We reiterate our Buy rating on the stock and slightly adjust our FV to AED3.37 (from AED3.46), which is set at 0.75x 2017e NAV. We see the latest stock underperformance as rather unjustifiable; we believe the company’s strong market positon as a leading developer in Abu Dhabi, solid investment portfolio and healthy balance sheet will allow the stock to outperform its peers even should the market soften.
• 2017: we see no surprises in operations nor financial reporting We expect 2017 to carry no surprises whether on the operational level or on the financial reporting. Below are the key highlights for the year, in our view:
• Contracted sales of AED4.4bn; with 80% generated from units sales. We expect the company will sell 1,140 units during the year given its strategy to launch 1,500 units per annum. Management stated that the focus will be on further launches in Yas Acres and some middle income projects in Shams Abu Dhabi - a currently underserved segment. We expect selling prices to be flat Y-o-Y.
• 21 land plots being offered with a total value of AED2.1bn. We forecast land sales of AED900mn in 2017; where the company will pursue some opportunistic land sales. It is worth noting that Aldar is offering land plots with a total value of AED2.1bn across its three major projects; with c60% of the plots in Shams Abu Dhabi.
• No surprises in investment portfolio performance. We see no upside/downside to our 2017 numbers; with the current rental portfolio (across all segments) already enjoying high occupancies. We expect flat rental rates during the year for lease contracts scheduled for renewal. Moreover, we forecast no significant impact from the potential net turnover rent generated from Yas mall (AED11mn in first year of operations).
• Hotel income to slightly increase (+7% Y-o-Y); however, still below 2014-15 levels. We estimate a general improvement in the hotel industry within the emirate resulting in slight revenue growth and margin expansion. We estimate ARRs of AED440 and average GPM of 21%.
• Further expansions in investment portfolio; in line with announced target. We believe it will announce commitments of an additional AED1bn, at least, during the year to expand its investment portfolio.

Mai Attia