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ADNOC IPO successful but below hoped valuation

Shares of ADNOC Distribution rose as high as AED 2.90 per share from 2.50 at initial bid the first day the company was listed on the Abu Dhabi Securities Exchange (ADX), and later dropped to 2.75.

Bloomberg said ADNOC raised $851 million from the sale of 1.25 billion shares.

Sultan Ahmed Al Jaber, chief executive officer at ADNOC had announced a share sale for its retail fuel stations unit at the Abu Dhabi Petroleum Exhibition & Conference (ADIPEC).

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“We will go at least 10 per cent of the shares we plan to float on the ADX market,” said Al Jaber. “But we’re not seeking a valuation.”

Bloomberg said that when the company initially set a guidance for its fuel-distribution IPO between 2.35 dirhams to 2.95 dirhams per share, it implied a valuation of just above $10 billion, but at $2.50, the valuation was $8.5bn, and sold just 10 per cent in this IPO.

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Who bought?

About 90% of Adnoc Distribution shares were bought by qualified investors, while close to 10 percent were sold to individuals, according to to ADX CEO Rashed Al Baloushi, who said a total of 12,000 investors from 73 countries participated in the IPO’s subscription.

“The offering was multiple times oversubscribed on the qualified investor tranche at a price of AED 2.50 per share. The retail or individual investor tranche of the offering was oversubscribed by 22 times on the original retail tranche size,” he said.

“Owing to this exceptional level of oversubscription, it was decided to increase the retail tranche size to 10 percent of the offering, allowing retail investors to further participate in this unique opportunity,” he added.

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Focus on oil

Oil is gaining again as supply cuts run to end 2018. Prices resumed its advance toward $58 and could hit $60 by year end for Brent.

The Adnoc IPO will be followed Aramco’s 2018 5% share sale of the $2trn company, though sector analysts Sanford C. Bernstein & Co. Placed it at $1trn-1.5trn,  whereas Tudor Pickering Holt & Co LLC, said it was closer to $1.1trn.

Regardless, the wait for Aramco’s IPO might benefit the oil giant as for one thing, oil is getting pricier, thus will return more for investors in it.

Reuters reported the Saudi energy ministry as saying Tuesday that it would announce increases in domestic prices of gasoline, jet fuel and diesel in the first quarter of 2018.

Saudi Electricity Company (SEC) announced higher power tariffs for residential users from Jan. 1.

“But the company said it would pay the government a fee equivalent to the rise in tariffs, so there should be no positive impact on its profit,” said Reuters.

Slot this as creative subsidizing. Subsidise the sector but make it more expensive on paper so as to make the commodity (Diezel fuel) more appealing to investors.

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Emaar IPO update

Accordinto Reuters, Emaar said it would pay a special dividend of$1.1bn related to its listing of Emaar Development: $0.82bn in January and $0.28bn following its annual general assembly in April 2018.

“That works out to a dividend of 0.56 dirham a share. The market had originally expected Emaar to distribute about 1 dirham per share, and expectations had then been revised to around 0.67 dirham based on the assumption that the entire proceeds of the 20 percent listing would be paid,” said Reuters.