JEDDAH, 22 November 2004 — In an updated equity report on Emaar Properties, Shuaa Capital values the company’s shares at AED9.37 per share compared to the current trading price of AED7.97, a rise of 17.6 percent.
Emaar Properties recently reported results for the nine-month period ending Sept. 30, in which net profits surged by 107 percent over the corresponding period in 2003, to AED1.04 billion on revenues of AED3.81 billion. Despite top line figures coming in-line with Shuaa Capital’s original expectations, bottom line results came in well above, reflecting very healthy margins from core operations.
The financial results reported by the company for the period reflect the strong demand on residential properties in Dubai over the same period, and the resultant increase in associated prices. Shuaa Capital expects this trend to continue over the next three years due to supportive demographic pressures, the fostering of a home-owning culture in Dubai and the further facilitation of the process going forward.
Walid Shihabi, head of research for Dubai-based Shuaa Capital said, “Demand for real estate in Dubai has remained buoyant in 2004 and has been driven both by strong interest in property acquisition from expatriate residents, as well as the emergence of a secondary market for residential and commercial real estate units.
The Dubai real estate sector is set to receive at least 85,000 freehold residential units over the next three years, as per Shuaa Capital’s survey of all announced property developments to date in the emirate. The market for real estate remains serviced by three main players, who have been responsible for all mega-projects in the area, delivering approximately 90 percent of announced properties to date. Emaar is one of those three key players. We had conducted a five-year forecast for the company’s operations, based on details of the company’s announced developments, and our understanding of the supply and demand dynamics of the real estate market in Dubai, in which the company retains its core operations. We retain our buy recommendation for Emaar stock based on these expectations and a fair value estimate per share of AED9.37.”
Emaar Properties has in FY 04 made significant headway in completing large phases of its two main developments, the Dubai Marina and the Emirates Living range of residential properties. Phase one of five planned for the Dubai Marina has been completed and delivered to property buyers, comprising of 1090 residential units.
With the bulk of its initial range of properties completed, Emaar has shifted focus toward its Arabian Ranches development.
Burj Dubai, which was launched in September and planned to be the world’s tallest residential building, remains the largest upcoming development on Emaar’s hands at the time being.
It was the first firm in the United Arab Emirates to allow foreigners to buy shares.
With the Dubai real estate market set to receive well over AED50 billion in residential and commercial properties over the next three years, local opportunities for Dubai-based developers may start to diminish as competitive pressures take hold in the years to come. Consequently, Emaar’s expansion strategies appear to have shifted to a broader scope, targeting regional real estate development opportunities as well as pursuing collaborations with partners in the hospitality and governmental sectors.