x Abu Dhabi, UAESunday 23 July 2017

Pulled IPOs cast doubt for growth of UAE's stock markets

Traders have warned that the future growth of the UAE's stock markets could be stunted as family firms shelve plans to head to market.

Al Habtoor Group, the Dubai conglomerate, has called off plans for an initial public offering next year. Jeffrey E Biteng / The National
Al Habtoor Group, the Dubai conglomerate, has called off plans for an initial public offering next year. Jeffrey E Biteng / The National

Traders have warned that the future growth of the UAE's stock markets could be stunted as family firms shelve plans to head to market.

Al Habtoor Group, the family-owned conglomerate, which operates hotels in Dubai, several automobile franchises and a joint venture with Australia's Leighton Group, said on Tuesday that it was planning to delay a long-anticipated listing.

Al Habtoor Group's statement followed comments from Al Ghurair Investment suggesting that the management of the conglomerate would prefer to avoid an initial public offering if possible.

The cancellations would stall the UAE's hopes of reviving local equity markets and eventually attracting blue-chip firms capable of appealing to international investors, such as Emirates Airline, said Mohammed Ali Yasin, the managing director of NBAD Securities.

"If we can't handle a family business of Dh20bn-Dh30bn, how much do we think these companies will really get?" he said.

In the meantime, companies in sectors which were benefiting from the UAE's growth, such as health care, education and petrochemicals, were remaining on the sidelines.

The postponement of a well-organised family enterprise such as Al Habtoor Group from listing would also worry other, smaller firms seeking to raise funds from local exchanges, said Fathi Ben Grira, the chief executive of Menacorp.

"It's not a positive signal to the rest of the companies who potentially are contemplating launching an IPO," he said.

Al Habtoor's IPO had previously been viewed as an attractive story because it would allow investors to tap into sectors that were under-represented on local stock exchanges, namely hospitality and retail.

This year, IPOs across the Middle East have raised US$2 billion (Dh7.35bn) as of the end of last month, according to data from Thomson Reuters. NMC Health, which raised £117 million (Dh692.9m) in a listing on the London Stock Exchange completed in April, has been the only UAE company to sell shares this year.

Further details emerged of the valuation of the Al Habtoor business by accounting firm Grant Thornton, which at $6.06bn surprised some analysts.

The valuation, prepared on a discounted cash flow basis, included two hotels in Deira and one on Jumeirah Beach in Dubai.

 

It also include the site of the old Metropolitan Hotel on Sheikh Zayed Road, which has been demolished in preparation for the construction of three hotels and a leisure complex.

Al Habtoor has committed Dh5.9bn on this project, along with development of the Waldorf Astoria hotel on Dubai's Palm Jumeirah.

The Grant Thornton valuation also covers the group's GCC-wide automotive sales and servicing business.

It excludes properties in Lebanon, where it owns hotels, retail and leisure facilities, a hotel in Budapest, and the value of its shareholding in the Habtoor Leighton joint venture construction business.

A spokeswoman for Al Habtoor said the group would not be making any further statements about the postponed IPO. On Twitter, the chairman Khalaf Al Habtoor said the group would soon announce a deal with a major European tyre manufacturer. "This is in addition to recent expansion drives. Al Habtoor Motors will open 40 car repair garages across the GCC under its Speed Fit brand."

David Fisher, the chief executive of Grant Thornton Middle East, said: "Habtoor is a long standing client and I look forward to working with them in the future and helping them develop their strategy."

ghunter@thenational.ae

fkane@thenational.ae