Gulf News - ADNOC Gas sets IPO price range at Dh2.25 to Dh2.43 in UAE's first IPO of 2023

Dubai: ADNOC Gas has set a range of Dh2.25 to Dh2.43 a share for its IPO, implying an equity value of Dh172.7 billion to Dh186.5 billion ($47 billion to $50.8 billion). Just over 3 billion of its shares are to be released through the IPO.

The size of the IPO will be between Dh6.9 billion to Dh7.5 billion). The final offer price is to be announced on March 3. The price range is within what analysts had been expecting, and works out to a 6.5 per cent yield based on the stated dividend policy.

ADNOC Gas can also lay claim to be the biggest IPO so far this year worldwide. On annual dividends, the company had earlier announced a base of $3.25 billion.

Meanwhile, 'cornerstone investors' such as ADQ and IHC have collectively committed to $850 million in the IPO.

ADNOC Gas will be the fifth ADNOC subsidiary or JV that will have a presence on ADX.

ADNOC Gas has access to 10 billion standard cubic feet per day of gas processing capacity.

The company meets 60% of the UAE’s sales gas needs.

It has access to 95% of UAE's natural gas reserves, estimated to be the 7th largest natural gas reserves globally.

Sign up to UAE's energy future

Investors thus get a chance to be part of a company that will have an integral role in the UAE's ambitious energy development programme, with recent gas finds adding to the luster. ADNOC Gas recorded a net income of $3.6 billion in 2021 and in the year to October 2022, that went up to $4.2 billion. (Obviously, the demand and sharp escalation that gas prices recorded last year helped.)

In the first 10 months of 2022, its adjusted revenues topped $21 billion.

The subscription period has opened and will run through to Wednesday (March 1) for the UAE retail offering. (ADNOC Gas could increase the size of the offer if such a need arises. Allotment notifications for UAE retail investors will be sent March 8, with refund of surplus investments and dispatch of allotment letters also from the same day.)

Employees of ADNOC group firms residing in the UAE and UAE National retirees from the ADNOC group (and residing in the UAE) are also part of the retail offer.

The book building for the IPO is also off the blocks, and continue until March 2 for qualified investors. The completion of the offer and admission onto ADX is expected on March 13.

"A competitive valuation with superior visibility of earnings and high dividend yields offers investors in ADNOC Gas a perfect theme of value and growth," said Sameer Lakhani, Managing Director of Global Capital Partners. "And that makes it a necessary component for any long-term investor."

Cornerstone investors

On February 22, ADNOC had entered 'cornerstone' investor agreements with Abu Dhabi Pension Fund, Alpha Wave Ventures II LP, IHC Capital Holding llc and OneIM Fund I LP, which have committed to subscribe for shares in the offering in amounts of $125 million, $225 million, $50 million, and $225 million, respectively.

Also, entities 'ultimately controlled by ADQ and Emirates Investment Authority have committed to subscribe for $150 million and $75 million. (They will participate in the qualified investor offering at the final offer price.)

In aggregate, the cornerstone Investors have committed up to $850 million in the IPO, subject to the final offer price and based on the current offer size. Their shareholding is subject to a 12-month lock-up arrangement.

The recent ADNOC-affiliated IPOs from 'Fertiglobe and Borouge were heavily subscribed and gained much traction," said Vijay Valecha, Chief Investment Officer at Century Financial. "Fertiglobe posted net revenue of $1.3 billion, a growth of 75 per cent compared to the year prior, while the share price more than doubled to Dh3.98 from October 2021. Borouge announced revenues of $6.7 billion, an increase of 8.2 per cent compared to 2021 and a profit of $1.4 billion, in line with market expectations."

Busy IPO season

Oman and Saudi Arabia have their own first-of-2023 IPOs running, in what promises to be a strong year for GCC entities thinking of going public. Saudi Tadawul could end up listing more than 20 of these this year.

"Foreigners have remained net buyers of GCC equities for the last 23 consecutive months," said Junaid Ansari, Senior VP of Investment Strategy and Research at Kamco Invest. "That said, net buying by foreigners during January 2023 was at a six month low of $350.3 Mn (excluding Bahrain), mainly led by a seasonal slowdown.

"We believe that GCC markets are the bright spot in the global emerging market universe, offering fundamentally strong stocks, a stable investment environment and significant untapped potential. As a result, we expect to see foreigners taking significant interest in IPOs in the region."