Magazine report reveals offer price of DFM shares

Dubai: The Dubai Financial Market will offer its shares to the public at single-digit earnings multiple, believed to be between six and eight.

The initial public share offer, which is likely to open in the first half of this month, is the second part-sale of a Dubai government owned company this year.

According to a report in the latest issue of Money Works, the shares will be priced at Dh1 each and subscribers will have to pay a fee of Dh0.03 per share. The IPO is open to both nationals and non-nationals.

DFM, which is also the first bourse in the GCC to be privatised, will be diluting 20 per cent of its equity through the IPO, which will raise Dh1.6 billion for the owner, the Dubai government.

However, the DFM was still awaiting the approvals from both the UAE Ministry of Economy and the Emirates Securities and Commodities Authority. It is understood that the concerned permissions are technicalities and are due shortly for the IPO to hit the market as planned.

The sources said DFM was valuated by Ernst and Young at between Dh8 and Dh12 billion, and the bourse's management decided to take the figure at the lower end of the valuation band.

DFM's net profit for 2005 was Dh1.3 billion. Although the report could not access projections for this year, sources said that if 2006 net profits are taken into account, the earnings multiple of the offer will be less than six.

Significantly, the IPO is being offered in two tranches, and then there are categories and reservations made for different sections of the subscribers within these tranches.

The first tranche comprises 720 million shares or 45 per cent of the offering. There are three categories of applicants that can apply for shares in this tranche.

It is learnt that 10 per cent or 160 million shares will be reserved for listed companies, another 10 per cent or 160 million shares will be reserved for DFM members and brokers and 400 million shares or 25 per cent has been reserved for national staff of the Dubai government, including those that have retired.

A total of 880 million shares or 55 per cent of the IPO are being offered in the second tranche. Of these 200 million shares have been reserved for small national investors, and it is learnt that they are guaranteed subscription once they apply.

The rest, or 680 million shares, have been reserved for all nationalities.