DUBAI: Dubai’s Emaar Properties remains a lone bright spot in a gloomy outlook for UAE developers, but woes are set to continue for Abu Dhabi’s Aldar Properties with an expected third-quarter loss.
Real estate firms across the Gulf state have been hit hard by the global financial crisis and the pain is set to continue for most listed firms in Dubai and Abu Dhabi, likely reflected in quarterly earnings to be released later in October.
A recovery in Dubai’s property sector is still some three to five years away, despite a confidence boost from the restructuring of conglomerate Dubai World and Dubai’s recent return to international debt markets, Marwan Shehadeh, group director of corporate development at UAE conglomerate Al-Futtaim Group, told Reuters earlier this week.
Most analysts polled by Reuters expect Emaar to increase earnings in the third quarter, boosted by the handover of properties at Burj Khalifa, the world’s tallest tower.
"Forecasting risk is almost entirely dependent on the handover rate of the Burj Khalifa, which we estimate is 30 percent in Q3 2010," said Chet Riley, analyst at Nomura.
Nomura forecasts a net profit of 737 million dirhams ($200.6 million) for Dubai’s largest listed developer, while Egyptian bank EFG-Hermes expects a profit of 750 million, up 14.6 percent from the same period last year.
For Dubai’s second-largest developer Union Properties, Nomura expects a profit and EFG is forecasting a loss, as the market awaits the sale of the company’s Ritz Carlton hotel in the Dubai International Financial Centre (DIFC).
Profits at Dubai construction firms Arabtec, the United Arab Emirates’ largest builder by market capitalization, and Drake & Scull International, are expected to fall from the same period a year ago.
The key reason for the lower expected earnings is a delay in the execution of projects and also a slowdown witnessed during Ramadan, analysts said.
Bahrain’s Securities & Investment Co expects Arabtec’s third-quarter profit to fall 65.8 percent from the same period last year to 57 million dirhams.
Losses to Continue for AlDar
Aldar Properties, Abu Dhabi’s largest developer by market capitalization, is likely to suffer its fourth consecutive quarterly loss on declining land sales, while the market awaits a financing plan for the indebted firm.
"We still anticipate operational losses, with the catalyst remaining the delivery of a clear, cohesive and credible financing plan in Q4 2010," said Nomura’s Riley.
Riley expects Aldar to incur a loss of 306 million dirhams in the quarter and sees the developer’s recurring income remaining static during the period.
The developer’s fragile debt position spurred ratings agencies Moody’s and Standard and Poor’s to each downgrade the developer this summer and put it on watch for further downgrades, citing weak earnings and a lack of implicit government backing.
EFG expects little change for Sorouh Real Estate, Abu Dhbai’s second-largest developer.
"Sorouh won’t see much change from the second quarter. We don’t think they will recognize revenue from their Sun and Sky projects this quarter," said Jad Abbas, equity research analyst at the bank, adding that land sales were not anticipated.
The developer will hand over some 1,725 units by the second half of next year as deliveries remain on track, Chief Operating Officer Gurjit Singh said in July.
"The fourth quarter should be better across the board on the back of unit handovers by Aldar, Union Properties and Sorouh," said Abbas.
