Dubai developer Emaar's stock is already up 18% year-to-date - and more could be on the way
If forecasts of a Dh8b EBITDA for 2021 come true, expect more action on the stock
Dubai's largest listed property developer, Emaar, had a record 250 per cent surge in revenue for the first five months of 2021 - Dh10.5 billion against Dh3 billion in the same period last year. The net profit for the first quarter came in at Dh1.2 million, a 29 per cent increase from the same quarter last year.
This striking performance once again illustrates the resilience of the group to withstand the pandemic. The nation’s swift vaccination programmes and government stimulus offered resulted in a faster recuperation compared to other countries.
The Dubai residential real estate market felt the bump in 2020 with prices hitting rock bottom - and now it offers attractive opportunities, especially on premium properties. The luxury end of the market is enjoying a boom, with the emirate recording 22 residential sales in the $10 million and above bracket in the first five months compared with 19 for all of last year. A dip in the prices have culminated in a buyers’ market with stronger demand for premium homes.
The rating agency S&P Global revised Emaar Properties’ outlook to 'stable' from 'negative' as the Dubai residential real estate market gains momentum for the first time since 2015. Another reason is because S&P anticipates the company’s EBITDA to likely exceed Dh8 billion and funds from operations (FFO)-to-debt to improve to about 30 per cent, suggesting a full rebound is around the corner.
A merger gain?
To solidify Emaar Properties’ position as MENA’s largest integrated and diversified real estate company, the developer announced its re-merger with Emaar Malls. This could boost Emaar Properties’ financial and operational performance, reduce volatility through an increase in the proportion of earnings from recurring businesses and drive shareholder value.
The market capitalization of the company stands at Dh29.99 billion, with the share witnessing an 18 per cent rise on a year-to-date basis, partly due to investors renewed confidence in the developer’s mettle to cope with difficulties. The company is expected to raise up to $500 million through a sale of 10-year sukuk to further accelerate its expansion plans.
The real estate market in Dubai and the UAE could possibly attract more investors from Europe and the US as global migration picks up pace. Emaar Properties seem well positioned to exploit these dynamics.