‘Savvy’ investors snap up DEWA shares

• The MENA region is enjoying surge in IPO markets amid global downturn
• Middle Eastern floats have pulled over $10 billion in 2022, overtaking Europe for the first time since late 2019

Plenty of mystery surrounds the listing of Dubai utilities giant DEWA, the Middle East’s largest IPO since the floating of Saudi Aramco in late 2019.

When CNBC’s Dan Murphy organised an interview with DEWA’s CEO, he hoped to extricate some details from the infamously secretive boss. 

Amid surging shares following news of the float, Saeed Mohammed Al-Tayer sat down with Murphy — mic’d up and ready for questions — only to suddenly flee from the prearranged interview, leaving Murphy, and the MENA business community, waiting for answers.

• DEWA IPO bodes well for Dubai’s asset sale

The UAE’s largest IPO, announced by the leadership of the city, has so far been a tremendous success, with 37 times oversubscription for shares, giving plenty of confidence to the city’s market. The Dubai Financial Market’s CEO Hamed Ali said the consumer demand was testament to the infrastructure and connectivity of the capital markets and the strength of Dubai in general. 

A revolutionary rush to privatising publicly owned companies is expected to follow after the DEWA listing, with Salik, a road toll operator, Tecom, which runs business parks, and cooling systems firm Empower all in line for a float.

The DEWA float comes amid a broader Middle Eastern IPO boom that has seen the region pull ahead of Europe for only the second time since the financial crash, with regional investors pumping hydrocarbon-fueled cash to work in the markets. 

At the end of March, the region’s floats have pulled $4.8 billion this year, well above the $3.9 billion that European floats have boasted. DEWA’s IPO has pushed the region over the $10 billion mark. The last time it enjoyed this lead over Europe? The Aramco IPO. 

AIi said: “Ten of our crown jewel government-owned assets will be listed on the exchange,” but the exchange’s boss has termed the floats as a move to drive “the growth of capital markets” more than a “privatisation programme.”

But regardless of how Emirati financiers wish to spin the IPOs, it’s important to note that a culture of privatisation and citizen investment will be catalysed by the floats. 

Daniel Pryor, Head of Research at the London-based free market think-tank the Adam Smith Institute, said: “It’s no wonder Dubai is embracing privatisation: a surefire recipe to boost economic development and improve infrastructure. Just as ordinary Brits continue to benefit from the Thatcher-era privatisations today, Emiratis can look forward to more investment in higher quality services, greater innovation and direct financial benefits if they end up becoming shareholders.”

Ali seems to agree, telling the Daily Mail: “We do have a culture of private investing in shares. The culture of the stock market among individuals is strong. People are financially savvy.”

And this savviness could bring them a lot of investment profit if they exploit the offerings being listed on the DFM.

Pryor told me that as oil-rich MENA nations look to adopt a leaner, greener public image and financial growth strategy, Emiratis and expats stand ready to benefit: “The selling off of government-controlled assets will invite more competition into stagnant markets, offering smart investors an opportunity to reap the rewards of a booming Emirati economy.”

Ali’s hopes for the growth of Dubai’s capital markets are already being satisfied, with the DFM set to achieve a Dh3 trillion market capitalization with the DEA float. DEWA’s retail offering was 37 times over-subscribed, with investors looking for sizable returns from a company that boasted a 2021 net profit hike of 75% amid a surging demand for electricity in the emirate. The company’s shares surged by 23% after listing on Tuesday, with DEWA holding a market value of $39 billion, the largest on the DFM.

Savvy investors expect long-term gains, with demand for electricity tipped to buzz into new heights as local government officials anticipate the population to grow from 3.5 to 5.8 million by 2040. This growth, tied with changing working patterns from the pandemic and a renewed focus on green energy, bode well for investors betting on boosted electricity consumption.

Multiply Group, a tech-focused investment firm, invested $100 million into DEWA at the IPO. Its Chief Executive Samia Bouazza said: “As one of the cornerstone investors, we are excited about what the future holds for one of the region’s leading fully integrated utilities companies, especially its strategy for energy transition to net zero by 2050,” adding: “We remain confident that our investment will generate substantial, long-term value for our shareholders.”

And that confidence can be felt globally. The DFM is open to investors of any nationality based in any country. British investors who turned a profit after the Thatcher-era privatisation of utilities in the 1980s might be looking optimistically at Dubai’s move to offer up energy assets to the markets.