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Abu Dhabi, UAEMonday 18 June 2018

Emaar Development listing is to be celebrated

Lower stake sale will not put off local and foreign investors

Emaar Development will be the first major IPO on the DFM since late 2014. Gabriela Maj / Bloomberg
Emaar Development will be the first major IPO on the DFM since late 2014. Gabriela Maj / Bloomberg

It has been a while since the Dubai Financial Market has had an exciting new company to list for investors to buy into. Since Dubai Parks and Resorts (now DXB Entertainment) began selling shares in November 2014, just one new company has listed on the country’s largest stock exchange. That company, insurer Orient UNB Takaful, has not traded a single share since its listing in June.

So Sunday’s announcement that Emaar Properties’ real estate development arm, Emaar Development, would go public in November with the sale of 20 per cent of its shares, was a moment to celebrate for investors. The last Emaar subsidiary to go public, Emaar Malls, was one of DFM’s largest ever IPOs, raising over US$1.5 billion when it listed in 2014. The effect was spoiled somewhat, however, by the reduced size of the listing, with Emaar previously suggesting it would launch a 30 per cent stake ­rather than just 20 per cent, resulting in a lower special dividend payment for shareholders.

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Retail investors were none too impressed, with Emaar Properties shares suffering their worst day in six months.

But while the stake sale may be lower than expected, Emaar Development’s listing is likely to prove a welcome shot in the arm for the DFM, which, like its regional peers, has not enjoyed the stellar returns posted by emerging markets and those in the West.

The Dubai bourse has risen just 3 per cent so far in 2017, compared with 12 per cent last year.

Emaar Development’s listing in Dubai may soon be followed by a similar large entry on the Abu Dhabi bourse, in the form of Adnoc Distribution. Next year promises to bring the biggest listing of all, the sale of a 5 per cent stake in Saudi Aramco.

The listing of such high-profile assets on domestic markets promises to inject significant liquidity into the region’s stock markets, attracting the interest of both local and foreign investors.

The disappointment over Emaar Development’s smaller listing is therefore likely to be short-lived, with investors tempted by a target of aggregate dividends of no less than $1.7 billion over the next three years.

That is a tempting prospect, which will have prospective investors queuing around the block to participate next month.