|15 May, 2019

Damac reports large drop in first quarter earnings, revenue meets estimates

Damac’s net cash generated from operating activities rose sharply in Q1

Community Skatepark Opens in DAMAC Hills. Image for illustrative purposes.

Community Skatepark Opens in DAMAC Hills. Image for illustrative purposes.

Damac / Handout via Zawya

Dubai’s Damac Properties reported a sharp drop in first quarter earnings (Q1) for 2019, while recorded revenues were “decent”, according to an analyst.

Damac’s Q1 2019 net profit amounted to 31.06 million UAE dirhams ($8.46 million), compared to 483.9 million dirhams in Q1 2018, a 93.58 percent decrease, missing CI Capital’s estimate of 63 million dirhams.

Moreover, although revenue more than halved year-on-year to 896.39 million dirhams in Q1 2019, from 1.89 billion dirhams in Q1 2018, CI Capital said that it was in line with its estimate of 900 million dirhams.

“While the quarter’s weak margins and bottom line figure disappoint, we highlight its (Damac) decent contracted sales and revenue figures, as well as positive cash flow from operations,” Sara Boutros, senior analyst of real estate and financials at CI Capital, told Zawya by email.

The company’s net cash generated from operating activities amounted to 196.64 million dirhams in Q1 2019, compared to 31.23 million dirhams in Q1 2018, a 529.65 percent increase.

“The latter was helped by what appears to be a relative improvement in collections during the quarter, with the company’s receivable balance inching down 1.5 percent, despite a decent contracted sales figure,” Boutros added.

Trade and other receivables dropped 1.48 percent to 8 million dirhams in Q1 2019, compared to 8.12 million dirhams in Q1 2018.

“We continue to incorporate a humble set of assumptions for DAMAC over the medium term,” Boutros said, citing limited product offering, a diminishing land bank and “weak contracted sales since 2015”.

Damac’s shares were trading 0.22 percent higher by 12:18 GST at 0.932 dirhams on Wednesday but have dropped 38.28 percent so far since the start of 2019.

“While the stock is attractive from a valuation perspective, we acknowledge the absence of stock catalysts in the short and medium-term,” Boutros said.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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