Business | Markets
Dh3.2b Deyaar IPO approved
Deyaar, the real estate subsidiary of Dubai Islamic Bank, has received approval from the Ministry of Economy to launch a Dh3.178 billion initial public offering (IPO).
- Gulf News Report
- Published: 00:00 April 23, 2007
Dubai: Deyaar, the real estate subsidiary of Dubai Islamic Bank, has received approval from the Ministry of Economy to launch a Dh3.178 billion initial public offering (IPO).
The Deyaar IPO, the largest public issue in the UAE, will comprise 3.178 billion shares representing 55 per cent of the company's capital. The shares will be offered at Dh1 per share in addition to 0.02 fils for administrative costs. Deyaar plans to use the proceeds to finance its expansion in a series of projects in the UAE, Saudi Arabia, Qatar, Kazakhstan and India.
The IPO will be open for subscriptions by UAE and GCC nationals from May 6 to 16.
Deyaar has produced phenomenal growth in profits from a modest Dh5 million in 2003 Dh412 million in 2006. "In a short span of three years, Deyaar has earned the confidence of customers, investors and its shareholders. It has constantly exceeded shareholder expectations and achieved Return on Weighted Capital of 55 per cent in 2006," said Zack Shahin, chief executive.
Despite the company's excellent track record, analysts said they are worried about the impact of the IPO on the local and regional stock markets.
"Deyaar IPO represents an excellent investment opportunity to primary market investors. Under the present circumstances, retail investors lack liquidity while any attempt to raise cash by selling existing investments will further depress the secondary market," said a DFM broker.
Makram Kubeisy, managing director of the Investment Banking Group at Shuaa Capital, said there is huge appetite for real estate and a company like Deyaar that has delivered consistent performance will attract investors from across the region.
Ample liquidity
"There is ample liquidity available on the market. I do not personally believe that there is a crowding out of IPOs in the region. On the contrary there is a healthy stream of new issues catering to the investment appetites of different classes of investors."
Shuaa Capital is the IPO's lead manager and sole bookrunner, with Millennium Finance Corporation as co-lead manager, and Dubai Islamic Bank as lead receiving bank.
Caution: Charm among Gulf investors declining
Analysts say the retail investors have not been very enthusiastic about the growing number of IPOs in the GCC this year. "The lacklustre investor response was evident in the case of Air Arabia IPO which was oversubscribed just 1.5 times while previous issues such as Dubai Financial Market and Dana Gas received 300 times and 14 times oversubscriptions respectively," said an analyst.
The charm of IPOs has been in decline due to the poor performance of stocks on secondary markets and the relatively large number of issues competing for diminishing liquidity. The Saudi stock market slipped more than seven per cent during the past two weeks as investors sold heavily to subscribe to the upcoming $1.8 billion Kayan Petrochemical IPO. The Doha Securities Market Index shed five per cent in anticipation of the Al Khaliji Bank IPO.
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