Investing institutions are weighing the value of the Emaar Malls Group (EMG) business following the announcement of the price range for UAE’s biggest initial public offering since 2007.
Emaar Properties, the owner of the malls business, set a range of Dh2.50 to Dh2.90 a share for the sale of two billion shares, representing 15.4 per cent of the shares.
Final pricing awaits the book- building process by institutional investors over the next two weeks, but at the top of that range Emaar would raise Dh5.8 billion, most of which it has pledged to return to its shareholders.
At mid-point in that range, the business is valued at Dh35.bn, Emaar said, rising to Dh38bn at the top.
There is no forward profit forecast in the prospectus published yesterday, sparking a debate among investment professionals about the valuation.
Mohamed Ali Yasin, the managing director of NBAD Securities, said: “By my calculations, at Dh2.9 that comes out to a price earnings (p/e)ratio of about 30 times, which is quite expensive. This is a company being sold at a premium. I think it will be a successful IPO, but the real test is how it trades after the first day.”
The p/e ratio of Emaar Properties itself, based on yesterday’s close, is 24.9.
Other analysts took a different view. Adel Merheb, the director of equity capital markets at Shuaa Capital, said: “We tend to look at other factors than p/e in this kind of valuation. Enterprise value and price compared to net asset value are just as important and those are pretty much in line with comparable international groups. The valuation is on the conservative side, not too steep.”
Tariq Qaqish, the head of asset management at Al Mal Capital, said: “It’s a bit on the high side but it’s a play on the most successful stories in the emirate of Dubai, which is tourism. The free cash flow yield and net asset value are just as important in assessing this.”
The first day of book-building was successful, according to one source close to the process who did not want to be named. “I heard this morning that the whole issue has already been covered 1.5 times,” he said.
Mr Yasin added: “I’m just waiting for the press release in a couple of days that says the whole thing has been covered easily.”
Interest from retail investors in the UAE has been growing. A source at the Dubai Financial Market, where the EMG shares will be listed on October 2, said there had been a spike in the past week in the number of people applying for a National Investor Number, which is mandatory for application for EMG shares.
The prospectus revealed high margins at the malls business in the first half of 2014, with profits of Dh617 million on revenue of Dh1.25bn in the period to June. More than 80 per cent of that revenue came from The Dubai Mall.
fkane@thenational.ae
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Ruwais timeline
1971 Abu Dhabi National Oil Company established
1980 Ruwais Housing Complex built, located 10 kilometres away from industrial plants
1982 120,000 bpd capacity Ruwais refinery complex officially inaugurated by the founder of the UAE Sheikh Zayed
1984 Second phase of Ruwais Housing Complex built. Today the 7,000-unit complex houses some 24,000 people.
1985 The refinery is expanded with the commissioning of a 27,000 b/d hydro cracker complex
2009 Plans announced to build $1.2 billion fertilizer plant in Ruwais, producing urea
2010 Adnoc awards $10bn contracts for expansion of Ruwais refinery, to double capacity from 415,000 bpd
2014 Ruwais 261-outlet shopping mall opens
2014 Production starts at newly expanded Ruwais refinery, providing jet fuel and diesel and allowing the UAE to be self-sufficient for petrol supplies
2014 Etihad Rail begins transportation of sulphur from Shah and Habshan to Ruwais for export
2017 Aldar Academies to operate Adnoc’s schools including in Ruwais from September. Eight schools operate in total within the housing complex.
2018 Adnoc announces plans to invest $3.1 billion on upgrading its Ruwais refinery
2018 NMC Healthcare selected to manage operations of Ruwais Hospital
2018 Adnoc announces new downstream strategy at event in Abu Dhabi on May 13
Source: The National
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