Emaar Malls Group’s executives and its investment bank advisers will today decide the next crucial issue in the UAE’s most eagerly awaited initial public offering in seven years: at what price to sell shares in the Dubai Mall operator?
Applications from global institutional investors closed on Friday, completing the book-building process that will set the final price. Retail investors’ applications – accounting for 30 per cent of the IPO – had closed 48 hours earlier.
With demand said to be strong from both classes of investors, EMG must decide whether or not set the price at the top of the Dh2.5 to Dh2.9 per share range indicated a fortnight ago. The shares are due to be listed on the Dubai Financial Market on Thursday.
People close to the process, who did not wish to be named, said there was still a debate about the matter, although the balance of opinion was to go at Dh2.9, which would value EMG at nearly Dh38 billion, and the tranche to be sold to investors at Dh5.8bn.
Most of the proceeds have been promised to shareholders of the holding company, Emaar Properties, which will retain 85 per cent after the IPO.
Investment bankers were said to be meeting in London – where many of them are based – considering the final price, ahead of a formal announcement tomorrow.
“There is a strong feeling that the range was quite conservative, and demand has been so strong we feel justified in going for that,” said one adviser.
The company was unable to confirm final application levels, but one source, who again asked not to be named, said that the institutional element of the offer had attracted about 7.5 times the number of shares on offer towards the top of the range, while retail investors’ interest was 20 times the available shares.
Another executive said: "Emaar has proved the attraction of the malls business with those levels of subscription, there is no need to go for the maximum. It would be better for the whole market to avoid another DP World."
DP World, the Dubai-based ports operator, sold shares on another Dubai market in December 2007 at a price that it has been unable to meet since, despite a comeback from the depths of the market crash after the global financial crisis of 2009.
Mohammed Ali Yasin, managing director at NBAD Securities, said: “I’m sure they have many more than enough orders to do it at Dh2.90, but investors will be watching the price closely. It might be better for the after-market if it were priced at say Dh2.75.”
Most investment analysts are convinced the IPO will be a success, at whatever price. Mohammad Kamal of Arqaam Capital said: ”The business has exceptional cash generation and strong fundamentals coupled with growth potential. It is a proxy play on Dubai growth, an exceptionally cash-rich mall operator strategically exposed to strengthening retail fundamentals.”
He added that if the shares were priced at the top of the range, there would still be upside for investors: Arqaam’s “fair value estimate” of the stock is Dh3.14.
Another broker, Mubasher, put a fair value of Dh2.65 on the share, but conceded its forecasts did not take into account a planned 800,000 square feet addition to EMG’s potential retail space, mainly in Fashion Avenue in the Dubai Mall, which attracted 75 million customers last year.
“Given the hype about this long-awaited IPO and its relatively large size and with apparently huge demand from institutions, we could see the stock price jump upon its debut before stabilising,” a research note from the broker added.
fkane@thenational.ae
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