By David French
Dubai's Emaar Properties has priced the initial share sale of its malls business at the top end of the proposed range, marking another milestone in the return of investor confidence in the Gulf Arab state after the financial crisis.
Shares in Emaar Malls Group (EMG) were allocated at 2.90 dirhams apiece following huge demand, giving an overall sale value of 5.8 billion dirhams ($1.6 billion) and making it the largest stock sale in the Gulf region since 2008.
After years of debt-fuelled expansion, Dubai was hit hard by the global financial crisis and needed a multi-billion dollar cash injection by neighboring emirate Abu Dhabi.
Several of its largest companies have since undergone painful restructurings, while a pick up in revenue from the core industries of travel and tourism - of which EMG's Dubai Mall is among the biggest draws - has helped to lure investors back.
With a market value of 37.7 billion dirhams upon listing, EMG will become the third-largest stock on the Dubai Financial Market when it begins trading on Oct. 2.
It is the biggest initial public offering (IPO) in the Gulf since Saudi Arabian Mining Co (Ma'aden) raised $2.47 billion from its debut on the Saudi stock exchange in July 2008.
It will also be the second stock listing on the Dubai bourse in just over a week, following a five-year hiatus, after Marka debuted on Sep. 25.
That IPO - albeit only worth 275 million dirhams - was hugely oversubscribed by investors as well, and the shares jumped 59 percent on its first trading day as pent-up demand pushed the price higher.
Analysts are expecting a positive reception for EMG too.
"Although the valuation looks a bit stretched, with strong demand from both retail and institutional investors I think the stock might get a good reaction," said Harshjit Oza, banking and property analyst at Naeem Brokerage in Cairo.
Naeem had estimated at the mid-point of the proposed price range that EMG would be valued at 28.5 times this year's forecast earnings. That would be above the parent company's multiple of about 25 times earnings and the wider stock market's 16, according to Reuters data.
Strong demand
Mohamed Alabbar, chairman of Emaar Properties, said the firm was delighted with the response from both professional and retail investors for EMG's IPO. Emaar is now locked-up for 180 days, meaning it can sell no more shares until the period ends.
Demand for EMG's offer had been expected to be high since a statement on the day after the announcement of the offer's 2.50 dirham to 2.90 dirham price range disclosed institutional investors had already pledged to buy all the shares on offer to them.
A message from the banks arranging the transaction said at the end of last week that bids from investors worth less than the top price would not obtain any shares.
In total, the portion of shares allocated to institutional investors was covered more than 30 times by orders from 470 accounts, while retail investors submitted orders worth over 20 times the amount of shares available to them, the filing said.
Of the offer of 2 billion shares, equivalent to 15.4 percent of EMG, 70 percent will go to institutional investors and the remaining 30 percent to retail accounts, it added.
"We have registered significant demand from ultra high net worth and institutional investors from across the region," said Patrick Delivanis, head of investment banking for the Middle East and North Africa at Morgan Stanley, one of the arrangers of the IPO.
There was also high interest from international real estate specialist funds, emerging market dedicated funds and international long-only asset management firms, he added.
Bank of America-Merrill Lynch, JP Morgan Chase and Morgan Stanley were joint global coordinators of the offer, and four other banks acted as joint bookrunners.
