Dubai Financial Market PJSC (DFM) Initial Public Offering (IPO) is coming soon. It could be "coming soon ..." for a while though. Watch this space .
So far it seems that only 20% of shares in DFM will be offered to the public (no information yet regarding foreign ownership) with the remaining 80% held by the Dubai government. Probably a good one to consider.
[edit] Changed title from "DFM PJSC - 20% IPO coming soon ...", [/edit] _________________ UAE IPO list | posting guidelines
Last edited by sharewadi on Sun 24 Dec 2006 16:11; edited 5 times in total
DFM public issue closer to reality
By Arif Sharif and Ahmad Ameen, Staff Reporters
Dubai and Abu Dhabi: The formation of the founders committee of the Dubai Financial Market (DFM) is a step towards its initial public offering, officials said.
"This is one of the requirements of the industry that there would be a founders committee and this notification fulfils that requirement," Eisa Kazim, director-general of DFM, told Gulf News.
DFM will offload 20 per cent of shares in the IPO.
His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, yesterday issued a decree forming the founders committee to transform the DFM into a joint stock company.
Positive development
"It is definitely a very positive development which will support the UAE's financial market towards applying international practices and standards. It is a step in the right direction," a source from the Emirates Securities and Commodities Authority said.
The committee is responsible for handling all the necessary legal procedures to convert the Dubai Financial Market into a joint stock company in which the Dubai government will hold an 80 per cent stake, leaving the remainder to the public.
The move comes at a time when the region's stock markets are struggling to remain buoyant.
Analysts said the move might not stimulate the market.
Besides, the Abu Dhabi Securities Market may not follow suit.
A senior ADSM official told Gulf News, "This decree was expected. As for ADSM, we have no intention for the time being to partially or fully float the way DFM did."
DFM IPO is coming by the end of 2006, so there's the question of "when?" answered.
I believe that any other stock market that has gone public has done well. Makes sense. Once you get set up, operating costs are probably minimal compared to revenue. And with the number of companies rumored to be considering going public, there's more opportunity for trading fees, listing fees, and various other fees.
Gulf News 18 June 2006:
Public issue launch by end of year
The initial public issue of the Dubai Financial Market (DFM), that will offer 20 per cent of its equity to the public, is likely to hit the market before the end of 2006, director general Eisa Kazim said yesterday.
Kazim added the DFM had nearly completed documentation for the IPO, some of which had been submitted to authorities.
He said the value of the offering had not been decided yet and the current slump in the local market would not affect the issue's timing. Dubai Financial Market posted a net profit of Dh1.3 billion in 2005.
Dubai Financial Market (DFM) issues a profit warning for 2006. Some rather blase comments from the Mr Kazim, the Director-General (CEO?). Someone in that position should hardly be saying he doesn't have any idea what his company's profits for the year should be .
Gulf News 05 October 2006:
DFM unlikely to report better profits this year
By Arif Sharif, Staff Reporter
Dubai: The Dubai Financial Market (DFM) - poised to float an IPO this year - may not report profits in 2006 that are better than last year's Dh1.3 billion despite an increase in trading values, its chief said yesterday.
The six-year-old Dubai exchange, which lists 41 companies, has been valued at Dh8-Dh10 billion and is likely to raise at least Dh1.6 billion in the IPO with its planned 20 per cent share sale.
"I really don't know. The trading fluctuates, one day it is Dh200 million and the other day it is Dh1.6 billion," Eisa Kazim said, when asked about DFM's earnings in 2006.
"The activity is certainly better than last year, but of course we lowered our fees by 30 per cent if you remember at the beginning of the year," he said after the listing ceremony for Aerated Concrete Industries Company.
Average daily trades on the Dubai Financial Market rose to an average Dh1.63 billion in the first five months of this year from Dh1.4 billion in 2005.
Kazim said DFM was upgrading its trading systems and had just spent Dh11 million on new IBM machines to cope with the current volumes at the exchange.
It has also signed a $1.3 million contract to upgrade its trading software with Swedish company OMX and expects it to be installed by the first half of 2007.
DFM IPO before end of year with 20% of equity floated
MacSharaf Securities? Haven't heard of them, can't find them listed on DFM or ADSM site but zawya.com has a reference to MacSharaf Brokerage with the same general manager name. They say as early as mid-November. Director of DFM says by the end of the year. Maybe that'll mean January or February 2007 then ...
Emirates Today 30 October 2006:
DFM IPO ‘as early as mid-November’
NIKHIL LOHADE BUSINESS REPORTER
The Dubai Financial Market’s (DFM) initial public offering (IPO) that is expected to raise up to Dh2.20 billion could put the brakes on an expected market recovery post Ramadan.
Speculation is rife that the IPO is scheduled to hit the markets soon and that could dry up market liquidity with investors flocking to buy DFM shares, market sources said.
Nour Al Zoubi, general manager at MacSharaf Securities, said: “The markets are expected to firm up post Ramadan with the return of liquidity but this recovery could be hampered by the DFM IPO that is expected as early as mid-November.” Investors could pull out money from the secondary markets to invest in the IPO, besides, cash destined for the markets could be diverted to it, another broker added.
Declining to comment on the exact date for the DFM IPO, Essa Kazim, Director General of DFM, said: “The IPO will definitely be launched before the end of the year.” DFM will offer 20 per cent of its equity to the public and the IPO will be lead managed by Dubai Bank along with First Gulf Bank and Emirates Bank.
IPO price 1 dh per share.
Trailing PE 6.25 at that price.
2005 profit Dh1.25 billion on total revenues of Dh 1.29 billion. What ? Is that correct? Profit margin of 97%?
Earnings likely to be less for 2006 than they were for 2005.
Total capital AED 8 bn but AED 6 bn owned by Dubai Government.
Foreign investors can buy up to 680m shares or 8.5% of the IPO.
I'd expect this one to be heavily oversubscribed and worth buying into. No information on which banks are offering lending yet.
Gulf News 05 November 2006:
DFM initial public issue opens on November 12
Staff Report
Dubai: The initial public share offer of Dubai’s stock exchange will open on November 12 and raise Dh1.6 billion through the sale of 20 per cent of its equity, the market said yesterday.
Each of the 1.6 billion shares in the IPO, which will close on November 23, will be priced at Dh1, the Dubai Financial Market (DFM) said in a statement.
Investors will also pay an “offer cost” of Dh0.03 for each Dh1 share to cover all IPO expenses.
DFM said the Ministry of Economy has approved its a paid-up share capital of Dh8 billion comprising eight billion shares, all owned by the Dubai government.
“DFM’s IPO is unique considering that it is the first listing of a stock exchange in the Middle East and I’m confident that it will herald a new trend in the region,” Eisa Kazim, DFM’s director-general, said in the statement.
Forty-five per cent of the upcoming IPO or 720 million shares will be a preferential share allocation to specified investors while the remaining 55 per cent or 880 million shares will be available to the public, the statement said.
The IPO is priced at a price-earnings multiple of 6.25 to DFM’s previous year’s per share earnings and a steep discount to the overall market’s trailing price-earnings multiple of 15. DFM reported a net profit of Dh1.253 billion in 2005 on total revenues of Dh1.289 billion.
Kazim said last month that the market’s profit in 2006 may not be better than in 2005 since it had slashed its fees this year.
Dubai Bank (DubaiBank) is the lead arranger, financial adviser, manager and book runner for the IPO.
As of October 31, DFM listed 44 companies, six bonds and sukuks and 11 mutual funds.
The market, which provides listing, trade execution, clearing and settlement as well as data and information services, has a network of 90 brokers.
Just found an older article in the Gulf News from 03 Nov 2006 reporting on an analysis in MoneyWorks magazine.
PE for 2006 expected to be less than 6 based on earnings guess and IPO price of 1 dh. You might see price on floating to at least double and probably triple ie 3 dhs per share or so.
Ernst and Young valued DFM at between 8 and 12 billion dhs. That would mean that at 1 dh per share, you're buying in at book value or less. Unusually low - but that's something to do with IPO rules in the UAE and part of the reason why IPOs have been so hugely oversubscribed.
However, I'm not sure what sort of valuation that is. Presumably assets but I really wonder what on earth DFM has that's worth so much. A few computers, a floor at the Dubai World Trade Center (which is probably leased), and erm, what else? I know I'm way oversimplifying the situation but 8 billion dhs is a huge sum of money. That's not far off the equity that was injected into EMAAR when it had its rights issue last year. _________________ UAE IPO list | posting guidelines
Last edited by sharewadi on Tue 27 Feb 2007 09:44; edited 1 time in total
Some good news today for punters wanting a stake in the DFM IPO with today's announcement the DFM Islamic stock market conversion. Also I see full page advertisements in the press listing the details and terms & conditions of the DFM IPO - oddly, at the end of the sports section in Emirates Today .
For enquiries, we're told to call Dubai Bank on 800-5555, any of the other receiving banks, or visit www.dfm.ae. However, I can't find the information on the DFM website except for the press release from 04 November 2006. There's an IPO link on their site but that takes you to a PDF file (dated from 2001) telling how you can take your own company public through an IPO.
Some information that's relevant (from newspapers):
Date of subscription 12-23 November 2006.
Start date of allotment and refunds 10 December 2006.
Listing date not given - it will probably be a month or two after subscription close.
Anyone can buy shares - with minimum age 21 years.
I don't see it stated in the terms but I'm sure you'll need a DFM investor card.
Lead Bank is Dubai Bank (not the same as National Bank of Dubai), co-leads are EBI and FGB.
Receiving banks are (they'll have prospectuses and subscription forms):
The Dubai Financial Market (DFM) IPO starts tomorrow. Reuters are saying that PE (Price/Earnings ratio) is about 10 based on 2006 earnings and IPO price of 1.03 dhs. That's up a bit from the PE of 6 based on 2005 earnings since 2006 earnings are down (and an adjustment to my guess of 6 for PE from 2006 earnings).
If LSE trades at PE of 26, NASDAQ and NYSE both around 50, then you could see DFM share price hit 2.60 to 5 dhs on flotation for it to have a similar PE. But as average PEs for stocks on DFM and ADSM are only about 13-14, I suspect the float price will be at the lower end of that range. My pick would be about 3 dhs.
What will make a difference is estimates of 2007 earnings. If DFM index is due for some sort of recovery, and trading volumes increase, then there should be a good rise in 2007 earnings. Add to that any fee income for new listings - I think there's quite a number in the pipeline. By this time next year, 3 dhs a share may look quite cheap.
Good luck .
Reuters 11 November 2006:
DFM shares sale starts tomorrow
DUBAI — Dubai’s stock exchange will become the first in the Arab world to sell its own shares when a $435 million private and public offering opens on Sunday after the the worst year for the region’s markets since 2001.
Dubai’s government is selling a 20 per cent stake, or 1.6 billion existing shares, in the Dubai Financial Market (DFM), one of two bourses in the United Arab Emirates, the second-largest Arab economy.
The sale values the exchange at 8 billion dirhams ($2.18 billion).
Dubai’s government, like others in the world’s top oil exporting region, has used its bourse to give citizens a share of the prosperity created by a tripling of oil prices since 2001.
It reserved 200 million shares in the offering for UAE nationals. Another 720 million shares have been reserved for a private share sale to government employees, brokerages and listed companies.
The remaining 880 million shares will be sold in an initial public offering, with 680 million of them open to foreign investors.
“The offering provides Arab investors (with) an exposure to an exchange for the first time. Many investors are interested in this exposure,” said Mohamed el-Nabarawy, an assistant vice-president at investment bank Shuaa Capital.
“This is a play on the DFM, a play on Dubai.”
The DFM will sell shares for Dh1.03, indicating a price-to-earnings ratio of 10 times expected 2006 earnings — one of the cheapest stock market valuations in the world.
The P/E of the London Stock Exchange is 26.25, while The Nasdaq Stock Market trades at a P/E of 49.20 and the NYSE Group Inc., owner of the New York Stock Exchange, at 50.10.
The DFM’s valuation is likely to fall into line with its peers once it lists.
Wow. "Bankers" expect 200-250 times oversubscription for the part of the DFM IPO open to all nationalities. But they say there's 880 million shares in that portion. I thought it was 680 million .
Anyway, I was working on an assumption of 100 times oversubscribed. At that rate if you plonk down 100,000 dhs (+ the 3,000 dhs fees), you'll get 1000 shares. Sell them as soon as the bell dings when they float and you may get 3 dhs per share or 3,000 dhs. A profit of 2,000 dhs. But remember the opportunity cost of that money being tied up. At least you'll get the excess funds back in December, if what they say is correct. So you'remissing out on a month's interest at the bank if you were to deposit that 100,000 dhs instead - say about 400 dhs if you could get 5% per annum. Or borrowing cost if you leverage - probably about 800 dhs or so.
Of course, if the demand isn't as high as anticipated, they may only float at 2 dhs and your profit isn't looking quite so attractive then. Even worse if the IPO is 200x oversubscribed as expected (but I don't think that will happen).
Low uptake could be because banks don't have the forms? At least the one I tried on Wednesday didn't. NBD said only a few branches had the application forms - Umm Suquiem, Sharjah, other emirates, and one more in Dubai but I forget which one now.
Khaleej Times 16 November 2006:
Dh1.6b DFM IPO gaining momentum
BY BABU DAS AUGUSTINE (Assistant Editor)
DUBAI — Dubai Financial Market's (DFM) Dh1.6 billion initial public offering (IPO) which got off to a slow start, is fast gaining momentum with the issue already oversubscribed by more than 6 times, according to investment banking sources.
At the close of fourth day yesterday, many banks said the initial investor response has been less than what was expected. “We were prepared for big crowds like the ones we saw during the past IPOs such as Dana Gas and Aldar Properties. We are yet to see such response,” said an official with one of the receiving banks.
The IPO has 16 receiving banks. The record number of branches accepting applications is also said to be a reason for the absence of big crowds outside bank branches.
DFM shares are offered at Dh1 plus a service charge of 0.03 per share. The 1.6 billion shares on offer are divided into two offerings, the private offering of 720 million shares and public offering of 880 million shares.
The preferential allocation is meant for specified investors and includes the current national employees of the Government of Dubai, employees of government owned companies, retired nationals from Dubai as well as companies where the Dubai Government owns not less than 99 per cent of its equity.
Other segments of the private offering comprise stock brokerages and listed companies.
According to analysts the overall poor performance of the UAE and GCC markets during recent months has also dampened the investor enthusiasm. However, the DFM IPO with several different tranches are expected to be successful in all segments of the offer.
The General Tranche of the IPO open to all nationalities comprises of 880 million shares. Bankers expect this portion of the IPO to be oversubscribed between 200 to 250 times.
“Usually the big investors start subscribing towards the end of the offer period. The issue is open through November 23 and we expect huge subscriptions during the last few days,” said an investment banker.
Banking industry sources indicated that there has been substantial decline in demand for leverage.
This report says the DFM IPO may be 50x oversubscribed. But that sounds like as much of a guess as my earlier 100x estimate . A couple of other recent IPOs and their oversubscription rates were ...
So previous IPO experience would indicate a higher figure than 50x oversubscribed no?
Gulf News 21 November 2006:
DFM offer likely to be oversubscribed 50-fold
By Arif Sharif, Staff Reporter
Dubai: The Dh1.6 billion Dubai Financial Market (DFM) IPO could be oversubscribed 50 times as it is attractively priced and likely to attract strong institutional interest, a banker said yesterday.
The DFM initial public share offer, the first by a stock exchange in the region, will close on Thursday after opening on November 12.
"In the context of investor sentiment otherwise being poor in the secondary market, this is a fairly priced opportunity," Suresh Kumar, chief executive of Emirates Financial Services (EFS), told Gulf News.
"The valuation is reasonable and there will be strong institutional interest."
Price-earnings
Kumar said judging by the experience of previous UAE IPOs, the current issue could be oversubscribed 50 to 70 times.
At its offer price of Dh1 per share, the DFM IPO is priced at a price-earnings multiple of 6.38 to 2005 earnings and 9.88 times to its forecast 2007 earnings.
Kumar said a price-earnings multiple of 8-12 was reasonable for stock and commodity exchanges. The overall UAE market currently trades at 13.88 times its trailing four quarter earnings.
Investment bank Emirates Financial Services is a collecting institution for the initial public share offer.
EFS' parent, Emirates Bank (EBI), is a co-lead manager processing bank for the IPO.
Earlier this year, the Dh2.4 billion du IPO was oversubscribed 167 times and the Dh550 million Tamweel IPO, 485 times.
Shares in the UAE usually jump after listing since they are priced at a discount to their fair value, resulting in a windfall for investors. Easy bank lending to subscribers also boosts oversubscriptions.
Bankers say a clear picture on the quantum of subscriptions is not obtained until the last two days of the issue when most institutions place their bids.
The DFM IPO is open to both local and foreign individuals and investors.
23 November 2006 - last chance to get your IPO shares for Dubai Financial Market.
10 December 2006 - refunding begins of subscription funds, and share allotment figures.
Listing date - ??
Previous post in this topic quotes a source saying 50-70 times oversubscribed. I read another article on the same day quoting someone else saying 30-50 times oversubscribed. We'll probably know more in the next couple of days. Good luck to everyone who bought in ... _________________ UAE IPO list | posting guidelines
A good collection of numbers in this article for any eggheads wanting to do a session on their slide rule . Although it's just academic now since the subscription period closed yesterday. Nice introduction ... "The world's worst-performing stock market ..."
Bloomberg 21 November 2006:
Investing: Line forming in Dubai for stock market IPO
By Claudia Maedler
DUBAI: The world's worst-performing stock market this year is going public, and the losses have not deterred investors from lining up to buy shares.
Dubai Financial Market (DFM), the first exchange in the Middle East to sell stock, is drawing investors who speculate that the shares will behave like other initial public offerings in the region and soar once trading starts.
"I expect this IPO will be about 30 to 50 times oversubscribed," Suresh Kumar, chief executive of Emirates Financial Services, said during an interview Monday. "It's been attractively priced by the government." Emirates Financial is one of the institutions receiving and processing bids for the shares.
Arab stock markets have tumbled in 2006 on concern that a four-year bull market has made shares expensive relative to the outlook for profit growth. Dubai's benchmark has plunged 64 percent this year, making it by far the worst performing equity benchmark tracked by Bloomberg. Saudi Arabia, Qatar and Abu Dhabi have also seen 40 percent or more of their value wiped out.
Dubai Financial Market is following in the footsteps of NYSE Group, the Chicago Mercantile Exchange and Bolsas & Mercados Españoles of Madrid in selling shares to the public. In the United States, Nymex, the largest marketplace for energy transactions, sold stock to the public last week. The shares more than doubled Friday, the first day of trading.
The FTSE/Mondo Visione exchanges index, which tracks 18 bourses, gained 75 percent this year.
Dubai Financial Market said this month that it planned to sell a 20 percent stake worth 1.6 billion dirhams, or $436 million. The exchange is selling 720 million shares to employees of the Dubai government, brokerage houses and listed companies. A further 880 million shares are being made available to other United Arab Emirates and Gulf nationals, foreigners and institutions with a minimum subscription of 15,000 shares for Emirates nationals and 100,000 for all others. The IPO, managed by Dubai Bank, is to close Thursday.
Each share is being sold for 1 dirham, plus a 3 fils administrative charge, Kumar said. That values the bourse at eight times 2005 earnings or 12 times forecast 2006 earnings.
Banks in Dubai have collected cash commitments of about 200 million dirhams for the IPO, and the "big ticket buyers will probably come in the 11th hour," Kumar said.
"DFM is a good deal for investors," said Haissam Arabi, head of asset management at Shuaa Capital, a bank in Dubai that is planning to buy the stock. "Investors are getting a piece of something that should be valued more when the stock market recovers."
Gulf companies could raise a record $8 billion from stock sales this year, Gulf Capital, an investment bank based in the Emirates, said in a report last month. Oil prices, which rose to a record in July, helped fuel economic growth in the region and increased demand for investments.
Demand for shares in IPOs exceeded supply by 47 times on average during the first nine months of this year, according to Gulf Capital. That compares with a 2005 average of 73.
The Dubai Financial Market's benchmark index lost 1.6 percent Monday to finish at 369.07 points. The measure was trading near its lowest level in almost two years. It has slid 15 percent so far this quarter.
"Strong regional interest in IPOs is a product of pricing, not trends in the market," said Simon Williams, an economist at HSBC Bank in Dubai. "Some of the region's IPO pricing in the past suggests that there has been an attempt to distribute some of the oil wealth to the larger population." He did not comment directly on the share sale of the Dubai Financial Market.
Economic growth in the Emirates will accelerate to 11.5 percent this year, according to the Web site of the International Monetary Fund. The country's economy expanded 8.2 percent last year, the Central Bank of the Emirates said.
The IMF forecast in June that oil- producing Arab states would earn up to $500 billion from crude sales this year, about $100 billion more than it forecast six months earlier.
Dubai Financial Market will post a profit of about 800 million dirhams in 2006, down from 1.25 billion dirhams in 2005 after the exchange reduced commissions to spur trading, Essa Kazim, director general of the exchange, said recently during an interview by telephone. As of the end of last month the bourse had 44 companies listed, six bonds and 11 mutual funds.
The DFM IPO was 300 times oversubscribed, and AED 190 billion was collected. Wow! So much for estimates of 30, 50, 70 times oversubscribed. So does that mean there's 189 bn dhs ready to flow back into the local markets ?
Er, not quite. There was bound to be a fair bit of leverage there but, all the same, there must a bit of cash floating about ready to go back into the markets. Excess funds are to be returned from 10 December 2006. There's no date given for date of listing of shares. There'll be a bit of a pop when they do I guess. The oversubscription amount means that subscribers will get very few shares so I'm wondering if many of them will want to buy more. Hard to predict how it will go.
DFM earnings for 2006 will be looking good from IPO income. A nice little bonus for all the banks involved too.
Press Release 26 November 2006:
Dubai Financial Market IPO oversubscribed 300 times collects approximately AED 190 billion
• Excess funds will be returned on December 10, 2006
• DFM Chairman thanks H.H. Sheikh Mohammed, local and international investors, and banks
Dubai: Dubai Financial Market (DFM) today announced that its landmark AED 1.6 billion (US$435 million) Initial Public Offering (IPO) collected about AED 190 billion with approximately 300 times oversubscribe. The IPO was opened on Sunday November 12, 2006 and closed on Thursday November 23, 2006. The DFM announced that excess funds will be returned on December 10, 2006.
Essa Kazim, Director General of DFM, said: “On behalf of the DFM, I sincerely thank His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of UAE and Ruler of Dubai, for his leadership and vision. I am also grateful to the Ministry of Economy for sanctioning the necessary approvals. Of course, I also thank local, regional and international investors for their strong support of the IPO, and our banking partners for their support as well. The extremely positive investor response to the IPO is an indication of their trust in the DFM, its future growth potential and market leadership status.”
Kazim continued: “The DFM is also especially grateful to Dubai Bank, which served as the Lead Arranger, Financial Adviser, Manager and Book Runner for the IPO. We also thank the many receiving banks for reaching out to investors across the UAE, the Gulf and Middle East using a range of innovative outreach programmes. The success of this pioneering IPO, which took place against a backdrop of regional market softness, is testament to the commitment of so many people and organizations.”
DFM is a trusted brand name and is the primary listing venue in the UAE for 44 companies (as of October 31, 2006), six bonds and Sukuks, and 11 mutual funds. DFM provides a gamut of services ranging from listing and trade execution to clearing and settlement, as well as data and information services. DFM has a network of 93 brokers. For the year 2005, DFM’s total revenues stood at AED 1.289 billion and net income stood at AED 1.253 billion.
Just to put the amount collected from the DFM IPO into a bit of perspective, that 190 billion dhs is apparently about a third of the GDP forecast for the UAE for 2006.
WAM 22 November 2006:
Sheikha Lubna predicts 23 percent GDP growth in 06
Dubai - The United Arab Emirates is set to keep the pace of economic boom during 2006 with the country's Gross Domestic Product expected to rise by 23 percent to Dh 597 billion, according to Economy Minister Sheikha Lubna Al Qasimi.
Addressing a celebration held in commemoration of the Dubai Office of the Japan Bank for International Cooperation, Sheikha Lubna quoted the International Monetary Fund forecasts as suggesting a massive 36 percent growth in GDP to Dh 648 in 2006.
"In 2005, the UAE recorded GDP growth figures of 26.4% over 2004, with a total official UAE GDP of Dh 485 billion or USD 132.15. According to International Monetary Fund (IMF) statistics this makes the UAE economy the 37th largest globally, even larger than that of Malaysia and Egypt. The UAE gross domestic product for 2006 is expected to reach Dh 597 billion, an increase of 23% on the previous year. That estimate is our own - the IMF has suggested that GDP will grow to Dh 648 in 2006 which is a growth factor of a massive 36% on 2005," she said.
Why was the DFM was so successful? By 'success', I mean that it was so well oversubscribed in a period where the market is in the doldrums. It remains to be seen how well the DFM stock performs on listing. But here's part of an article from today's Gulf News giving two reasons for the success of the Dubai Financial Market (DFM) IPO.
1. DFM Islamic conversion - yes, that makes sense (and the rest of the article is found in that topic).
2. "to launch its IPO in the midst of market turmoil" - I don't know why that would be seen as a good thing. Unless the idea is that all the investors with spare cash are more likely to put it into an IPO with a higher expectation of a return than a sagging stock market.
Gulf News 02 December 2006:
Islamic conversion boosted DFM IPO
Sohall Zubair, Special to Gulf News
The overwhelming response registered by Dubai Financial Market's (DFM) initial public offering in the midst of the market's lowest ebb during the last two years is mind-boggling for some investors.
It gets more intriguing considering the shorter subscription period of 12 days allowed to DFM by the authorities as per the new IPO rules, compared to the standard three weeks observed in the earlier offerings.
DFM launched its IPO to offload 20 per cent of its lower equity value of Dh8 billion - the higher end being Dh12 billion based on valuation carried out by Ernst & Young. By adopting the IPO route, DFM became the first bourse in the Middle East to go public.
Some observers in UAE financial circles have viewed that the shorter IPO duration coupled with quicker refund turnaround, besides DFM's distinction of being the first market in the Middle East to offer its equity to the public, generated greater-than-expected demand for its scrip. This is especially noteworthy during present times when some companies have shelved their planned IPOs until a better time.
Is there any other reason for the DFM's stock being so sought-after?
Bold steps
DFM authorities took two bold decisions this month and both paid off handsomely. The first one to launch its IPO in the midst of market turmoil and the other to convert the bourse into an Islamic entity.
In my opinion, the DFM's conversion into the world's first Islamic stock exchange prompted much wider participation by the investors from the entire Gulf region, especially from the UAE and Saudi Arabia.
The conversion also enabled the Islamic financial institutions (IFIs) to wholeheartedly participate in the collection of the IPO application money, which would have otherwise been unlikely.
Almost all IFIs leveraged their customers' subscription applications in a Sharia-compliant manner, which created strong demand for the stock.
A bit of a long press release (at least I presume it is) to say only 5 things, and leave out the bit everyone wants to know - how many shares did they get?
IPO collected AED 201.2 billion
Excess funds will be returned 10 Dec 2006
80 million (or 5%) of the shares are allocated to the Ministry of Finance.
684 million shares in the preferential tranche are allocated in the ratio 1:1
836 million shares in the public tranche but allocation not given. Funds amount was 200.5 billion.
But if I understand correctly...
200.5 bn / 1.03 / 836m = 232.85 meaning the ratio would be 1:232.85 ie 1 share for every 233 subscribed for (approximately).
So if you'd subscribed for 100,000 shares, you'll get 233 .
This is going to be very disappointing for some. At best, I don't see the shares floating at more than 3 dhs and I think 2 is more likely. But let's say I'm wrong and they float at 4 dhs. That'll net you 1000 dhs - a 300% increase on your 233 dhs investment. But opportunity cost of that 100,000 dhs is 0.4% per month based on bank deposit rate of 5% per annum, of 400 dhs. Plus the subscription fees (I'm assuming the excess is refunded - you only pay fees for the shares you receive so that's only 7 dhs at 3 fils/share). If you were leveraged, then any loan / interest fees need to be factored in.
Anyway, it doesn't look great, and if it floats at less than 3 dhs it means people are effecetively losing money. Of course, those who didn't bother, and left their money in DFM, lost money in the past month anyway ...
Khaleej Times 05 December 2006:
DFM announces share allocation
BY A STAFF REPORTER
DUBAI — Dubai Financial Market (DFM) has announced that share allocation of its Dh1.6 billion Initial Public Offering (IPO) has concluded and collected Dh201.2 billion. Excess funds will be returned to investors on December 10, 2006.
Essa Kazim, Director-General of DFM, said: "On behalf of the DFM, I would like to sincerely thank all investors for their strong support for the IPO. I would also like to thank our banking partners for their support. Investor response to this IPO is an indication of their trust in the company, its future growth potential and market leadership status."
"We extend our great appreciation and sincere regards to His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, and Ruler of Dubai. His directives have resulted in a high share distribution among UAE nationals, as well as a fair distribution amongst private and public categories," Kazim added.
Eighty million shares representing 5 per cent of the total offered shares are allocated to the Ministry of Finance, considering that these shares were deducted proportionally from all tranches as mentioned in the prospectus. Allocation of the offered shares in different tranches is as follows:
The preferential tranche of 684 million shares were fully subscribed.
All the subscribers in the preferential category including Dubai Government employees and retired employees have been allocated shares in the ratio of 1:1.
The public tranches of 836 million shares collected Dh200.5 billion.
I read the wrong newspaper first. Gulf News had the rest of the press release. Now I have to check my calculations again .
Good news for UAE nationals, they get at least 1000 dhs. Actually, that's not so exciting but it's better than a couple of hundred shares. Also, as that section was oversubscribed only 7.5x, the 8.74% of what was subscribed for amounts to an an additional 8740 shares for every 100,000 requested. Now we're talking about better numbers...
Non-UAE nationals only get 334 shares for every 100,000 subscribed for. Odd that it's more than what I calculated originally...
Gulf News 05 December 2006:
About 76,367 subscribers applied to the UAE national tranche of 190 million shares, which collected Dh1.4 billion and was oversubscribed about 7.5 times. The UAE national will get the minimum of 1000 shares plus 8.74 per cent of the rest.
The public tranche of 646 million shares collected Dh199 billion and was oversubscribed 308 times. The allocation is 0.334 per cent of the number of shares applied for.
fact file
Oversubscription
-- The public tranche of the DFM IPO, excluding the quota for UAE nationals, collected Dh199.5 billion and was oversubscribed 308 times.
----The UAE nationals tranche collected Dh1.4 billion and was oversubscribed 7.5 times.
-- Allocation of preferential tranches including retired and Dubai Government employees is to be 1:1.
The Gulf News had an editorial on the DFM IPO. Hmmmm A couple of things...
If the IPO floats at less than 2 dhs, investors who leveraged heavily (and the editorial claims up to 90% of the IPO money was with leveraged funds) are unlikely to agree that it was "good news". With several companies that had IPOs last year or this year now getting close to par value, and yet were 5 or 6 times on listing, I don't see the DFM IPO being a roaring success just yet. However, I was wrong in my estimate of it being 100x oversubscribed (on the other hand, I was less wrong than the industry gurus that said it would be 30 or 50 or 70x oversubscribed ).
Their figure of 25 more regional IPOs for 2007 conflicts with what I thought I read in the Nomura Bank report yesterday - 100 IPOs coming. But perhaps that's regional (Middle East) versus GCC.
Gulf News 06 December 2006:
IPO spreads good news all around
The Dh1.6 billion initial public share offer of the Dubai Financial Market has been oversubscribed 125 times and collected Dh201 billion.
The IPO's public tranche, excluding the quota for UAE nationals, has been oversubscribed a staggering 308 times.
Clearly, there is still a substantial amount of liquidity available in the region, although some 90 per cent of the collections is believed to have been raised through bank borrowings. There was just a hint of worry about the issue when it was announced in November.
UAE share markets had just begun to slide, triggered by a selloff in Saudi Arabia, which made you wonder if this was the best time for a public offering. And an IPO could have only further strained an already fragile secondary market.
But the IPO has sailed through and even though the secondary markets remain depressed, the IPO can hardly be blamed for it. Investors clearly see the DFM shares as offering potential for substantial gains. So the downturn in the secondary market has had little impact on the appetite for IPOs, which is good news.
IPOs are good for the economy, give investors greater investment options and help economic growth. There is a lot more to come. Investment bankers expect more than 25 issues to hit GCC's equity markets in 2007.
Now you know what DFM are going to do with all the IPO money - go shopping for acquisitions. An exchange in Europe? Wonder if it's the LSE (London Stock Exchange)? Now that would annoy NASDAQ a little I guess. But I'm not sure the DFM has AED 20 billion or so spare to put in an offer for the LSE.
Impressive to see expected profit for 2006 almost the same as 2005 profit.
Gulf News 19 December 2006:
DFM on the hunt for major acquisitions
By Mohammad Ezz Al Deen, Staff Reporter
Dubai: The Dubai Financial Market (DFM) seeks to acquire stakes in other companies that own and manage stock exchanges, a top official said.
It is expected to make a Dh1.25 billion profit this year despite the fall of the market, Eisa Kazim, DFM's director-general said yesterday.
"The DFM expects to get between Dh1.2 billion and Dh1.3 billion in profits this year - less than the Dh1.3 billion of 2005," he said.
DFM will list 14 new companies by the end of the first quarter of 2007.
"One of these companies is European. The DFM has received many inquiries from Europe, but we can't mention any details now," he added.
He told reporters the DFM plans to invest Dh2.6 billion in a variety of Sharia compliant investments, and to start investing in derivatives as well as cash products.
Kazim also said that his bourse did not sign any agreement with the Dubai International Financial Centre (DIFC) on dual listing.
"There is no dual listing agreement between DFM and DIFC," he said.
Kazim said the exchange will apply a new trading system in June 2007.
Dubai Financial Market (DFM) shares are expected to list after the AGM. Emirates Today thinks that "any time after that" means before the end of January 2007? They're probably right but I wouldn't be counting on it.
The DFM D-G claims the DFM IPO had nothing to do with the recent market slump. I dunno, 200 billion dhs is a lot of cash and had to come from somewhere. Ok, not all of it from the markets but I think enough to have had an effect. The timing seems to support that idea - and there's been a bit of a rally since 10 Dec 2006 when excess cash was refunded to IPO subscribers.
The derivatives trading should be interesting. Don't you wish you'd been able to buy a few Put Options this time last year
And DFM may list on DIFX? That's different from DFM and DIFX dual listings of other companies then. But there seems to be some confusion about DIFX and DFM dual listings.
Emirates Today 19 December 2006:
Trading in DFM’s shares to begin late next month
MATT SMITH BUSINESS REPORTER
The Dubai Financial Market (DFM) will list its shares in the second half of January.
DFM Director General Essa Kazim said the market is also considering a secondary listing on the Dubai International Financial Exchange (DIFX).
“The first annual meeting will be held on January 16 and we should be ready any time after that,” said Kazim.
The DFM was the region’s first to launch an initial public offering.This was oversubscribed about 300 times, attracting Dh200 billion from potential investors.
Kazim said the DFM would launch a derivatives market within six months.
“Most markets generate money from 50 per cent cash (equity) markets and 50 per cent through derivatives, so we have huge growth potential.” The DFM has signed an agreement with Swedish based OMX Group to introduce a derivatives system, which will also include options and asset classes.
The exchange will fulfil its Shariah-compliant status by separating profits from its equity and derivatives sectors.
Kazim said the DFM price-to-earnings ratio of eight to nine times was a key factor in attracting such strong investor interest and response.
“The Singapore and Kuala Lumpur stock exchanges are about 25 times, while those in the West are much higher, so we represent very good value for money.” He also dismissed many claims that the DFM IPO was to blame for the recent slump in the market’s liquidity, which saw the index plummet to a near two-year low.
“The correction was a reflection of a loss in confidence across the region,” said DFM director-general.
Dubai Bank (DubaiBank) says the profit from the DFM IPO could be AED 400 million. Nice. That's about 30% of the DFM 2006 profit forecast (two posts up). I wonder if that 400m figure was included when Mr Kazim made that statement. It would be prudent to base any valuations on the assumption he did. But what a healthy bonus if he didn't .
Emirates Today 19 December 2006:
Profit from Oversubscription
Dubai Bank yesterday announced that the DFM made a Dh400 million profit from investing the oversubscription it received for its IPO.
Abdulaziz Al Muheiri, Dubai Bank Chief Executive, said his company would continue to offer customers significant leverage to invest in IPOs, but levels would be considered on an individual basis.
The UAE’s five IPOs of 2006 were oversubscribed by an average of 192 times, compared to 67 times for Bahrain and just 5.5 times for Saudi Arabia.
Analysts say easier access to credit was a key factor in the UAE’s popularity, but consumer demand is likely to be less next year because of the domestic stock markets sustained correction.
Al Muheiri added Dubai Bank would be fully Shariah compliant in January.
(DFM) Shareholders reminder: Founding General Meeting of Dubai Financial Market today 16/01/2007 at 06:00 pm in Godolphin Ballroom at the Emirates Towers
If a quorum is not achieved, the meeting will be postponed until Tuesday 23 January 2007, smae time and venue.
If no quorum then, meeting will be postponed until Thursday 22 February 2007. _________________ UAE IPO list | posting guidelines
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? Is that correct? Profit margin of 97%?
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