Abu Dhabi IPO Sees Investor Betting On A Better Pay Off On Middle East Oil

Share trading in one unit of an oil giant of Abu Dhabi in the first day of trading showed that the investors betting on the exposure to Middle East oil were right in their positivism.

There was a rise in the share price of Abu Dhabi National Oil Co. for Distribution of PJSC by 16 percent in the early trading as it jumped to as much as 2.90 dirhams. It is the fuel retailing unit of Adnoc. At the end of the trading session he ultimate gain was of 6 percent with prices at 2.65 dirhams in Abu Dhabi. Most of the oil in the United Arab Emirates, an OPEC member, is pumped by the emirate.

“It’s interesting for investors to own Adnoc Distribution because forecasts are indicating a rise in oil price, which can increase profit margins,” said Issam Kassabieh, equities analyst at Menacorp Financial Services in Dubai. “The offer was oversubscribed to retail by more than 20 times, and having a local fuel distributor listed will add more transparency to the sector in general.”

There are increasing geopolitical concerns in the Middle East and as therefore the stocks in the region are underperforming their global peers and the Adnoc Distribution is viewed as a representation to the regaining of oil prices at the moment. The increase in the MSCI Emerging Markets Index has been about 30 percent this year while at the same time there has been a decline of over 3 per cent in the benchmark stock at Abu Dhabi.

Because OPEC and its supporting oil producers including Russia has announced an extension of the oil production freeze till 2018 which has resulted in an environment where a second yearly gain for oil is on the cards. Following data reports of a fourth consecutive week for U.S. crude stockpiles, there has been a steady advance of oil prices towards the $58 a barrel mark. There has been a decline of more than 40 per cent in the prices of oil since 2014.

Priced at 2.50 dirhams per share, the sale of about 1.25 billion shares of Adnoc managed to garner about 3.1 billion dirhams ($851 million). While 10 percent of the total available share were bought by private investors, the rest were bought out by qualified investors.

“The IPO is part of Adnoc’s program to expand strategic partnerships and diversifying sources of income and diversifying mutual investment opportunities,” Adnoc Chief Executive Office Sultan Al Jaber said Wednesday.

An increase in geopolitical tensions between Saudi Arabia and Iran and the crackdown against corruption in the kingdom had resulted in a drop in the share prices of Emaar Development PJSC, the U.A.E. real estate arm of Emaar Properties PJSC, on the first day of its trading in Dubai.

“Everybody is pleasantly surprised with the opening of the shares — there was worry that the secondary market weakness could affect the opening day,” said Mohammed Ali Yasin, chief executive officer of NBAD Securities LLC. He said that end of year results meeting or beating expectations is “going to provide us with good ammunition for the share price to defend itself at the current price or maybe take it upward.”

(Adapted from Bloomberg)


Categories: Economy & Finance, Strategy, Sustainability, Uncategorized

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