For a man who once told me he doesn’t like running public companies, Emaar chairman Mohamed Alabbar is doing a pretty good job of it. And that isn’t just my view but I’m sure the view of every single Emaar shareholder this week, as they sit on a 116 percent one-year return on the shares. With the price coming close to AED12 ($3.26), that gives the company a market value of $22.7bn. Right now the price is at a six-year high.
But the best is yet to come. The announcement last week that Emaar Malls Group (EMG) will list on the Dubai Financial Market (DFM) later this month is a game changer of seismic proportions, and for many reasons. First and foremost, for Emaar itself. This magazine has long argued that EMG is the hidden gem in Emaar. Its flagship asset The Dubai Mall had a staggering 75 million visitors in 2013, and accounted for nearly half of all goods sold in Dubai during that year.
An independent valuation of EMG by Jones Lang LaSalle gives it a $10.6bn price tag. This is just the value of the real estate, so we can expect it to be a minimum, probably rising once EMG is listed. Emaar is slowly but surely closing in on the highest ever market value of $36bn recorded for the group back in June 2005.
Still to come is a likely listing of Emaar Hospitality, including its money spinning The Address hotels brand. I also suspect that Emaar will soon be looking at an IPO for its successful Egyptian entity Emaar Misr.
But while Emaar shareholders are rubbing their hands with glee, so should the entire investment community, as this is about far more than EMG going to the stock market. This is the first time a proper international book building process with 70 percent institutional and 30 percent retail allocation will happen. What this does is send a clear message to the global investment community that Dubai is back, and the DFM is the place for your IPO. I wouldn’t be surprised to see the Al Habtoor Group thinking again about a mega-listing, while companies like Damac and BR Shetty’s medical giant NMC that have already listed in London are now likely to think about a dual listing in Dubai. From conversations I’ve had this week, I believe there could be over 20 new IPOs in the pipeline for Dubai, which will dramatically change the shape of the capital markets in this region. Hats off to the regulator. After the shambles of Arabtec, this is exactly what the doctor ordered.
As for Emaar itself, this magazine first argued last November that the company should consider a corporate break up, which would make the group far more valuable and unlock far greater potential within its many iconic brands. That is now being done, and it is exactly the right thing to do.
How far can Emaar go? Back in 2005 it had aspirations to be the world’s most valuable company, following the GE model. When you look at Google (worth $390bn), Facebook (worth $194bn) and Amazon (worth $156bn), you soon realise the internet stars with futuristic (some would say fantasy) earnings will always win the day.
However, far more interesting is to look at shareholder returns. The one-year return on Facebook is a healthy 83 percent. You would be pretty pleased as an Apple investor, sitting on 51 percent. Even Amazon shareholders can be content with their 19 percent. But for a serious windfall, you need to go back to Emaar and its remarkable 116 percent.
Mohamed Alabbar has proved, more than anyone, that doing it the old way, the hard way, with bricks and mortar, can still deliver remarkable value for shareholders.
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