INTERVIEW: IPO still on the cards, says UAE contractor ASGC, but no date set

Al Shafar General Contracting (ASGC) eyeing new projects in Africa, CEO says

Image used for illustrative purpose. Labourers work at a construction area in Dubai .

Image used for illustrative purpose. Labourers work at a construction area in Dubai .

REUTERS/Ahmed Jadallah
Dubai-based construction firm Al Shafar General Contracting (ASGC) is still considering the idea of holding an initial public offering, but its timing depends on improvements in market conditions, the company’s chief executive officer (CEO) has said.

“We have not dismissed the idea, but we don’t necessarily think market conditions are favourable for a construction company to go public immediately,” Bishoy Azmy, ASGC’S CEO told Zawya in an interview last week.

“So we are growing as a company and that (the IPO) is not something that is impacting our investment strategy or our growth strategy, but we still firmly believe in it in the long term,” he added.

ASGC had started preparations for an IPO in late 2015, and had then hired three banks as advisers to arrange for its listing on the Dubai Financial Market (DFM), Reuters reported at the time, quoting sources familiar with the matter.

But the process seemed to have been suspended due to the economic slowdown that hit the Gulf Cooperation Council (GCC) after the sharp fall of oil prices which began in 2014.

The market for IPOs has witnessed a slow couple of years, but the listing of shares in Dubai’s Emaar Development, Abu Dhabi’s Adnoc Distribution and several real estate investment trusts in Saudi Arabia in the final quarter of 2017 meant the amount raised on local exchanges climbed to $3.2 billion last year, compared to just $700 million in 2016, according to a research paper published earlier this month by Kuwait-based KAMCO Investment Company.

Azmy said that he believes that any private enterprise needs to move into the public domain at some point in time to remain sustainable, but he said it is not yet clear when his company will undertake such a move.

“Whether it (the IPO) is some time later this year or next year or some time this decade or next decade, it will be something we still want to do,” he said.

Azmy also said that he had followed the latest news about British construction company Carillion, which announced last Monday it had no other choice but to start insolvency procedures after banks refused to lend it more money, according to Reuters.

In the United Arab Emirates, Al Futtaim Carillion, a joint venture between Carillion and the UAE’s Al-Futtaim conglomerate, was awarded millions of dollars worth of projects, including work at Dubai’s Expo 2020 site.

Azmy said one of his company’s subsidiaries is working with Al Futtaim Carillion on projects in the UAE. “It yet remains to be seen how that (Expo) contract will be handled. Because the company (Carillion) here is a joint venture company with Al Futtaim, so we await to see how the company will react to the news that we heard yesterday,” Azmy said last Tuesday.

Al Futtaim Carillion has not responded to requests for comment from Zawya on matters relating to the collapse of Carillion, which has formally been placed into the hands of the Official Receiver – part of the UK government’s Insolvency Service, which will handle the company’s liquidation.

Major projects

Azmy said that his company, which was established in 1989, has participated in several mega-projects such as the expansion of Dubai Mall and the construction of City Walk in Dubai.

ASGC also runs a number of subsidiary companies offering building materials and other construction-related services.

It has partnered with several real estate giants such as Emaar Properties, Nakheel and Meraas Holding in projects in the UAE and Egypt, the second- and third-biggest economies in the Middle East after Saudi Arabia.

“We are currently not looking at Saudi Arabia,” Azmy said, without further elaboration. Saudi Arabia, the world’s top exporter of oil, reported a historic budget deficit of $98 billion in 2015, a figure that later shrank to $79 billion in 2016 and $61.3 billion last year. The kingdom expects this year’s deficit to stand at $52billion.

“We are looking at opportunities in African countries but as yet this is sort of still at exploration stage,” he added. He said the name of the company’s new African destination will be revealed at a later stage.

The company is heavily investing in real estate projects in Egypt such as Al-Futtaim’s Cairo Festival City in the New Cairo district and Emaar Misr’s residential Mivida project on the outskirts of Cairo.

“Egypt at the moment is going through construction boom, so we are open to growth in Egypt,” Azmy said.

Egypt’s economy was hit hard by an uprising in 2011, which scared some investors away. However, over the past two years the country has implemented an economic reform plan that was backed by the International Monterey Fund (IMF).

The plan included passing a new business-friendly investment law and floating the Egyptian pound, which decreased the value of assets and business costs for international investors.

(Reporting by Yasmine Saleh; Additional reporting and editing by Michael Fahy)


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