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UAE investors are chasing yields from the new crop of IPOs that are heading their way. The Tecom Group’s ongoing subscription phase for its Dh1.5 billion to Dh1.7 billion IPO is the latest to feel this sentiment.
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The IPO, which opened Thursday (June 16) has already hit the ‘over-subscribed’ mark according to multiple sources in the banking sector. The price range is set at Dh2.46-Dh2.67 and the eventual one to be announced June 27.
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With an annual dividend payout of Dh800 million for the first three years, Tecom represents a 6-6.5 per cent yield and placing it among the top among the recent IPOs.
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Earlier, DEWA came up with a 5 per cent dividend yield after confirming a payout of Dh6.2 billion a year. The IPO turned out to be a high visibility one on all scores, getting oversubscribed 37 times to Dh315 billion.
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“Higher dividend yields with varying degrees of growth outlooks has been part of the Dubai government’s plan to deepen the capital market,” said Sameer Lakhani, Managing Director at Global Capital Partners. “Thus far, it has been wholeheartedly endorsed by an expanding local, regional and international investor base. This marks an astonishing achievement especially given the correction in Western capital markets and is part of the shift in allocation of capital towards the Middle East.”
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Tecom owns and operates high-on-demand business districts such as Dubai Internet City, its media city counterpart, and the fast-emerging Dubai Industrial City. As one of the most influential commercial real estate landlords, the Group retains occupancy levels in the 80 per cent range and with a sizeable number of tenants anchored to long term leases.
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The Dubai entity has left the door open to raise the stake on offer for the IPO ‘at any time prior to the end of the subscription period’ on June 23-24. DEWA, incidentally, did raise the IPO size and also brought in a slew of heavy hitters on board as strategic investors.
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Including Tecom’s, the UAE has seen four IPOs this year, with DEWA being the largest with a size of $6.1 billion and followed by Borouge at $2 billion.
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Of the last 10 IPOs, not all companies had disclosed their dividend payment policy in advance. “Abu Dhabi Ports and ADC Acquisition didn’t declare their dividend structure at the time of listing,” said Vijay Valecha, Chief Investment Officer at Century Financial. “Dana Gas raised cash dividends by 45 per cent for 2021 from a year earlier as it turned into profits, offering a dividend yield of 8.26 per cent and being the highest in the region.”
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So, who’s next? Dubai confirmed a new company structure for Salik, the emirate’s road toll operator. Its mandate includes adding new tolls as the city keeps adding to its road network.
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Investors will be more than ready for a Salik IPO, when that happens. “Any ‘jewel’ asset coming to market - whether government- or privately-owned - will draw enough demand as long as the investors are clear on the asset’s equity story,” said Mohammed Shaheen, CEO, Seven Capitals.
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Of course, an indicator of future dividend yields will also be welcome.
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