Investor interest is gaining momentum in the IPO of Barka Desalination Company SAOG (under transformation) (BDC or the Company). The Company, alongside the issue manager – Bank Muscat Investment Banking, has been holding several meetings with key investors for Phase I of the IPO (i.e. Book Building). Meetings were conducted with more than 50 key investors from Oman as well as the region with some meeting being conducted in Muscat while others through a virtual session. All meetings held in Muscat were conducted while ensuring that all pandemic guidelines including social distancing are being followed. The investors appreciated a number of aspects for BDC including long term offtake agreement until 2038 with the Government of Oman owned OPWP, resilient demand for water in the country and dividend yield range of 8.4% to 10.6% being offered to IPO investors. They also commended that the project has marquee founders including ENGIE, ITOCHU, SUEZ and W.J. Towell, who have strong track record and deep commitment to the project. Investors also appreciated the commitment by two leading names – National Power & Water Co. LLC (an investment arm of Bahwan Engineering Group), and Bank Muscat SAOG to participate in the IPO as anchor investors and confirming their interest at the price of Bzs 145 per share i.e. at the highest end of the price range.
The Company also had meetings with key research analysts in the Sultanate, who are expected to issue research reports on the IPO. Ubhar Capital, which has already released their report on 24 January, has recommended a ‘Subscribe’ rating for the IPO with fair value of Bzs 160 per share implying an upside of 10% to the higher end of the IPO price range and 39% to the lower end of the price range. The report mentions, ”BDC is an attractive dividend-paying company with steady revenues over the water purchase agreement (WPA)”. The report further added, “…we believe BDC deserves a premium as equity-holders are treated differently in this company.”
Phase I of the IPO opens for subscription by investors on 30 January 2022 and will close on 3 February 2022. During Phase I of the IPO the offer price will be discovered through book-building mechanism based on bids submitted by large and sophisticated investors in the Sultanate. Investors will be able to see the progress of the IPO live on the Muscat Stock Exchange (MSX) website www.msx.om. The investors need to apply for a minimum of 250,100 shares in Phase I of the IPO. Following the successful close of Phase I and discovery of the offer price, the IPO will be offered to retail investors at a fixed price through the E-IPO route.
Backed by revenues contracted by the Government of Oman owned OPWP up to 2038, BDC plans to offer the shares in a price range of Bzs 115 to Bzs 145 which translates into an attractive dividend yield of 8.4% to 10.6% to IPO investors. The first proposed dividend of 6 Bzs per share will be paid in April 2022, soon after the close of the IPO.
BDC’s Chairman Murtadha Sultan commented that, “BDC has taken steps to strengthen the dividend case for its public investors. BDC does not have any cash sweep obligations in their financing arrangement with the senior lenders. Further, the founding shareholders have provided certain loans to BDC the payments for which would be subordinated to BDC’s regular dividend to shareholders including public investors. This will provide further cushion to the Company’s dividend profile.”
Commenting on the Phase I of the subscription period, Patrick Thienpont, CEO of BDC said: “The IPO of Barka Desalination Company presents a unique and compelling opportunity backed by a consortium of marquee founder shareholders, a robust contractual framework, attractive dividend yield, and investing in a strategic asset employing proven technology driven by a strong and experienced management team. We are confident that investors will see the investment case presented by BDC and join our journey of success.”
Bank Muscat Investment Banking, Oman’s largest and most experienced investment banking team, is the financial advisor and sole issue manager for the IPO transaction. BDC has also appointed a large collection syndicate consisting of Ahli Bank, Bank Dhofar, Bank Muscat, Oman Arab Bank, Sohar International Bank, Ubhar Capital and United Securities, who would be accepting application forms from potential investors in the IPO.
Details of key investment highlights as well as risk factors are disclosed in the prospectus approved by the Capital Market Authority (CMA). Interested investors can view and download a copy of the Prospectus and Summary Information Booklet of the investment highlights through the company’s website at www.barkadesalination.com/ipo