Dubai's flagship developer completes the emirate's first listing since 2014
Emaar Development’s landmark $1.3 billion initial public offering is set to go live on Wednesday morning on the DFM floor, with shares comfortably within the original price range.
With backing from some prominent regional investors and global funds, and strong retail demand, it is the first IPO in the UAE since 2014.
The listing is expected to provide a shot in the arm to a nascent IPO market in the country, with other local companies such as ADNOC and others expected to follow suit in the coming weeks and months.
“Listing is not only the natural next step for us as a business, but also is a sign of the maturity of the DFM, and Dubai as an investment destination,” said Emaar’s chairman Mohamed Alabbar.
Alabbar added that the company generated strong investor interest for the listing, as its order book was filled on the first day.
A major factor in securing investor support is the company’s targeted dividend yield of 8.6 percent, which the company believes is significantly higher than Emaar’s competitors, and more than double the expected 3.84 percent yield offered by UAE developer Damac.
According to spokespeople from Emaar, the company plans to eventually be a paying much higher dividend than the minimum of $1.7 billion for the first three years, as previously announced.
This confidence is fuelled by the company’s ability to benefit from Dubai’s emergence as a global business and financial hub, specifically through its prime land bank, and increase in sales (the company announced sales of AED1.5 billion from October 1 to November 20).
The company said its fundamentals point to potential opportunities for long-term investors.
Emaar Development’s revenue stream can be divided into four sources over next four years. These include a backlog – which is unrecognised revenue of sold units – of AED41 billion. That will result in AED13 billion of gross profit for Emaar Development.
Also, new sales of units in projects currently under construction will total AED17 billion, which will result in a gross profit of AED5 billion for Emaar Development. Completed inventory will result in cash inflow of AED2 billion. Finally, new launches over the next few years will continue to drive profit growth.
Alabbar said: “We currently have a high-quality land bank of 170 million square foot gross floor area, which given Emaar Development’s average development rate is expected to provide 12 years of project launches and 16 years of project completions.”
Today, there are more than 5,000 units to be sold on current Emaar Development projects, with 50,430 units to be launched in the near to medium term. Emaar Development expects to deliver more than 24,000 units over the next four years.
As of September of this year, Dubai recorded AED390 billion in property transactions, and Emaar saw a 33 percent year-on-year sales growth, with a $11 billion sales backlog.
Over the longer term, the population of Dubai is expected to nearly double, reaching 5 million people by 2030.
“Of course, there will be a parallel increase in demand for housing alongside this growth, and Emaar Development has a proven track record of delivering some of the most sought-after projects in Dubai,” said Alabbar.