Dubai Electricity and Water Authority PJSC’s (DEWA) listing on the Dubai Financial Market (DFM) is set to revitalise the city’s stock exchange and create precedent for future investments, senior economists told Arabian Business.
DEWA has indicated it would be floating 6.5 percent of its issued share capital, totalling 3.25 billion shares, in the latest of IPO by a UAE government-owned entity.
“After a series of disappointing Greenfield IPOs in Dubai in 2014, the like of Marka, DEWA is planning a listing in an attempt, in our view, to revive an otherwise dry market. There are no shortages of IPOs in the region especially in KSA and Abu Dhabi Securities Exchange (ADX). Therefore DEWA needs to offer an attractive yield and leave something on the table for investors,” said Majd Dola (CFA), equity portfolio manager at First Abu Dhabi Bank.
“Post IPO performance is a key for the company and future IPO on the index as it will set a precedent. Decent stock performance post IPO will encourage investors to jump in on the next one and it will attract regional and international interest. It represent an opportunity for DFM to join an ever growing body of regional markets including ADX and KSA. If this turns out to be a boring IPO it will backfire on the index,” he continued.
Last November, Dubai announced it was planning to list 10 state-owned companies on its stock exchange to boost the size of its financial market to AED3 trillion ($817bn) as the Middle East’s business hub sought to catch up with Abu Dhabi and Riyadh.
“DEWA’s listing is important in many ways to Dubai and its stock market DFM. It delivers on the promise made last November to privatise part of Dubai Government jewels by listing portions of them on the stock market,” said Mohammed Ali Yasin, chief strategy officer at Al Dhabi Capital Ltd.
“It will increase the depth and diversify the companies listed on the DFM with large strong companies after a long absence and some mid-hits in the past 7 years. It will also revitalise DFM and try and regain its old position as the public market of choice for attracting FDI in the region,” he added.
Last year as well, Dubai replaced five of seven members on its stock exchange’s board as the Middle East business hub works on plans to boost the emirate’s bourse.
“In the case of DEWA, the privatisation being proposed is partial and represents a small percentage of the shares. This is due to two factors: first, given the strategic nature of the asset, the government wants to retain operational control, especially during the uncertain times that the world is seeing at present; and second, it wants to experiment gradually, since electricity and water privatisation have proven to be more difficult to successfully execute across the world than telecommunications and other utilities,” said Omar Al Ubaydli director of research at Derasat.
“Nevertheless, the initiative is fundamentally progressive in the sense that it is driven by a desire to improve performance, innovation, and customer experience. Tracking these with soundly selected KPIs over the coming decade will be an important input into decisions regarding further privatisations, both within DEWA and in other parts of the public sector,” he continued.
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