Analysts recommend 'subscribe' to DGC’s IPO

Muscat: Research analysts have provided strong recommendations to subscribe to the initial public offering (IPO) of Dhofar Generating Company (DGC) SAOG (Under Transformation).
The IPO of the company has been extended till August 16, 2018, with a reduced price of 225 baisas per share (including issue expenses), translating to a higher dividend yield of 8 per cent for the first five years.
Upside potential of 30.7%
“We value DGC at OMR0.294 per share, with a long-term perspective and recommend that investors ‘subscribe’ to the offer in view of the upside potential of 30.7 per cent from the revised issue price of OMR0.225 in the next nine to 12 months, along with the expected listing gains and the attractive dividend yield of 8 per cent at the offer price,” Al Maha Research said in its report.
“We reiterate our positive stance on the IPO of DGC. At the new offer price, the price to book multiple is 1.0x and offers a dividend yield of 8 per cent, which is way above the average yield of the power and water sector and Muscat Securities Market (MSM), with a potential upside of 27 per cent,” U-Capital said in its research note
Upside potential of 21.8%
Gulf Baader Capital Markets (GBCM) in its note to investors said, “Historically, the utility sector IPO has seen strong listing gains in the MSM and had adjusted for a 6‐6.5 per cent dividend yield immediately post listing."
"With DGC offering a dividend yield of 8 per cent on the revised IPO pricing, we recommend that both long- and short-term investors subscribe to the issuance. We maintain our long-term fair value of DGC at OMR0.274, offering an upside of 21.8 per cent from the revised offer price,” the Gulf Bader research note said.
In order to encourage enhanced retail participation, active trading in the shares of DGC on the listing and long-term commitment to Oman, DGC decided to offer more value to investors participating in its IPO and revised the price to 225 baisas per share on the entire offering of 88,896,000 shares.
“Our decision to offer more value to investors in Oman has been received well by the investor community. Analyst reports further reinforce the investment opportunity, especially with the new reduced price that offers significantly more value to investors," Naif Al Awaaid, CEO of DGC, said.
"We urge all investor groups to take advantage of the reduced price and the extended subscription period. DGC is Dhofar’s largest power company and is an essential part of the growth and prosperity in the region, and the IPO is a unique opportunity to be part of our remarkable success,” he further added.