Dubai’s Emaar Properties prices at top end in IPO

Emaar Properties prices malls unit IPO at top of range
Emaar Properties prices malls unit IPO at top of range   

The shopping malls unit of Emaar Properties, Dubai's largest listed builder, has priced at the upper end of analysts' expectations, setting the stage for the United Arab Emirates' biggest public offering since 2007.

Emaar Properties said on Monday that it had priced shares for its new Emaar Malls Group (EMG), at 2.9 dirhams (79 cents), valuing the firm at close to $10.3 billion. It will begin trading on the Dubai Financial Market (DFM) on Thursday.

Emaar Properties is listing 15.4 percent of EMG, in a IPO that is expected to raise $1.58 billion. The firm said that the retail tranche of the deal was 20 times oversubscribed and the institutional tranche was 30 times oversubscribed.

"The pricing corresponds to a relatively aggressive, but fair valuation of the Emaar Malls business," Mohammed Kamal, director of Equity Research at Arqaam Capital, explained to CNBC.

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"The group's primary asset, the Dubai Mall, continues to capitalise on rising tourist numbers and consumer retail spend. Emaar Properties stock remains a proxy trade into the Dubai growth story."

The listing of one of the Emirate's best-known brands has been eagerly anticipated in the region for weeks. Emirates NBD, a leading retail bank in the area, has offered shares through its ATM network, with close to 3000 investors subscribing through the service.

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The launch comes on the heels of the IPO of Marka, a Dubai retail brand with a small asset portfolio, which surged 59 percent at its debut last week. The offering broke a five-year IPO dry stint for the DFM.

Now, there is a sense of excitement ahead of the EMG launch that is reminiscent of Dubai's lofty IPO days of 2007, when port operator DP World raised $4.96 billion in a record-breaking listing.

As with EMG, DP World's launch was heavily oversubscribed (by 15 times). However, shares faltered when trading began. Two years later, its financial status was downgraded to "junk" during the 2009 Dubai debt crisis.

Stretched valuations?

Unlike Kamal, some analysts argue valuations for EMG looked stretched.

In addition, Rehan Akbar, analyst at credit ratings agency Moody's, told CNBC that the intention to distribute IPO proceeds was "credit negative" for Emaar Properties.

However, he added: "The EMG listing ticks a number of boxes including its role as a catalyst for future IPOs, promoting Dubai's growth story and deepening its stock market, and providing a windfall gain to shareholders."

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Dubai's economy expanded 4.2 percent year-on-year in the first quarter of 2014 led by the manufacturing sector, slightly faster than the 4.1 percent recorded in the same period last year, according to recent data from the Dubai Statistics Center.

The DFM, which was upgrading to emerging market status by index compiler MSCI in June, has gained over 50 percent this year, which has been marked by major volatility.

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