Drake and Scull lists on DFM

Drake and Scull, one of the largest building contractors in the country, is due to list on the Dubai Financial Market today. It will be the first listing on the DFM this year. Drake and Scull sold 55 per cent of its shares in July in its initial public offering (IPO), raising an overall Dh1.2 billion (US$326.7 million). The stock, at Dh1 each plus an offering cost of Dh0.02 per share, attracted 45,600 investors, and was 101 times oversubscribed.

The company was incorporated in November, but the listing has been delayed for regulatory and other reasons. The typical time between an IPO in the UAE and the actual listing is about three months. Yesterday the company was busy trying to talk up the market. "We are seeing 20 per cent to 25 per cent revenue [this year] and net profit growth," Khaldoun Tabari, the vice chairman and chief executive, told investors.

Mohammed Ali Yasin, the managing director at Shuaa Securities, said: "Usually a stock would not be trading at below par on its opening day, but after seven months you cannot assume that still holds true." The listing comes as Dubai's construction industry and financial markets have been hit by the global downturn, which has pushed the index 6.7 per cent lower so far this year. The construction industry is suffering from project cancellations and many developers have laid off staff.

"We hope for a good day," said Mr Tabari. Brokers are expecting the stock to open trading at between Dh0.75 and Dh0.85, the price range of Drake and Scull shares in over-the-counter (OTC) trading, or the so-called grey market. "Trading below par is no longer a reason to be ashamed," said Mr Yasin. "There are lots of stocks that even listed five or six years ago that trade at below par." The contractor is looking for growth elsewhere in the Middle East and shifting its focus away from high-rise construction in the face of a dearth of new building work in Dubai.

"I do not see another 100,000 or 200,000 new occupants in these buildings here in Dubai," said Mr Tabari, adding that the "Dubai high-rise building revenue stream would go down". He said the company had been hit by construction delays, but there had been no cancellations. Drake and Scull is seeking to acquire four companies in Saudi Arabia, Kuwait and Qatar by the third quarter. Mr Tabari said the company expected to spend up to Dh500m on the acquisitions.

As the latest sign of its expansion into GCC countries, Mr Tabari said it has signed a Dh600m, five-year contract for a district-cooling contract of the Durrat Al Bahrain project, the biggest mixed-use development being built in Bahrain. About 60 per cent of the company's revenues this year are already covered by projects in the pipeline. The company, which has provided the mechanical, electrical, cooling and plumbing work for buildings such as Jumeirah Beach Residences, started to venture into infrastructure, water and power (IWP) in 2006. "Going forward, I see infrastructure, water and power to contribute 70 per cent of our business in the UAE," Mr Tabari said. The company also expects more work on IWP in GCC countries and elsewhere in the Middle East.