Dubai: If share prices of listed property companies on Dubai Financial Market (DFM) are suffering, it has to do with all of the liquidity getting sucked up in a short span by a series of initial public offerings (IPOs).
“There’s no fundamental issue with any of the big developers, but their share prices — and the overall stock market itself — is getting affected,” said Khalid Bin Kalban, Chairman of Union Properties, whose scrip has been facing a trying time on the local bourse. “There were five IPOs in three months and which raised Dh15 billion from investors. And that Dh15 billion is sitting in the corporate accounts of the companies that floated and not out there in the market.
“Instead of five in three months, they [stock market authorities] should have had one each quarter and the spread the process over 24 months.”
The developer — which on Tuesday confirmed that it would venture outside of the UAE for the first time through a joint venture development in Saudi Arabia — recorded a slide in 2014 net profits to Dh858.57 million from Dh1.58 billion. The drop was brought on by making substantial provisions. Also last week, it proposed a 3 per cent cash dividend (totalling Dh120 million) and bonus shares of 5 per cent.
“I don’t buy the argument UP shareholders are unhappy with the performance or with the dividend announced — the last time we had a cash dividend was in 2002 (totalling Dh40 million),” Kalban said.
“There was a lot of speculation that the company did not have the ability to pay cash dividends … well, that’s been proved wrong. And we will continue to pay cash dividend.”
He also said that Union Properties would consider a share buy-back only if the stock price were to be consistently below the Dh1 face value. On Tuesday, it closed at Dh1, up 2 fils. Over a 52-week period, the share has seen a drop of 47.7 per cent.
The Chairman declined to put any growth targets on revenue and profitability expectations for this year. A medium-term strategy would be to create rental income-generating assets of Dh500 million in five years. For 2016, Kalban — who took up the helm to oversee UP’s turnaround after the 2009 crisis — is hopeful of crossing the Dh100 million mark under this count. Historically, rentals fetched UP around Dh80 million.
Stepping outside of the home market is also deemed as crucial going forward. “UP has to be in new markets and not confined to Dubai,” the Chairman said. “The announcement of the Saudi project with a partner there will be happening shortly.”
On Tuesday, UP’s facilities management subsidiary ServeU confirmed the creation of its Saudi venture, in tandem with Riyadh-based Mamlouka Al Momayzah, part of the Al Haddab Group. Union Properties recently sold a retail facility at its Motor City master-development, raising more than Dh500 million. On whether it was a defensive move on UP’s part, Kalban said: “To be honest, I was never sure about how the original Auto Mall concept would fit in. In fact, the new owner has decided to convert it into a proper mall offering.
“Union Properties has plenty of land on its hands and we are building what we see as fitting our immediate needs.
“That means the Vertex Towers [in Motor City and UP’s first vertical foray] is not a priority, though we have completed the detailed design phase.”
Kalban said that Union Properties would “consider a share buy-back only if the stock price were to be consistently below the Dh1 face value”. On Tuesday, it closed at Dh1, up 2 fils. Over a 52-week period, the share has seen a drop of 47.7 per cent.
