Will the Amlak Finance IPO be a second Emaar?

Just over six years ago Emaar Properties launched itself in an Initial Public Offering. Investors doubled their money in a week and watched the shares rocket from Dhs10 to Dhs160 before they fell back to earth. Those who got out in time pocketed a fortune; the late comers were less fortunate.

Then as now the UAE stock market was on a clear rising trend. But the Amlak Finance IPO is different from that of its parent Emaar Properties in several important respects.

First, Amlak Finance is not a start-up. The company has a three-year record of soaring profits behind it, and the outlook for further strong growth on the back of the Dubai real estate boom.

Second, the UAE stock market has matured since the Emaar Properties IPO. Then there were no trading floors and the whole market was Over-The-Counter. The market was therefore less transparent.

Thirdly, the $200 million Amlak Finance IPO is a much smaller offering than the Emaar Properties flotation with a lot less hype and publicity. This should mean that the share price will stay in line with the rest of the banking sector, which is already the best developed sector on the UAE bourse.

So the chances for super-profits on the Amlak Finance IPO are not good for investors. But the shares still represent a chance to buy into the success of the growing UAE economy and the dynamic real estate finance sector. Both UAE nationals and non-nationals will also be able to buy the shares, unlike the original Emaar Properties IPO.

In addition, Amlak Finance has announced that it is going Islamic. This means that the highly liquid Islamic investment funds are likely to find the shares more attractive.

At the same time, Islamic rules mean that Amlak Finance will no longer require life insurance from its real estate borrowers, unlike its new rivals Mashreqbank and Rakbank. Thus borrowing from Amlak Finance will be cheaper, a clever move in a competitive marketplace.

Amlak Finance looks sure to consolidate its position as a market leader in Dubai mortgage finance and as a play on the Dubai real estate boom looks a good investment.