Dubai: The guessing game has started for the next round of UAE IPOs, with Dubai Taxi Corporation cited as a possible front-runner.
A blockbuster would be the one from hypermarket operator Lulu Group, though the Abu Dhabi headquartered retailer recently said the stock float more likely will happen early-to-mid 2024 than in the coming weeks.
“The Lulu IPO will be massive whenever it’s launched,” said an analyst. “But if it happened this quarter itself, 2023 would have been a defining year for UAE stocks. Now, if the float is set for 2024, it could be the perfect start to the year for the UAE stock markets.”
Lulu needn’t be the only retailer heading for a listing – the legacy brand Spinneys Dubai is rated as another possible candidate.
The DFM is running at exceptional 24 per cent higher in the year-to-date, with volumes boosted by a rush of recent dividend announcements, from the likes of Salik (Dh548 million), du (Dh589 million) and Tecom (Dh400 million). Plus, of course, there’s DEWA with Dh3.1 billion, and which will land in shareholders’ accounts this month.
In fact, according to a new report, some of the UAE stocks have provided some sizeable returns for investors. Not just that, the dividend yields have even bettered return on investments in the UAE’s booming property market.
Not convinced? As proof, the Reidin-GCP report finds that four stocks – the ADNOC affiliated entities Borouge and Fertiglobe as well as DEWA and Al Ansari Financial Services - delivered higher than 6 per cent. These four along with Salik have ‘greater yields than EIBOR (the Emirates Interbank Offered Rate), which is effectively the risk-free rate’ says the report.
It's been a bumper first-half for investors from the many interim dividends announced by listed companies in the UAE. And should give them enough incentives - and dough - to partake in the next round of IPOs.
A putative Dubai Taxi Corp. IPO will benefit from all the dynamics that propelled the Salik one - more so when it's backed up by solid dividend commitments.
How do property yields stack up?
Yields from owning apartments in the high-rise hubs of Dubai Marina, JBR and Downtown Dubai average between 3.5 per cent to 4, while at the Palm Jumeirah, it would be just a shade over 3 per cent. (Property yields are measured by dividing the rental value on the unit by the current market price. In areas like Palm Jumeirah, the Downtown and Dubai Marina, property values have shot up considerably, which explains the lower yield. Even though rents there had risen 20-35 per cent.)
And the highest yielding residential communities in Dubai? This would come as a surprise, but it’s International City with 5 per cent and followed by Jumeirah Village Circle with 4.5 per cent. (In JVC, property values are inching up, which could dent yields near-term.)
Stock or property?
In Dubai, the property market is seen as being near or already at its peak, while stock prices still have some ways to go.
“This can make them (stocks) a more inviting investment prospect, as their lower
value in tandem with greater yields suggest UAE stocks are a better value-for-money option relative to real estate,” says the Reidin-GCP report.
“The spate of new IPOs has resulted in a multi-fold increase in UAE volumes, both at the retail and institutional level. With further IPOs in the pipeline we anticipate there to be further value discovery.
“More importantly, with the impetus now on capital markets - with the change in the UAE pension plan structure - valuations are expected to be attractive relative to real estate markets on a replacement value basis.”
That’s slightly down the line – all that UAE investors are looking at is what’s the next IPO coming out of the pipeline.