Dubai’s utility giant, DEWA, prepares for the listing on the Dubai Financial market – most likely tomorrow (April 12), after offering the Middle East’s second-largest IPO since Saudi Aramco, with over-subscription levels reaching Dh315 billion.
DEWA will list at Dh2.48 a share.
In October last, another utility company, ACWA Power, was listed on the Saudi Tadawul at SR72 a share. And within six months, the ACWA stock shot up to SR144. The DEWA stock could be heading on the same trajectory, according to market watchers.
“DEWA had earnings of Dh6.6 billion in 2021 – with an annual dividend payout of a minimum Dh6.2 billion, that would then represent a 90 percent-plus payout,” said Sameer Lakhani, Managing Director at Global Capital Partners. “Of DEWA’s current earnings, 9 percent came from the district cooling entity Empower, which too is due to be listed on DFM. That would mean a further pop in DEWA’s valuations.”
Investors who participated in the retail offering will be notified of their allocations via SMS today.
- Nine billion shares, representing 18% of DEWA’s issued share capital, were offered in the IPO, setting it up to raise Dh22.3 billion.
- The DEWA float is the largest IPO to date in the UAE – and the largest in Europe, the Middle East, and the African region so far this year.
Retail investors will want more
The DEWA IPO, not surprisingly, saw retail investor interest touch 37x times – and many of them will be angling to buy more of the stock from the moment trading starts. The investor allotments will likely start any time now. Here’s how the likely allotments could be.
Assume an investor applied for Dh100,000 worth of allotment during the offer period between March 24 to April 2. Given that the retail investor part was 37x over-subscribed, this implies that Dh2,700 of the Dh100,000 would be eligible for allotment. If so, that investor would get 1,088 shares on average, based on the share price of Dh2.48.
“Even with interest rates rising – or even because of it – the DEWA stock appears to be a safe bet with its 5 percent yield,” said Lakhani. “A share price rise would still render yields attractive to investors, making it a cornerstone for equity portfolio allocations in Dubai.”
That’s a sentiment shared by Kuwait-based KAMCO’s Junaid Ansari. “Being state-backed and in a fundamentally strong utility segment, DEWA is expected to remain on investors’ radar post the listing,” said Ansari, who is Senior Vice-President of Investment Strategy and Research.
And what of the likely first-day ‘bounce’ for the DEWA stock? The market is talking about a 15 percent gain as a near certainty. Nearly all of the high-profile IPOs in the Gulf were met with overwhelming investor interest on the first day of their trading. “Since most of the listings in Q1-2022 were in Saudi Arabia, the maximum allowable debut gains were 30 percent for 9 out of the 18 listings during this period,’ said Ansari.
