Dubai: The Dubai-based school operator Taaleem has set a price range of Dh2.95-Dh3 a share for its IPO, which will see the company offering 25.32 per cent ahead of its listing on DFM, according to a public announcement.
What the IPO does is widen the number of sectors that investors have access to in the UAE’s capital markets, with the K-12 space cites as having high growth potential in the medium term. Final offer price is to be confirmed November 18. The price implies a valuation of Dh3 billion for the company.
Proceeds from the Taaleem IPO, which opens today (November 10), will be partly used to fund four new greenfield schools in Dubai and Abu Dhabi. Two of these are at an advanced stage of clearing approvals.
What investors in the IPO will get is a 'secular growth story - Taaleem offers a value proposition to other listed education providers like IDP (listed in Australia)," said an analyst. "The fact that investors have more benchmarks to compare increases the prospect of sustained inflow of investments into UAE stock markets."
The Taaleem IPO size could be increased during the subscription period. (Empower, which closed out a successful stock float, did so twice on its original 10 per cent offer.)
There are no plans to raise any near-term debt for upcoming expansion, with the net debt/EBITDA at 0.6x as of end August.
Keep these dates in mind for Taaleem IPO:
- Issue opens for subscription November 10, and the tranche meant for retail investors will close November 16.
- Professional investors' tranche is set for closing November 17.
- The final offer price will be announced November 18.
- Subscriber refunds set for November 25.
- Listing on DFM is scheduled for November 29.
The company – in which National Bonds and Al Mal Capital have sizeable stakes – operates 26 schools with a student population of 27,407 students and a faculty of 1,721 teachers. As with the other Dubai IPOs – such as DEWA, Salik and Empower – Taaleem’s prospects are directly in sync with the widening of the resident base in Dubai and other emirates.
As for dividends, the intent is to pay Dh67.5 million ‘ relating to the financial performance during the year ended 31 August. This dividend would be paid to shareholders before the IPO closing date.
“The company intends to pay dividends at least at the current levels and intends to grow its dividends in line with future earnings growth,” the announcement said.
Taaleem has a robust balance-sheet with a healthy net debt-to-EBITDA ratio of 0.6x. The net proceeds from the IPO will primarily be used to fund the roll out of four new premium schools. We will also consider debt project financing on a case-by-case basis where it makes strategic sense
Solid growth curve
In the 12 months to end August, the company picked up revenues of Dh623.33 million, above the comparable numbers for 2021 (Dh526.83 million) and 2020 (Dh485.14 million). The growth mirrors the widening of the population base in the country, which obviously feeds into the schooling system.
In a recent interview, a top official at Taaleem had said new schools in the UAE would be the priority for the company and other possibilities – such as acquisitions of existing ones and entry into other Gulf markets – could be taken up later.
Profit for the 12-month period ending August this year came to Dh82.92 million, up from the Dh78.27 million and Dh45.64 million from the last two periods.
“This is a steady-as-it-goes company, and investors will be buying into that stability,” said an analyst. “The nature of schooling itself will change brought on by greater digitalisation, and Taaleem will be well-placed to make good on any such transformation.
There is also talk that the other big Dubai school operator, GEMS, will eventually tread the IPO pathway. But first, it would need to get in a strategic investor, and many names are cited as possibilities.
The business of schools in the UAE is getting a lot of attention.
Combined with the fact that being a listed company will raise Taaleem’s public profile to attract high-quality teachers and confidence in the brand, making parents shareholders can also lead to higher student retention rates.
"By hiring Maher Rabah from Dubai Investments, the company has demonstrated that its foresight extends beyond just the IPO to establish an Investor Relations (IR) function, which will ensure that new share owners can stay well informed — the pre-requisite to capital markets success in the long-run.
"Notably, in addition to offering stakes to institutional (88%) and retail investors (10%), Taaleem has chosen to make a 2% tranche available to parents. Allowing parents to become shareholders can strengthen their symbiotic relationship with the organization.
"Combined with the fact that being a listed company will raise Taaleem’s public profile to attract high-quality teachers and confidence in the brand, making parents shareholders can also lead to higher student retention rates.”
- Oliver Schutzmann, CEO at Iridium Advisors