Abu Dhabi: Aldar Properties, the Abu Dhabi-based real estate developer, announced on Tuesday it has recorded Dh638 million in net profits during the third quarter of this year, marking a nine per cent increase from the Dh584 million recorded in Q3 2014.
The growth in profits was a result of rising recurring revenues and higher development profits on new projects, the company said in a statement.
The figure brings net profits for the first nine months to Dh1.81 billion – up from the Dh1.55 billion recorded in the first nine months of 2014.
The company’s revenues saw a drop, however, reaching Dh1.17 billion in the third quarter of 2015 compared to Dh1.37 billion in Q3 2014. The drop brings revenues for the first nine months to Dh3.46 billion – down from Dh5.28 billion in the same period last year.
Aldar did not comment on the drop in revenues, but said in a statement that the gross profit margin from recurring revenue asset grew 47 per cent in Q3 2015 to Dh349 million from Dh238 million in the same period last year. This was driven by Yas Mall, which is now fully leased, and the contribution of the residential portfolio.
The results were above expectations, which had estimated that net profits for the third quarter would drop to Dh422 million, according to Bloomberg consensus. Vijay Harpalani, fund manager at Almal Capital, said that the recurring revenues were particularly encouraging.
“In any particular quarter, revenues booked from properties depend on how many properties were sold, so that will very every quarter. Recurring revenues were very encouraging so these include revenues generated from assets like Yas Mall, hotels, and education business,” he said.
Harpalani added that the coming few quarters will be “very critical” as investors will be watching for any slowdowns on the property development side along with revenues from projects sold.
Despite the positive performance and the fact that Aldar is one of Abu Dhabi Securities Exchange’s powerhouses, analysts said that they did not expect to see much of a positive reaction in the market. Investor sentiment has been negative on the back of macroeconomics, translating to weak liquidity in the market.
“People are now focusing on the macro picture, so they look at factors like rate hikes [from the US Federal Reserve], which is expected in December. These results, although encouraging, probably won’t move the market.
If the macro situation is not very supportive, then investors won’t be looking at stocks, regardless of results,” Harpalani said.
Saleem Khokhar, head of equities at the National Bank of Abu Dhabi’s asset management group, agreed, saying that Aldar’s results were not enough in isolation to boost liquidity and market performance.
“The overall sentiment at the moment is still somewhat negative, so I think once we see stabilization and the markets begin to recover, you’ll find that stocks that have this solid backing in terms of fundamentals recover sooner and faster,” he said.
Commenting on the company’s financial performance, Khokhar said, “I think it’s a good set of numbers, supported by strong performance from the recurring income and hospitality segment, and that’s despite the decline in revenues.
For us, Aldar is quite a solid story and not so impacted by what is going on in the real estate environment where we have seen a slowdown.”
Gross debt remained stable at Dh7.1 billion as of September 30, 2015. The company’s unrestricted cash position increased to Dh5.9 billion following strong cash flow generation during the quarter, including the receipt of a Dh545 million Government receivable in relation to infrastructure recoverable costs.
Mohammed Al Mubarak, chief executive officer of Aldar Properties, said that the company has continued to see strong demand in residential sales, with Shams Meera and West Yas performing well.
