Alec IPO could start listings rush in construction sector

Alamy

• Dubai owner ICD considers listing
• UAE building sector growth expected
• Other companies could follow

A listing by Dubai’s Alec Engineering and Contracting could open the gates for more construction-related companies to go public as they take advantage of the country’s buoyant property market, according to a business expert.

Alec, which is backed by the Investment Corporation of Dubai (ICD), the emirate’s sovereign wealth fund, is behind some of the Gulf’s biggest projects, including the UAE’s first casino in Ras Al Khaimah and Saudi Arabia’s entertainment city Qiddiya.

ICD is looking at a potential initial public offering (IPO) for the company, according to reports this week from Bloomberg.

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“As market conditions evolve and companies seek to capitalise on growth opportunities, we may observe an increased interest in listings,” said Jelena Janjusevic, associate professor of finance at Heriot-Watt University Dubai.

ICD, the principal investment arm of the government of Dubai, acquired Alec in 2017 from Abu Dhabi’s Al Jaber Group. Alec’s projects include SeaWorld Abu Dhabi and Sofitel Dubai Downtown

• UAE’s first casino resort in Ras Al Khaimah appoints builder

• Dubai tests modular building to cut demand down to size

• Project overruns remain but payment issues improving

In an interview with AGBI in October last year, Alec’s CEO, Barry Lewis, revealed plans to double the company’s business over five years.

In order to achieve that, he said, the company needed year-on-year growth of between 15 and 18 percent.

When asked specifically about an IPO, Lewis said: “At the moment we are comfortable with where we are. Our growth strategy and our plans are in place. There’s no talk of it.”

Alec was contacted by AGBI for comment.

The UAE’s construction market is expected to grow by more than 3 percent a year between 2024 and 2027, the latest Mena Construction Intelligence report from the real estate consultancy JLL said.

This will be led by increased investment in the infrastructure and real estate sectors including residential, hospitality, mixed use and commercial real estate.

The UAE construction sector has had problems recently. Arabtec, the company that built the Burj Khalifa and Emirates Palace Hotel, ceased operations in October 2022. Other major players, including Drake & Scull International and Union Properties have also experienced difficulties.

However, Janjusevic said: “Despite the ups and downs faced by other construction giants, Alec seems ready to take this leap. This confidence likely comes from their solid track record, their own operational strengths, project portfolio, and their ability to stay agile in a market that’s always on the move. 

“These strengths help Alec stand out and could make investors more interested.”

Nearly 30 companies in the Middle East and North Africa plan to launch IPOs this year, despite mixed share price performance from many regional businesses that went public last year, a report by the consultancy EY said.