Dubai: One of the UAE’s biggest food catering companies, ADNH Catering, is the next IPO and setting up what should be one of the busiest fourth quarters for the local stock market. The subscriptions open on October 7, which is when the offer price will be confirmed. October 15 will mark the closing date for subscriptions.
Part of the Abu Dhabi National Hotels’ portfolio, ADNH Catering will offer 40 per cent via the IPO, representing 900 million shares and then listing on the ADX, according to a listing prospectus issued in the local media. In terms of the size of the stake that’s being offered through the IPO, ADNH Catering’s float will be one of the bigger ones in the UAE.
ADNH Catering currently serves up 11 million meals - in a month.
The parent entity ADNH is already a quite visible presence on the Abu Dhabi stock market. (ADNH, which operates multiple luxury hotels in Abu Dhabi and Dubai as its core business, had gone for a 1:10 stock split last year.)
Since 1979, ADNH Catering has been a core component of the growth of the UAE’s hospitality industry, partnering with government and private sector clients across food services and support services
ADNH Catering operates on-site kitchens for clients as well as having its own massive central production facilities. The entity has a market share of 28 per cent in the UAE as of end 2023. Plus, there is a joint venture in Saudi Arabia with UK’s Compass Group.
Earlier this year, ADNH had bought out the 50 per cent held by Compass in the UAE joint venture, paving the way for the renaming as 'ADNH Catering' and the IPO now. Compass, itself listed on the FTSE, is a dominant name in the UK’s catering and hospitality support services.
What's the dividend going to be?
For 2024, shareholders will get Dh60 million and next year will see that increase to Dh180 million. In 2026, there will be a minimum 5 per cent increase to the dividend.
Retail investors allotted 9.83%
In terms of allocations, retail investors get a chunky 9.83 per cent of the equity on offer, while institutional investors get a say in 90 per cent of the IPO.
Also, preferential rights of up to 10 per cent will be made available to those subscribers who are already existing shareholders in ADNH.
"We pride ourselves on our long-standing relationships with clients across government and the private sector, with over 90 per cent of our contracts lasting for over five years," said Clive Cowley, CEO of ADNH Catering.
"This success has been driven by a commitment to quality and a highly efficient and well-invested operating base that enables us to serve over 260 clients across 350 contracts and more than 11 million meals per month. Our strong operational performance generates a robust financial performance driven by strong margins and high cash conversion."
The parent company ADNH reported net profit of Dh1.15 billion for the first six months of 2024, trading on Abu Dhabi’s efforts to widen its attractions as a destination for tourism, hosting conferences and high-wattage entertainment and sporting events, and, of course, to do business.
These taken together should add up to something significant for ADNH Catering's medium-term prospects, which is what the promoters expect potential investors in the IPO to take note of. The entity also has standalone operations in Dubai and Sharjah.
So far in 2024, UAE investors had welcomed IPOs from Parkin and Spinneys in Dubai, while Alef Education and, more recently, NMDC Energy came to market on the ADX. The level of subscription activity was intense and ADNC Catering will have every reason to believe it can do the same once October 7 comes by.
"IPOs continue to do well in the UAE this year, led by NMDC Energy and Parkin," said Sameer Lakhani, Managing Director at GCP. "Moreover there has been a steady build up in demand for recently listed companies such as ADNOC Drilling, Salik, ADNOC Logistics, ADNOC Gas, etc.
"The percentage of divestment - at 40 per cent - of ADNH Catering suggests a response for greater secondary market activity as well as corporate activism. It marks another milestone in the growing maturity of the local capital markets as issuers respond to rising investor demand, domestically as well as internationally."
Adding to the IPO pipeline
The GCC markets and investors had seen heavy IPO activity - 26 of them - through the first-half of the year, and now, Q4-24 is shaping up to be another bonanza. The net proceeds from the H1-24 offers totaled $5 billion.
"The UAE represented 44 per cent of that, or $2.2 billion (Dh8 billion)," said Amer Halawi, Head of Research, Al Ramz Capital. "This compares to $3.6 billion locally in 2023 and $11.1 billion in 2022. This year is therefore set to equal or exceed the last but should remain behind the record-breaking 2022.
"The pipeline remains healthy with both public and private companies expected to hit the market. Over-subscription levels to these offerings have been impressive and suggest that liquidity remains abundant. All in all, we expect the IPO bonanza to continue in the UAE and the wider GCC..."
