Dubai’s Marka Jumps 59% In First DFM Flotation Since 2009

Shares in Dubai retailing and restaurants start-up Marka jumped 59 per cent on Thursday in the first flotation on the emirate’s main stock market since 2009, showing a hunger for fresh equity among local retail investors.

Marka shares closed at Dhs1.59 on the Dubai Financial Market (DFM), up from their initial public offer price of Dhs1.00. The firm raised Dhs275 million ($75 million), 55 per cent of its capital, in April via an offer that was 36 times subscribed.

The shares swung wildly on Thursday, hitting a high of Dhs2.00 and a low of 1.53, in massive volume of 119 million shares – almost half the number of shares sold in the IPO. Marka was by far the most heavily traded stock in Dubai, where the main index fell 0.2 per cent.

IPOs in Dubai dried up when the emirate’s financial crisis erupted five years ago, and since then restrictive listing requirements have encouraged several United Arab Emirates companies to float in London rather than at home.

But a strong rebound in Dubai’s equity and property prices over the past 18 months has revived investors’ spirits, and the Marka IPO appears to signal the start of a string of offers on the DFM.

Emaar Properties, Dubai’s top real estate developer, has attracted heavy demand for the much bigger IPO of its shopping malls unit on the DFM, which will end this week and is expected to raise $1.58 billion.

The huge oversubscription for Marka’s offer was partly a vote of confidence in Dubai’s travel and tourism boom. Founded this year by prominent United Arab Emirates investors, the firm plans to spend proceeds of the offer on opening fashion retail outlets, restaurants and cafes across the Gulf Arab region.

But because Marka is a start-up which does not yet have major underlying businesses, the stock mostly attracted retail investors; analysts at institutions contacted by Reuters said they had not assigned the stock fair value or target price estimates.

“We should expect the stock to fluctuate,” said Sebastien Henin, head of asset management at The National Investor in Abu DHabi. “The volume is likely to be dominated by retail investors.”

A Dubai-based asset manager said: “With no underlying business, it’s not an investment we would consider. I believe the IPO was dominated by retail investors.”

Khaled Almheiri, Marka’s vice chairman, said this week that the company was looking at possible acquisitions in the retail and hospitality sectors, but did not name the targets.

Marka says it has obtained rights to introduce six international fashion brands to the Gulf, including the CR7 footwear of soccer star Cristiano Ronaldo. It plans to open its first three store outlets in Dubai and Abu Dhabi in early 2015.

The company has said it aims over the next five years to open over 100 fashion stores, restaurants and cafes across the Gulf Arab region, where personal consumption is rising rapidly because of strong economic growth.

Marka’s 151 founders are a virtual who’s who of the UAE business community, including Jamal Al Hai, a top executive at Dubai’s airports operator, Abubaker Al Khoori, chairman of Abu Dhabi’s biggest real estate developer Aldar Properties , and Khaled Almheiri, founder of Evolvence Capital.

The firm obtained regulatory approval to list in Dubai as a “greenfield” company, meaning it did not have to file financial records for past years as existing companies would have to do. Greenfield IPOs were popular at the height of the UAE’s stock market boom a decade ago but then fell out of favour as financial storm clouds gathered.

Marka initially planned to list its shares on the DFM around the first week of June, but the market was hit by massive volatility that month. Two companies have listed shares on the smaller of Dubai’s two stock markets, NASDAQ Dubai, over the past 12 months.