Damac Properties, the upmarket Dubai developer, could have a market valuation of more than US$3 billion when its lists its shares on the London Stock Exchange in the next couple of months, higher than market estimates so far.
A source familiar with the preparations for an initial public offering said that the valuation process was at an early stage, and several factors could ultimately decide the eventual price at which the company’s shares would list.
But between $3bn and $4bn was a realistic assessment of Damac’s worth, the source said.
Damac is believed to have retained the investment banks Deutsche Bank and Citibank as principle advisers and book-runners on the IPO process, but the formal announcement of an “intention to float” (ITF) document was a few weeks away, the source added.
Neither Damac nor the banks would comment on any aspect of the IPO. Spokesmen have previously stuck to the line that Damac was considering “all future growth possibilities” with regard to any possible flotation or other financial plans.
Confirmation that the listing will be in London will end dwindling hopes within the UAE financial community that Damac might be persuaded to go for local markets, rather than London.
Several other UAE private companies – including the health groups Al Noor and NMC – have recently chosen London over the UAE, and at least one more – the oil equipment group Gulf Marine Services – is believed to be planning a London listing.
Financial professionals say private companies in the region are deterred from local listings by UAE company law on IPOs and perceived illiquidity in local markets.
A price of up to $4bn would make Damac the biggest IPO ever by a UAE company. DP World is the biggest UAE company on the London exchange, with a value of nearly $13bn, but it listed first on the Nasdaq Dubai exchange in 2007.
Damac made a name for itself as a developer of top-end property in the heyday of Dubai’s boom, before the global financial crisis hit the regional property market. Under the founder and chairman Hussain Sajwani, the company came through the property downturn that wiped as much as 60 per cent off prices in the Emirates and the region.
With Dubai property prices recovering over the past year, Damac has announced a string of high-value projects this year. It has 37 completed buildings across the Middle East region and another 66 are under construction, including a $1bn development in Dubai in partnership with the US leisure group Paramount.
Yesterday it announced a Dh1.35bn luxury residential project in the Downtown district, called “Privé by Damac”. The 30-storey development is due to be completed in 2016.
“As prices continue to rise in Dubai, it is a great time for investors looking for healthy returns – luxury serviced living is proving time and again to be the driving force of the real estate market,” said the managing director Ziad El Chaar.
Although London will be the venue for the IPO, advisers are hoping to tap into the company’s reputation in the GCC region. Further advisers could be retained to help stimulate investor appetite for the shares in the UAE and Saudi Arabia, where Damac also has developments.
Property developers are regarded as difficult to value by financial professionals. Factors such as land bank values and volatile earnings streams make the valuation process uncertain.
Potential investors will hope to see details of assets, sales, and profits in the ITF document. As a private company, Damac has never published any financial details.
The company has cleared a potential hurdle to an IPO with the resolution of disputes with the Egyptian authorities relating to deals done under the presidency of since-deposed Hosni Mubarak.