Emaar's IPO signals market optimism, says expert

10/11/2017 00:24 AST

When the most celebrated man-made structure on earth is built and occupied, what's the next frontier? For Dubai-based Emaar Development, the leading regional developer, it is the public itself, says an expert.

Emaar Development's initial public offering (IPO) is set for November 22 on the Dubai Financial Market. Even with 20 per cent of the company being offered, it is a firm step in the right direction for the UAE real estate market.

The move comes at an opportune time, with property transactions for off-plan housing in Dubai, the expert added.

For end-users and the general public, the IPO signals better health overall for the economy and a clear signal of market optimism.

"Emaar is the most reputable developer in the region and consistently delivers quality stock. While lesser known developers compete for buyers with low deposit offers and creative back-ended payment plans, Emaar still commands and receives the bulk of their property purchase prices during construction, ensuring strong cash flows," remarked Lukman Hajje, the chief commercial officer of Propertyfinder Group.

"This, combined with reported development profit margins of over 40 per cent and a long back log of buyers, equals an interesting proposition for local investors. The IPO is a very positive move for the market," he added.

Emaar Development has practically kept its cranes running continuously, putting up 34,500 residential units since 2002, and reports more than 24,000 residential units are under development as of September of this year.

Its position is strong going into its IPO, with revenue for the first half of 2017 up 27 per cent to Dh6.5 billion, with income from apartment sales up 82 per cent compared to the same time window the year prior.

Emaar Development accounted for 40 per cent of the company's revenue and 31 per cent of its gross profit in the first half of 2017, according to its results document available on its website.

An IPO will secure more funds for the company's investment ambitions, but it is not just Emaar that can benefit.

The open market is best at determining a company's value, and investor confidence in the region - as oil prices remain suppressed - in sectors like real estate and development, are a boon to the UAE. Investments in real estate and developers who add value and vitality to Dubai, as Emaar has already done with past projects, is a marked step away from oil dependency and makes for a less volatile market.

Being beholden to public shareholders, too, should make Emaar Development more transparent.

Emaar Development may make its ambitions better known to the public sooner, as shareholders should have a say in the company's long-term direction and near-term plans. This opens Dubai up to more public discourse about ambitious development plans, and innovative, shareholder-friendly ways of getting them built.

Trade Arabia