Dubai's Emaar looks to raise $1.58 billion from malls unit's IPO

September 14
10:23 PM 2014

Dubai's Emaar Properties is seeking to raise as much as 5.8 billion dirhams ($1.58 billion) from an initial public offer of shares in its shopping malls unit that is expected to be the Gulf's biggest stock sale since 2008.

The planned listing of Emaar Malls Group (EMG) underlines Dubai's recovery from its financial crisis, which erupted in 2009, and is expected to pave the way for other companies to list on the emirate's stock markets after a drought of IPOs.

"I believe we are going to see very significant demand for Emaar Malls' IPO, especially since the market has been in a drought for more than six years which made investors very thirsty for new IPOs," said Samer Mardini, Dubai-based vice president for fixed income at SJS Markets.

Emaar, the emirate's largest real estate developer, expects to sell 2 billion shares in EMG, representing 15.4 percent of the unit's share capital, in a price range of 2.50 to 2.90 dirhams per share, it said on Sunday.

The share sale starts on Sunday and will end on Sept. 24 for retail investors and on Sept. 26 for institutional investors; Emaar has said it aims to allocate at least 60 percent of the offer to institutions and no more than 40 percent to retail investors. EMG shares will then list on the Dubai Financial Market on Oct. 2.

At the mid-point of that range, EMG's market capitalization upon listing its shares would be approximately 35.1 billion dirhams, said Emaar, builder of the world's tallest skyscraper, Burj Khalifa.

Brokerage firm Naeem Holding said the price range suggested EMG's valuation in the offer would be "a bit stretched". It estimated that at the mid-point of the range, EMG would have a price-to-earnings ratio based on this year's earnings of 28.5 times. That would be above the parent firm's roughly 25 times and the broader market's 16, according to Thomson Reuters data.

Nevertheless, investors' belief in the long-term growth of Dubai's retail sector may mean there is no shortage of demand for the offer.

Dubai's government owns about 30 percent of Emaar Properties, which plans to pay a special dividend related to the IPO of around 9 billion dirhams to its shareholders: 5.3 billion dirhams from the IPO proceeds and 3.7 billion dirhams from a dividend already paid by EMG to its parent.


Emaar Properties shifted its focus beyond housing to the more profitable retail and hospitality business after the 2009 financial crisis resulted in the collapse of the real estate market. The retail sector has benefited from a strong rebound in the emirate's economy on the back of a tourism and trade boom.

All of EMG's assets are in Dubai with the largest being Dubai Mall, one of the world's largest shopping malls, which the company claims sells approximately 50 percent of all luxury goods sold in the emirate.

About 82 percent of the company's rental income in the first six months of 2014 came from Dubai Mall, the prospectus said.

"Basically it's a play on Dubai Mall which has extremely high margins, and on Dubai which has also been very successful recently," said Sachin Mohindra, senior vice president and portfolio manager at Abu Dhabi-based investment firm InvestAD.

"The debate now is how much more premium we can assign to this stock."

EMG made a profit of 617.2 million dirhams in the first half of 2014, up from 498 million dirhams a year earlier. Revenue in the six months to June 30 was 1.25 billion dirhams, compared to 1.11 billion dirhams a year ago.

The company said the fair value of its assets had tripled to 39.79 billion dirhams at June 2014 from 13.45 billion dirhams in December 2011.

Dubai retailing and restaurants group Marka has announced plans to list its shares on the DFM on Sept. 25, in that market's first flotation for five years. More IPOs are believed to be in the pipeline.

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