to buy holdings in the developer that owns one of the biggest shopping malls in the world, sending the stock to a six-month high, after it announced intentions to spin off its retail unit. It also proposed a 15 per cent dividend as well as 10 per cent bonus shares.

“What I like in this business is [that it is] exactly what local and international investors want,” said Sebastien Henin, the head of asset management at The National Investor, an Abu Dhabi-based boutique investment bank. “People are ready to die to have access to the retail sector in Dubai due to the fact that this area has strong visibility and growth is exceptional.”

Emaar surged 5 per cent to close at Dh9.10 a share on the Dubai Financial Market, one of the emirate's two stock markets.

More than 46 million shares changed hands yesterday to a value of Dh421 million. That compares to a 15-day moving average of 21.68 million shares. Emaar, regarded a blue-chip among institutional investors, is a candidate for inclusion into MSCI's Emerging Markets Index when UAE shares are incorporated in May.

On Saturday, the developer revealed plans to sell down up to 25 per cent of its retail business in a secondary offering at a value of up to $2.45bn.

A secondary offering is the sale of new stock from a company that has already gone public.

Existing shareholders would be expected to be given priority for allocations, analysts said.

The company said it planned to make use of the funds generated from the public to reward shareholders as dividend distributions.

Mr Henin said there is a real possibility that some of the cash generated will also be used as a cushion for its developments scheduled in the coming quarters, such as projects planned for Dubai Expo 2020.

“It should unlock some value for shareholders and investors will be able to assess each business line separately,” Mr Henin said. “On the one hand there’s the pure real estate line and the other is the recurring income that comes from the malls and the hotels.”

While the move has been welcomed by investors, it has also fuelled speculation over how the transaction will take place in light of the current legal framework.

“So far, the current law and regulation does not allow a sell-down to go public – unless it’s been exempted from current law, ” said Majd Maaiteh, the head of securities at National Bank of Abu Dhabi.

The current framework does not allow for companies listed on the DFM to sell less than 55 per cent to the public, he said. “The other scenario is that the current companies law is subject to being amended that will allow companies to go public by selling down 30 per cent of their capital - but we don’t know when that will be implemented.”

Otherwise, Emaar will have to seek a global depositary receipt on international markets, such as in London or on the Nasdaq Dubai exchange, he added.

If 25 per cent of the company is valued at Dh8bn to Dh9bn, that makes the value of the total retail unit about Dh36bn, and its price to earnings ratio at 16 times, Mr Maaiteh said.

Also, once the company is listed, it will no longer be completely under Emaar’s book and would affect dividends to shareholders and the valuation of Emaar going forward, he said.

“All these things need to be carefully addressed,” Mr Maaiteh added.

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