Dubai: Real estate scrips weighed down UAE stock markets on Monday, with DFM slipping 0.86 per cent and ADX by 0.7 per cent.
Damac shares dropped, as did those of Emaar and Arabtec. Even then, Damac remains in the spotlight after Hussain Sajwani’s Maple Invest hinted at buying up the developer’s publicly available shares.
This has triggered speculation that Hussain Sajwani, Chairman of Damac, is taking the company private. In fact, with global interest rates at a record low, financing a takeover of shares that he doesn’t own now should not be a big deal.
Indeed, this is the most opportune time. During 2016-19, Damac has seen negative annual cashflows and the amount of cash on the balance-sheet declined from Dh8.50 billion to Dh4.93 billion.
Reflecting the negative sentiments, Damac shares are currently trading at just 32 per cent of their book value (price/book value is only 0.32).
Going private will most likely happen through loans that will be financed against future cashflows. So if a takeover offer is happening now, it means Sajwani believes the worst is over for Damac and, maybe, Dubai’s property sector tooo.
Shares have rallied by more than 125 per cent since the third week of March and by 18 per cent since the beginning of the month. In contrast, Dubai Real Estate index has rallied 42 per cent since the third week of March.
On DFM, Damac, Arabtec and Emaar Properties contributed most to the decline while Finance House and Bank of Sharjah dragged down ADX. Damac shares were down 4.95 per cent for the day.
Both DFM and ADX are trading above their 50- and 100-day SMA (Simple Moving Average), which is helping them to maintain a bullish posture. In the near term, DFM and ADX has support at 2,020 and 4,180, respectively, from the moving averages.
Among other news, Gulfa Mineral Water & Processing Industries saw its Dh10 million rights issue oversubscribed with total subscription standing at 100.18 per cent of the offer. With the completion of the offer, capital will be raised from Dh30 million to Dh40 million.
- Vijay Valecha is Chief Investment Officer at Century Financial.