Emaar revenues match expectations

Friday, Oct 28, 2011

Gulf News

Dubai Emaar Properties, developer of the world’s tallest tower Burj Khalifa, suffered a dip in its third-quarter revenues and profits despite the continued strong showing by the retail and hospitality divisions. The third-quarter net profit slipped to Dh406 million from the Dh422 million in the earlier three-month period.

For the year to end September, Emaar’s net profit was Dh1.24 billion on revenues of Dh5.87 billion. “The net operating profit of Dh406 million, though down 3.9 per cent quarter-on-quarter, is still in line with general market expectations,” said Krishna Murthy, CEO of Dubai International Securities.

“The top-line of Dh1.86 billion is down by 8.5 per cent quarter-on-quarter and, is below market expectations. From the available disclosures, we can interpret that there is a fall in revenue from property sales.

“Even then, gross margins showed signs of improvement as a result of the handover of high-end properties in prime locations in and around Burj Khalifa Downtown.”

The fourth quarter now assumes added significance for the company with residential units to be delivered in Saudi Arabia and Egypt, this generating additional revenue streams for the company. In the year so far, the company has done handovers in Turkey, Jordan and even Syria.

Sustainable

But a counterpoint to that would be the costs associated with the setting of the full-fledged subsidiary, Dawahi Development, to take on value housing projects in the Middle East and North Africa territory.

“In a recessionary economy, costs can be managed,” said an analyst tracking the stock. “More than the cost or expenses, the concern is about margin. “In value housing, the margin is thinner. But this segment promises growth and volume in the mid to long term. That is sustainable.”

As in the second quarter, retail and hospitality accounted for 41 per cent of the top-line numbers for a combined tally of Dh2.44 billion. This compares with the 20 per cent plus contribution put in by the two divisions last year.

“Rental revenue from retail is about 27 per cent, which can be considered a recurring income and providing stability to the top-line,” said Murthy. “But a concern, at least in the short term, is the falling rental rate.

The leisure division has generated revenues of around 14 per cent.

IN NUMBERS

the results so far

Dh1.24b

Emaar’s net profit this year till September

Dh5.87b

Emaar’s revenues till now this year

By Manoj Nair?Associate Editor