What UAE hospital operator Burjeel is targeting with 10% share buyback

Dubai: The Abu Dhabi hospital operator Burjeel Holdings is starting to see a lot of action – on its stock. In recent days, there have been some bulk trades involving the stock, which is listed on the ADX, as investors process the fact that the company is getting into a major share buyback program.

Burjeel, which has multiple hospitals and clinics operating under various brands in UAE, plans to buy as much as 10% of its shares from the open market. And that’s quite sizable given that Burjeel during its October 2022 IPO had floated 11% in the company through the IPO. Which essentially leaves about 1% in the open market.

It was late last month that the company, which has been gradually expanding its interests in Saudi Arabia, confirmed plans to go for a buyback.

“The Burjeeel buyback was a surprise, but it reflects the management’s confidence in its ability to generate cash flow from operations,” said Sameer Lakhani, Managing Director of Global Capital Partners.  

“Buybacks ae a mechanism for an uneven return of capital - rather than through dividends.

“In Burjeel’s case, it appears to be a signaling mechanism - that the stock is undervalued - to its institutional investors.”

On the ADX, the stock is at Dh1.55, against the IPO offer price of Dh2. (The Abu Dhabi investment company IHC has also gone through multiple buyback programs of its own. IHC, in fact, is a shareholder in Burjeel.)

According to market sources, buyback programs can be a sound tool to get value flowing back into the share. It's a tactic that UK and UK companies have used, including, most recently, by HSBC, which announced plans to buyback up to $2 billion of its shares.