Emaar net drops 4.7pc; but firm upbeat on future
Dubai, October 23, 2012
Emaar Properties, Dubai's biggest real estate developer and builder of the world's tallest tower, reported a 4.7 percent drop in third-quarter net profit, missing analyst estimates by a large margin, as a seasonal slowdown hit revenue.
But company chairman Mohamed Alabbar said the property market's tone was positive, as the emirate continues to recover from a real estate crash in 2009-2010.
The sector is witnessing "an ongoing upward price revision as well as a high level of demand for new projects in strategic locations", he said in a statement on Tuesday.
The company, in which the government has a 31.2 percent stake, posted a net profit of 387 million dirhams in the quarter compared to 406 million dirhams a year earlier.
The earnings missed the average forecast of five analysts who had expected a much larger profit of 516.2 million dirhams.
Revenue for the quarter dropped to 1.6 billion dirhams from 1.9 billion dirhams in the prior-year period.
The company said the quarterly profit was in line with seasonal trends. Revenue from the hospitality and retail sectors tends to grow less strongly during the summer as hot weather deters inflows of tourists from some countries.
"While the results came in below our expectations and consensus, their weakness was mostly stemming from lower-than-expected revenues booked on real estate deliveries," said Jan Pawel Hasman, vice president for equity research at EFG Hermes.
"We note that this income statement item is not indicative of the overall market condition and largely depends on Emaar's internal delivery schedules.
"Hospitality revenues came in line with our expectations, showing a seasonal slowdown caused by Ramadan and hot summer months. Meanwhile, the retail segment performed slightly weaker than we have anticipated."
He added: "While investors could receive these results with a dose of disappointment, we remain buyers of the stock."
Emaar, which also owns what is billed as the world's largest shopping mall, said recurring revenue from its hotels and retail business was 2.9 billion dirhams in the nine months to September 30. No quarterly figures were provided.
The developer has shifted its focus in recent years away from the emirate's property market and towards its more profitable retail and hospitality business.
However, renewed optimism in the property market has helped Emaar's sales. It launched three new real estate projects this year, which contributed 3.08 billion dirhams to total sales in the first nine months of the year, Emaar said.
Dubai's real estate market saw house prices drop by over 60 percent from their 2008 peak, after a global financial crisis sparked a collapse in property values propped up by market speculation.
The gradual recovery in the sector is now encouraging developers to announce new projects, which is attracting a return of speculative investors. - Reuters