Why Abu Dhabi National Hotels 1:10 stock split plan makes sense

The Abu Dhabi National Hotels (ADNH) announced a stock split last month. While the company has not yet provided the ex-date, the shares will be split in the 1:10 ratio, implying ten shares for every single share held.

With the split, the nominal share value will reduce from Dh1 to 10 fils, with the rise in shares outstanding to 12 billion from the current 1.2 billion. The company had undergone a stock split in April 2005.

The company’s share price has had a stellar run this year, with YTD gains of 210 per cent. While ADNH has shown stellar results for 2022, for H1-2023, it reported lower net profits. While overall revenues increased y-o-y, the decline in the bottom-line is one worrying factor for investors. Companies typically undergo a stock split when the owners feel the underlying share price is high. By announcing a stock split, the company aims to make its stock more attractive and appealing to smaller-level retail investors.

ADNH counts the National Corporation for Tourism & Hotels as its immediate competitor. The latter is priced at Dh2.84, while ADNH is currently quoting at Dh9.88. It looks like the company is likely readying itself to batter any major market turmoil.

In either case, lowering the share price to near Dh1 could allow the company’s stock price to remain attractive in any major industry-specific volatility.