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Emaar Malls Group IPO too expensive and heading for Facebook-style flop? [ArabianMoney.net](ArabianMoney.net Via Acquire Media NewsEdge) The Emaar Malls Group is looking overpriced at about 30-times earnings at what may be the peak of its business cycle and could face a Facebook-style flop after its initial public offering, although those who bought Facebook when the shares fell have since done extremely well. EMG will be the UAE’s largest IPO since 2007 and raise around $1.6 billion for Emaar shareholders of whom the Dubai Government is the largest. Big market cap Yesterday Emaar Properties which owns the malls business, set a range of AED2.50-2.90 per share for the sale of two billion shares, leaving it with 84.6 per cent of EMG and 15.4 per cent of the stock in free float. Analysts said that the upper end of the range would mean a richly priced earnings multiple of 30, though there is no forward profit forecast. Emaar Properties itself trades at a multiple of 25. Still according to market rumors the EMG IPO has already been covered so the IPO is likely to be a success on Day One with a rise in the share price. The real test will be in the weeks to come. One possible outcome is a Facebook-style debut for EMG. Shares in this large IPO fell back for several months before being bought up by bargain hunters who have subsequently made a fortune. Where to next? The ArabianMoney investment newsletter (subscribe here) will examine this scenario more closely for its paid-for subscribers in the next issue. The opportunity may not open up, however, and there will be institutions and individuals who do not want to take that risk. We also continue to be concerned about the impact of this IPO on the whole Dubai Financial Market. It risks draining liquidity by encouraging buyers of the IPO to sell off their other shares to buy EMG. Given the uncertain outlook for global stock markets over the next few weeks this local liquidity drain could come at a particularly bad time. It will make the DFM more volatile than it would be without the IPO and deepen any shift the downside. (c) 2014 Peter John Cooper All rights reserved Provided by SyndiGate Media Inc. (Syndigate.info). |