Emaar Development's first quarter earnings drop, shares follow

The company's shares fell 1.93% on Tuesday to AED3.55

Image taken in Dubai downtown, outside an Emaar Development construction site.

Image taken in Dubai downtown, outside an Emaar Development construction site.


Emaar Development, the United Arab Emirates based property development arm of Emaar Properties, reported a drop in first quarter earnings (Q1), triggering a retreat in the company’s shares on Tuesday.

Emaar Development’s Q1 2019 net profit amounted to 751 million UAE dirhams, compared to 819 million dirhams in Q1 2018, an 8.3 percent drop, trailing SICO Bank’s estimate of 902 million dirhams.

“While the earnings was a miss on our estimate; key takeaway for us is the surge in 1Q19 off-plan sales with rising penetration from non-UAE residents, which we think would be driven by rising Chinese appetite,” Ayub Ansari, senior analyst at SICO, told Zawya by email.

Ansari said that off-plan sales surged by 51 percent year-on-year to 5.9 billion dirhams, a “major beat” to SICO’s 4.2 billion dirhams estimate.

Emaar Properties had reported earlier this week a rise in first quarter earnings and a surge in property sales. (Read more here)

Sara Boutros, senior analyst - real estate and financials at CI Capital, said in a note seen by Zawya that “1Q19 represents a good kick-off for the year for Emaar Development, confirming the company’s ability to outperform its peers in a relatively rough market.”

At the end of March, Emaar Development’s sales backlog increased to 37.73 billion dirhams, the company said in a press release published on Monday.

“We also reiterate our view of the company’s ability and willingness to meet its dividend commitment for the coming two years (implies 14 percent in dividend yield), given its healthy backlog (AED38bn), inventory (AED14bn), and cash in escrow (AED7bn),” Boutros added.

Emaar Development had approved for the full year 2018 a cash dividend of 26 fils per share.

The company’s shares dropped 1.93 percent on Tuesday to 3.55 dirhams, and have fallen by 19.5 percent since the start of the year.

Emaar Development is a constituent of the MSCI Emerging markets index. Some of the stock's price decline has been attributed to a fear by investors that the recent decline in value of Emaar Development's stock might put the company out of the coverage range of the index, which considers only large and mid-cap stocks.

“While we acknowledge the risk of the stock’s exit from MSCI, we see the current level as a good entry point for long-term investors,” Boutros said.

Emaar Development launched eight new projects during the first quarter of 2019 with a total project value of 4.362 billion dirhams, the company said in the press release.

(Reporting by Gerard Aoun; Editing by Michael Fahy)


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