In the largest public offering on the Dubai Financial Market (DFM) in seven years, Emaar Properties raised Dh5.88bn ($1.6bn) with the initial public offering (IPO) of its malls division, Emaar Malls Group (EMG), operator of The Dubai Mall. Shares were priced at the top of the range at Dh2.90 ($0.79) and oversubscribed by 30% for the institutional segment and by 20% for individual shareholders, underscoring investor confidence in both the company itself and the prospects for Dubai’s retail sector. The sale of 2bn shares represents 15.4% of Emaar Properties’ share capital.
When EMG listed on October 2, 2014, it had a market capitalisation of Dh37.7bn ($10.26bn). In the final allocation, 70% of shares went to institutional investors and 30% to individuals. The company revealed it had attracted investment from around the world. The UAE accounted for 35% of institutions and 55% of overall investment, while 39% of institutions came from the MENA region and 26% from the rest of the world, including the US, UK, Europe and South-east Asia. On its first day of trading, Emaar Malls’ price rose by 21%. Dubai’s government owns 30% of Emaar Properties, which paid a special cash dividend to shareholders of Dh9bn ($2.45bn) after the IPO. Emaar Properties said this took the total paid-in cash dividends in 2014 to Dh17.12bn ($4.66bn), which the company described as one of the largest dividend payouts in UAE company history.
Performance
All of EMG’s assets are in Dubai, with the largest being The Dubai Mall, one of the world’s largest malls, which retails approximately 50% of all luxury goods sold in the emirate, according to the prospectus. The Dubai Mall generated 82% of the company’s rental income in the first half of 2014. EMG made a profit of Dh617.2m ($168m) in the first half of 2014, up from Dh498m ($135.55m) in the first half of 2013. Revenue rose to Dh1.25bn ($340.25m), up from Dh1.11bn ($302.14m) in the same period. Emaar Property’s assets were valued at Dh64.93bn ($17.61bn) at the end of 2013. On October 11, 2014 the company reported Emaar’s stock value had risen by 108% in 2013. It stated Emaar’s market capitalisation had reached Dh81.98bn ($22.31bn).
Marka
A few days before the EMG debut, shares began trading on another retailer, Marka, whose IPO was the first on the DFM for five years. Marka is a start-up with Dh500m ($136.1m) in capital and a management team with significant experience in the region’s retail sector. It sold 275m shares at Dh1 ($0.27) each. On the first day of trading the price closed at Dh1.59 ($0.43). Marka plans to buy franchises in retail and food and beverage chains and roll them out over the next five years. It already has agreements with six luxury brands, a growing segment of the market. “The market for luxury brands in the UAE has reached a level of maturity where most brands can now financially justify their own standalone boutiques,” Abdul Hamid Seddiqi, vice-chairman of Ahmed Seddiqi & Sons, a luxury Swiss watch retailer, told OBG.
Marka was the first retailer to be listed on the DFM and its IPO, the first on the market since Drake and Scull International in 2009, was 36% oversubscribed. According to its prospectus, its retail investments will focus on apparel, sportswear and luxury accessories, while its food and beverage targets are Arabic, Asian and Italian food brands and sports cafes. It expects sales of Dh109m ($29.67m) in the first year, rising to Dh1.14bn ($310.31m) by the fifth year. In mid-October 2014 Marka announced it had secured retail outlets in Galleria Mall in Dubai and at two malls owned by Meeras Holdings, The Beach and City Walk Phase 2, due to open in 2015. Marka says it will open Sonia by Sonia Rykiel, Berenice and Essentiel Antwerp later in 2015.
The popularity of the share issues came as no surprise to Ajai Kumar Dayal, CEO of Tridayle Consult. Although Emaar has thus far concentrated all its retail activities in Dubai, he speculated that the company might use the money raised to look for opportunities further afield. “If other people want to participate in the excitement of retail in Dubai, these are some of the companies that it would be fun to be part of,” he said.
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