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Pit stops equal profit in ADNOC listing — but it’s no pointer for Aramco

DUBAI: The UAE’s biggest convenience-store operator has announced it is going to sell 10 percent of its shares on the Abu Dhabi Securities Exchange (ADX) in an initial public offering (IPO) that could value it at as much as $8 billion.
The announcement was made at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC), one of the world’s biggest gatherings of leaders in the global energy business.
Retailers at an energy summit — surely the IPO candidate got the wrong venue for the announcement? Not at all, when the prospective issuer is ADNOC Distribution, the fuel retail and wholesale arm of the Abu Dhabi National Oil Co., the country’s powerful national oil company.
As the intention to float (ITF) document boasts: “Its 235 ADNOC Oasis convenience stores as of Sept. 30, 2017 make it the largest retailer in the UAE by number of stores.”
All those essential pit stops we have to make on the country’s busy highways make for a very good business, generating 200 million financial transactions last year. That’s an awful lot of coffee, crisps and cheeseburgers.
Of course, ADNOC Distribution is much more than that as well. It is the No. 1 retail fuel brand in the Emirates, with 67 percent of the total number of petrol stations in the country; it has the largest market share in the wholesale fuel business; and it is the biggest supplier of fuel to commercial, industrial and government customers throughout the UAE, providing refueling facilities at seven airports.
So, in addition to being a convenience-store operator, it is a beast of an industrial group, generating profits of 1.6 billion dirhams ($435 million) in the first nine months of this year. That sort of return looks certain to generate substantial interest from regional and international investors when the book-building process starts in a few weeks’ time, ahead of an ADX opening in December.
What will also attract investors is the “consistent and progressive” dividend policy the ITF document also details. ADNOC Distribution will pay at least $400 million in dividends, as well as a one-off special payment of $200 million next April. It will pay no less in 2019, and thereafter is pledging a minimum 60 percent of profits each year.
That level of shareholder payout will come from operations boosted by new and better services at the convenience stores and the petrol pump, as well as expanding into new geographies. The potential of Saudi Arabia, the region’s biggest economy, was mentioned by one adviser yesterday.
ADNOC can also leverage up its dominant position in corporate, government and aviation fuel deals.
All that commercial muscle and financial generosity could value the IPO at $800 million, and the parent company (100 percent owned by ADNOC) at $8 billion. These are staggering sums, and a real boost both for the ADX and Abu Dhabi’s economic diversification strategy, which could lead to further big IPOs in the UAE.But to suggest, as some analysts did yesterday, that the ADNOC Distribution IPO gives us a pointer for the forthcoming record-breaking issue by Saudi Aramco is surely wide of the mark.
The ADNOC flotation is very much a segment of the downstream business, whereas with Aramco the stated intention is to sell a 5 percent stake of the whole company, the biggest oil producer in the world, for $100 billion, valuing it at $2 trillion — roughly three times the gross domestic product of the entire UAE.
Aramco has enormous refineries, petrochemicals plants and research and development facilities in the Kingdom and around the world, but so far has not bothered much with petrol stations or convenience stores. Maybe it’s a revenue stream awaiting development?

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