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$866m IPO planned for Deyaar

Dubai Islamic Bank seeks to raise AED3.18 billion ($866 million) selling shares in property unit Deyaar in the biggest initial public offering in the Gulf in 15 months.

Dubai Islamic, the third-biggest lender in the Gulf by market value that complies with sharia, plans to sell 3.178 billion shares at AED1.02 each, equivalent to 55% of the company, in an offering from May 6 to May 16, Deyaar said in a statement on Sunday.
Deyaar, which has 17 residential and commercial projects in the United Arab Emirates, Turkey and Lebanon, will use the funds to finance projects in the UAE, Saudi Arabia, Qatar, Kazakhstan and India, Chief Executive Zack Shahin said in the statement.

"Proceeds from the IPO will be used to finance the company's massive expansion in property development," Shahin said.

Dubai-based investment bank Shuaa Capital is arranging the share sale.

Only nationals from the UAE and the other Gulf Arab countries - Saudi Arabia, Kuwait, Qatar, Oman and Bahrain - will be able to buy the shares.

The IPO will be the biggest in the Gulf since Islamic lender Masraf al-Rayan raised $1.13 billion in January last year.

Hamood Abdulla al-Yasi, general manager at Emirates International Securities, said the IPO might not attract "heavy" demand because there are already several property companies listed in the UAE, including Emaar Properties, Union Properties and Aldar Properties.

"This isn't something new for the market to diversify portfolios," Yasi said. "There will be demand but I don't think demand will be that heavy because it's a real estate company and we have a liquidity problem."

The pipeline of Gulf Arab IPOs has slowed in the last year after a Gulf-wide stock market crash spooked investors, driving down four of the seven Gulf Arab bourses by more than 35%t.

Dubai-based Oger Telecom in November scrapped a $1.25 billion IPO on concern the crash would hit its share price after listing.

UAE investors, who borrowed just under one-and-a-half times the country's gross domestic product to invest in the 2006 IPOs of Islamic mortgage lender Tamweel and du telecom, are now more cautious.

The IPO of Air Arabia, the Middle East's largest low-cost carrier, was just 0.5 times oversubscribed last month because of investor reluctance to borrow money to finance share purchases.

"I don't think investors will be borrowing money for this IPO," Yasi said.

IPO shares of Deyaar, which made AED412 million in 2006, will sell at 14 times last year's earnings, Yasi said. By contrast, shares of Emaar trade at around 10 times expected 2007 earnings.

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