Abu Dhabi's ADNH Catering sets price range for IPO offering 40% stake - with dividend yield at 8.3-8.8%
ADNH Catering is offering 40% via IPO as it guns for more market share in UAE
Dubai: For the UAE's latest IPO, ADNH Catering has set the offer price range at between Dh0.91 and Dh0.96 a share, in a float that will see the company offer 40 per cent of its equity base. The price range implies a market cap of between Dh2.05 billion (around $557 million) and Dh2.16 billion ($588 million).
The float offers 900 million shares with a nominal value of Dh0.10 each. The company has promised Dh180 million as 2025 dividend, which sets up a dividend yield of an eye catching 8 per cent plus.
"Our market-leading position in the UAE, coupled with strong and resilient financial performance, ideally positions us to deliver long-term value to shareholders while capitalising on new opportunities and building deeper relationships with our existing clients," said Clive Cowley, CEO.
"With exposure to high-growth sectors such as healthcare and education, and an expanding geographic footprint in Abu Dhabi and Dubai, we also see significant potential in Saudi Arabia, especially in the Eastern Region, Jeddah, and Riyadh, where we are already making excellent progress on expanding our operations.
"We look forward to welcoming new shareholders to join in our journey."
Catering to universities, industries
In the UAE, the company has a near 30% market share, with big-ticket contracts to serve the government and defence establishments in Abu Dhabi. In Dubai, ADNH Catering is on the lookout for opportunities to tap wins in the education sector, especially catering to universities, and for industrial clients.
“There is no ceiling to our growth chances in the UAE,” said Cowley. “Our CAGR for the next 5 years would be in the 4-6% range.”
In Dubai too, the company has set a central kitchen facility, which can cook up 16,000 meals a day. It is located in the area near Dubai Parks & Resorts. (Some of the requirements for Dubai are also met by sending semi-finished meals from the Abu Dhabi central hub and then doing the needful.)
“We do have sufficient capacity at the central production facilities currently to cater to market needs in the UAE,” said the CEO. "In Dubai, we can go up to 20,000 meals a day at the facility, which means we more flexibility than in Abu Dhabi."
One of the biggest employers, with a workforce of 18,000 plus, ADNH Catering is part of Abu Dhabi National Hotels, which owns some of the signature luxury hotels and resorts in Abu Dhabi and Dubai. Interestingly, the catering entity draws about 1% of its turnover from serving the parent entity's needs.
IPO details
By offering as much as 40% through the IPO, ADNH Catering sure has gained in visibility with investors. So has its choice of IPO price range, at under Dh1. "The price range and valuation of ADNC Catering implies a dividend yield of 8%, which is at the very high end of the range that IPOs in the UAE have offered," said Sameer Lakhani, Managing Director at Global Capital Partners. "Thus setting up the stage to attract cashflow oriented instititional and retail investors.
"Demand is expected to be strong for such high payout yielding companies with attractive valuations and prospects for growth especially in regional markets."
The subscription period is to close on October 14 for the UAE retail tranche and for eligible employees, and October 15 for institutional investors.
The final offer price will be determined through a book building process and which will be confirmed on October 16.
Early this year, ADNH had bought out the stake held by UK's Compass in the catering business and that in turn led to the IPO.
More GCC projects?
In Saudi Arabia, ADNH Catering has been present since 2012, winning some major contracts from oil and gas sector clients. In the last year, the joint venture there has seen faster growth, picking contracts from healthcare sector companies and the like. In 2023, Saudi revenue contribution was SR180 million.
On whether it plans to enter Qatar - there's been some speculation about that in the market - Cowley said: "That talk probably has to do with Compass wanting to sell its Qatar stake to exit from all non-core interests. At this moment in time, we don't have a specific plan to enter Qatar. But definitely, we will consider any other Gulf market when it makes absolute sense for us to do so.