Emaar Development's $1.5 Billion Dubai IPO Fully Subscribed

Updated on
  • Company offering 800 million shares at 5.7-6.9 dirhams each
  • Sale would be biggest since IPO of Emaar Malls in 2014

An Emaar Properties sign near the Burj Khalifa tower in Dubai, United Arab Emirates

Photographer: Chris Ratcliffe

Emaar Properties PJSC’s $1.5 billion initial public offering of its United Arab Emirates development business received bids for the entire amount within half a day of the issue’s opening.

The developer of the world’s tallest skyscraper is offering 800 million shares in Emaar Development PJSC at a price range of between 5.7 dirhams ($1.55) and 6.9 dirhams per share, the Dubai-based company said in a statement to the bourse on Thursday. The books are fully covered by institutional investors’ bids, according to terms obtained by Bloomberg. The offering opened on Thursday, with about 10 percent of the shares available to retail investors and 90 percent to institutions.

The sale would be the largest since Emaar Malls PJSC’s $1.6 billion offering in 2014, according to data compiled by Bloomberg. It’s part of Emaar’s plan to list subsidiaries to help boost the value of the parent, which spearheaded a building boom in Dubai after foreigners were allowed to own properties in some parts of the emirate in 2002. Emaar, Emaar Malls and the company’s units in Saudi Arabia and Egypt are already listed.

“The market perception is that Emaar Development’s portfolio is much better than others in the U.A.E., and so is their reach and branding,” said Ankit Gupta, an analyst at Dubai-based Shuaa Capital PSC. “In the short-term, it’s positioning itself as a dividend play, which will be higher than many of its peers, including Damac.”

Premium

The high-end of the offer price represents a premium of as much as 15 percent to the company’s net asset value and the lower end a 5 percent discount, according to Bloomberg calculations. Emaar said Oct. 22 the unit had a net asset value at 24.1 billion dirhams at the end of September, or 6.025 dirhams a share. Competitor Damac Properties Dubai Co. PJSC trades at a 15 premium to net asset value, according to Bloomberg calculations.

Emaar is selling 20 percent in the unit, which expects to pay at least $1.7 billion in dividends over the next three years in about equal installments. That would imply a dividend yield of at least 7.5 percent at the top end of the price range. Damac trades at an indicated dividend yield of 6.4 percent, according to data compiled by Bloomberg.

The IPO is an “opportunity to invest in the future of Dubai as we continue to build iconic freehold master-planned communities,” Emaar Chairman Mohamed Alabbar said in the statement. Emaar Development has a clear growth strategy, projects in premium locations, “underpinned by Dubai’s transformation from regional to global destination,” he said.

Better than Peers

The offering to retail investors closes Nov. 13 and to qualified investors on Nov. 15, with the shares to be listed on the Dubai Financial Market on Nov. 22. The final offer price is expected on Nov. 16 after a book building process.

“I would be very comfortable investing at the lower end of the range, but it becomes challenging if there is a lot of premium to the development portfolio,” Shuaa’s Gupta said. “A premium of about 5 percent to net asset value would be appropriate because you have to leave some value on the table for investors as well.”

Bank of America Merrill Lynch, EFG Hermes U.A.E. Ltd., Emirates NBD Capital PSC, First Abu Dhabi Bank PJSC and Goldman Sachs Group Inc. are acting as the joint global coordinators for the offering, while Emirates NBD PJSC and FAB will be the lead receiving banks. Rothschild is the financial adviser.

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