Emaar reassures shareholders of Dh7.5b cash-and-share deal for Dubai Creek Harbour
Emaar says deal enhances access to '100% profit' and reduces pressure on cashflow
Dubai: Emaar Properties has been quick to reassure shareholders that the Dh7.5 billion deal to acquire the whole of Dubai Creek Harbour is definitely a net positive for the company mid- to long-term.
The deal with Dubai Holding will effectively enhance ‘Emaar’s returns by accessing 100 per cent of the profits to be generated from Dubai Creek Harbour development over its development lifetime,” said the Dubai developer. (Emaar will also be looking to give shareholders a boost through its H1-2022 results, helmed by record sales.)
In early trading Monday (August 15), the Emaar stock is up over 1 per cent to Dh5.67, shaving off most of the 1.57 per cent dip Friday.
A super-sized deal
Emaar also brought out the numbers to reaffirm its case. The Dubai Creek Harbour, a cluster of residential high-rises and with extensive mixed-use possibilities, recorded Dh4.2 billion in 2021 sales and added another Dh3.6 billion between January to end June this year. “This clearly reflects the significant demand for properties at Dubai Creek Harbour and future profit potential of the development, which is the primary consideration for Emaar in respect of the acquisition,” the developer said.
I don't think the 1.57 per cent dip last Friday was heavy - in fact the company is still undervalued
On Friday, the Emaar stock fell 1.57 per cent to Dh5.61 on fairly high volumes. Shareholders clearly were trying to gauge how the deal – announced overnight – would pan out for Emaar’s numbers. (This is the second major consolidation Emaar has been in recently, earlier there was the re-integration of Emaar Malls.)
On the Dubai Holding deal, Emaar said that it would also help reduce ‘pressure on Emaar’s cashflows using a combination of an issue of shares and cash for consideration’.
Dubai Creek Harbour LLC – the operating company for the project – was valued at Dh14.6 billion to Dh15.7 billion by an independent valuer.
'Undervalued'
"I don't think the 1.57 per cent dip last Friday was heavy - in fact the company is still undervalued," said Vijay Valecha, Chief Investment Officer at Century Financial. "We could see short-term investor pull back owing to higher interest rates (and what it means for property demand), but overall Emaar looks on the upward trajectory.
"The H1-22 results were great and, at any time, consolidation is better long-term."
What the Dubai Creek Harbour deal means for Emaar:
- Full control of the underlying undeveloped land, which is 'strategically located, and comprising of more than 100 million square feet of future development';
- It will streamline the decision-making process for Emaar, thereby 'improving the overall project execution and realisation of the development'; and
- Enhance Emaar’s returns by accessing 100 per cent of the profits to be generated over its development lifetime.