x Abu Dhabi, UAEThursday 18 January 2018

CAPM Investments advising on IPO as UAE market conditions improve

CAPM Investments is back in business, advising a company in the food and beverages sector on an initial public offering, say sources.

UAE stocks have rallied strongly with the Dubai bourse, above, surging 77.3 per cent this year to date. Sarah Dea / The National
UAE stocks have rallied strongly with the Dubai bourse, above, surging 77.3 per cent this year to date. Sarah Dea / The National

CAPM Investments is advising on an initial public offering, its first deal since the Abu Dhabi-based investment company was acquired by Finance House last year.

The transaction was awaiting regulatory approval by the markets regulator, the Securities and Commodities Authority (SCA), sources familiar with the deal said. It is understood that the company it was advising would be involved in the food and beverages sector.

Mahdi Mattar, the chief executive of CAPM, declined to comment on the IPO mandate yesterday, but said he was “seeing a revival of entities expressing interest in going public”.

CAPM’s previous shareholders decided to wind down their holdings in March last year after the Arab Spring put pressure on the UAE’s equity markets that were already experiencing lacklustre trading and an absence of investor appetite. They sold the licence to Finance House in a deal that would place a 10 per cent premium over CAPM’s cash value.

CAPM had two units – Asayel Shares & Bonds Trading and Ithmar Invest – in brokerage and investment banking respectively. Neither were carried over into the new CAPM following its acquisition by Finance House.

“What happened to CAPM was a function of the market,” Mr Mattar said, who was head of research under the previous CAPM entity.

Shares listed on the Abu Dhabi Securities Exchange and Dubai Financial Market have rallied this year, reversing recent years’ losses amid a recovery in the banking and property sectors.

The FTSE Nasdaq Dubai UAE 20 Index has surged 57.2 per cent year to date. The DFM General Index has rallied 77.3 per cent this year, while the ADX General Index has risen 43.2 per cent over the same period.

After the establishment of Dubai’s financial free zone, western lenders flocked to the emirate to capitalise on a flurry of deals such as taking companies public and advising on sovereign fund mandates. But the global financial crisis cut access to credit in the emirate, triggering a major sell-off across Dubai’s banking and property sectors.

From 2005 to 2011, the emirate’s index lost more than 80 per cent of its value. Traded value on the UAE markets also dropped from Dh537 billion in 2005 to a trough of Dh57bn. Investment banks, whose key businesses include equity research and brokerage services, were forced to rethink their business presence and close divisions.

There are currently 47 equity brokerages operating in the UAE, down from 110 in 2010, according to SCA’s website.

“It’s unfortunate that those companies closed down prior to the market recovery,” said Tariq Qaqish, the head of asset management at Al Mal Capital, an investment bank in Dubai.

“There was a mismatch of shareholders objectives and the requirements needed to maintain a business in a sector that requires long-term commitment.”