'Lacklustre quarter for UAE developers'
Dubai, October 26, 2011
Real estate developers in UAE will see a lacklustre quarter as price competition and slower construction activity may impact the companies' profits, Arqaam Capital said in a note.
The brokerage expects slower construction activity across Middle East and North Africa during the month of Ramadan and the end of summer, which will likely curtail construction group revenues contributions.
'Abu Dhabi is fast becoming the worst construction market in the GCC, after Dubai,' analyst Mohammad Kamal wrote in a note to clients dated October 25.
Real estate firms in UAE were hit hard by the global financial crisis in 2008 with property prices dropping by about 60 percent from its peak.
“Despite challenges resulting from the slowdown in sector activity in recent years, and the dry up in bank credit, Arabtec has demonstrated an ability to manage its funding needs in 2011, rather than resorting to additional bank borrowing”.
Arabtec is looking to eventually more-than-double its workforce to 25,000 in Saudi Arabia as it continues to shift its focus to other markets following a real estate collapse in Dubai, it said in June.
Cut-throat price competition and a scale-down in government plans by 30 percent during the year should have its repercussions on backlog and margins on Arabtec and Drake & Scull International, the brokerage said.
Emaar Property's hospitality group is likely to be impacted as the spike in tourist flows to the UAE has now likely abated, and the company may face margin pressures and flat income, Arqaam said.
The brokerage said Qatar is 'slowly losing promise as a sector growth driver' and industry players are concerned that contracts are selectively being awarded to foreign contractors over regional ones. - Reuters