Union properties mulls share buyback

DUBAI // The board of directors of Dubai-listed Union Properties is considering a 10 per cent share buyback plan aimed at lifting the value of the firm's stocks, which have fallen nearly 60 per cent since hitting a peak in late July. According to Ziad Ghoul, the chief financial officer at UP, the senior management has sent a proposal to the board to consider the buyback plan, which is likely to be formally discussed late next month. "It is still at a proposal stage," Mr Ghoul said. "The reason why we are suggesting it is to enhance the value for shareholders and bring the share price close to its true potential. "Right now the share price is at a very attractive level and makes a buyback plan feasible." Mr Ghoul said he was not certain if a buyback would have the desired effects, considering the exit of foreign investors and the negative sentiment currently sweeping the markets. "Markets here are not behaving normally and this (buyback) is no more a matter of simple supply and demand equation in the market," he said. "We may not see the desired movement in the shares even if we implement our plans." According to Mr Ghoul, markets are not reflective of how firms are performing. It would be some time before the firm could actually implement the buyback, he said. The company's board must first approve it and then get endorsed at an extraordinary general meeting. The firm would then have to apply for approval to the market regulator, Emirates Securities and Commodities Authority (ESCA). "If we get all the right approvals, Union Properties will then have two years to implement the buyback and plans will be executed at a suitable time," he said. Union properties has a total of 3.06 billion shares outstanding, capitalised at Dh7.07bn (US1.92bn), according to Zawya Dow Jones data. The firm's shares closed at Dh2.31 yesterday, down 6.48 per cent. Union Properties has been the subject of merger speculation with rival Deyaar Development Company. However, Mr Ghoul said that senior management, including the directors, were not aware of any merger talks. "It (merger talk) may or may not be happening at government level," he said. "We are simply not aware of that." According to Mr Ghoul, the market was fragmented and consolidation would be positive for the property market in the UAE, considering the current credit situation. "I would not be surprised if smaller developers start merging as the cost of raising money goes up," he said. "Merging or closing businesses are the only two available options for them." About 120 developers are operating in the UAE, but only about six have a consistent project delivery record, according to Mr Ghoul. "These are the developers, like Union Properties, who could afford to raise capital at any cost and still reap returns on investments," he said. "Capital is available but it is impossible to raise it at the rates of, say last year." However, he added that developers were cautious in releasing new projects, as everyone was "feeling the pinch of tight liquidity". "We are very careful about what projects we want to release. It has to be a feasible project for us to raise expensive capital," Mr Ghoul said. skhan@thenational.ae