SMN Power Holding's initial public offering is attractive to risk-averse investors seeking exposure in Oman's profitable power sector.
The company, which is in a three-way joint venture between Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, International Power - mostly owned by GDF Suez - and Oman's National Trading, is the largest power company in Oman in terms of electricity capacity and generated output. Through its two units, SMN Barka and Rusail Power, it produces 1,333 megawatts, or 35 per cent, of the country's total capacity.
Demand for electricity and water in Oman has been growing 7 per cent annually in recent years, fuelled by population growth, increased investment in various tourism projects, along with the development of industrial hubs in the towns of Sohar, Sur and Duqam.
Gulf Baader Capital Markets initiated coverage on SMN Holding with a "fair value" of 3.877 Omani rials, compared with the current offer price of 3.520 rials per share.
"We believe that the issue would be a best fit for long-only funds and institutions as a dividend play," said Kanaga Sundar, the head of research at Gulf Baader Capital Markets.
Oman's stock market is largely illiquid. Value traded reached US$9.3 million on the Muscat exchange yesterday, compared with the Dubai Financial Market exchange at $17m and Abu Dhabi Securities Exchange at $13m.
The company plans to pay out dividends twice a year to shareholders, at the end of the September period and the end of March.
Its first dividend payment is expected to be released by the end of November, at 0.193 Omani rials a share. The second dividend at 0.250 baiza - a baiza representing one thousandth of a rial - would be paid at the end of March next year based on the company's retained earnings and cash position at the end of its fiscal year.
SMN announced on Sunday it was selling 35 per cent of its total share capital. The stock will be listed on the Muscat Securities Market by October 25.