Damac Properties plans to raise $500m through a London bourse flotation marks one of the regions most exciting initial public offerings of the year.
Not only does it involve a major company, but it is also the first time a local property developer looks abroad for a listing. If it manages to attract enough investors, Damac will be able to set a precedent for other companies operating in the UAEs more volatile sectors.
So far, companies that previously listed on the London Stock Exchange – including Abu Dhabis NMC Health and Al-Noor Hospitals Group – operate in areas set for stable growth. Planned offerings by other companies, such as Gulf Marine, are also set to raise demand as maritime firms are governed by international law.
Damac operates in quite a different environment. Dubais volatile property prices have risen 30.6 per cent over the first half of 2013, but investors have not forgotten the 2008/2009 crash, which led to prices to drop by more than half. In addition, the property market requires a thorough understanding of the emirates local laws and regulation.
Developments over the past year may have changed perceptions, however. Tighter regulation on the development of off-plan property and the strong performance of Emaar Properties Dubai-listed stock may convince investors to take on the risk. Lower interest rates globally add another incentive to consider investment in riskier, higher yielding emerging markets stocks.
If the offering does generate sufficient take-up, that could be the beginning of many more major companies going public.