03-Aug-2017
Aldar Properties - 2Q17 conference call takeaways
Rating: Buy
Target Price: AED2.81
Closing Price: AED2.34
Management (Greg Fewer, CFO, Talal Al Dhuyebi, CDO and Jessem Busaibe, CAMO) of Aldar Properties (Aldar) held a conference call, hosted by EFG Hermes today, to discuss 2Q17 results. Below are the main highlights from the call:
Strong pick-up for The Bridges; focus will continue on the mid-market in the near term
Management had noted that demand for The Bridges was strong, which encouraged the company to launch three towers, while the original plan was to launch only one. Average selling price was AED1,100/sqm, with payment terms set on a 50:50 basis for pre- and post-unit delivery. Other developments for Aldar have payment terms of 70:30. The new product targets those who earn between AED10-30k/month. Buyers mix was evenly distributed between nationals, Arab and Western buyers. Management is planning to continue focusing on mid-market opportunities in the near term, given the need for high-quality mid-market housing, in management’s view.
Development progress on track for 4Q17 deliveries; may help dividends
Construction at Ansam, Al Hadeel and Nareel Island is nearing completion, with handovers set for 4Q17. Al Merief is on track for handover in 1Q18, while construction in Meera is progressing on schedule. Early works for Mayan and Yas acres are both complete, with main contractors appointed and mobilised on-site. West Yas’ infrastructure and non-residential work are also sustainably complete. Management indicated that, while planned handovers may support dividend payment for 2017, it is still early to confirm. We estimate a dividend of AED0.11/share, implying 4.7% yield.
Guidance unchanged for NOI for recurring income portfolio at AED1.6bn
Office segment occupancy rates were down to 92% (down from 95% in 1Q17), as 5% of the gross leasable area (GLA) was due for expiry. Management is confident that the vacant space will duly fill. Discussions with tenants in Yas Mall are ongoing, with not much to be shared at this point. We note that this year will mark the first lease renewals with tenants. On the residential portfolio, demand for “bulk leases” is seen, which should reflect positively on occupancy rates in 2H17. Performance of the hospitality segment in 4Q17 will be key to achieve 2017 NOI target (from recurring income sources) of AED1.6bn, as indicated by management. Guidance for NOI is unchanged, following the implementation of VAT; management expects the retail base to be more affected than the commercial base, given that the tenant base for the second is mostly government entities.
No commercial risk to be taken on AED1bn Yas South development
Aldar has been hired by the government as the development manager for new AED1bn project on Yas South development. The project is currently in the design phase, which should be concluded within six-nine months, with completion set for 2019-20. The financing plan for the project is still ongoing, but it will likely be on a BoT basis. Management fees for the project are yet to be disclosed.
Mai Attia
Sara Boutros
Target Price: AED2.81
Closing Price: AED2.34
Management (Greg Fewer, CFO, Talal Al Dhuyebi, CDO and Jessem Busaibe, CAMO) of Aldar Properties (Aldar) held a conference call, hosted by EFG Hermes today, to discuss 2Q17 results. Below are the main highlights from the call:
Strong pick-up for The Bridges; focus will continue on the mid-market in the near term
Management had noted that demand for The Bridges was strong, which encouraged the company to launch three towers, while the original plan was to launch only one. Average selling price was AED1,100/sqm, with payment terms set on a 50:50 basis for pre- and post-unit delivery. Other developments for Aldar have payment terms of 70:30. The new product targets those who earn between AED10-30k/month. Buyers mix was evenly distributed between nationals, Arab and Western buyers. Management is planning to continue focusing on mid-market opportunities in the near term, given the need for high-quality mid-market housing, in management’s view.
Development progress on track for 4Q17 deliveries; may help dividends
Construction at Ansam, Al Hadeel and Nareel Island is nearing completion, with handovers set for 4Q17. Al Merief is on track for handover in 1Q18, while construction in Meera is progressing on schedule. Early works for Mayan and Yas acres are both complete, with main contractors appointed and mobilised on-site. West Yas’ infrastructure and non-residential work are also sustainably complete. Management indicated that, while planned handovers may support dividend payment for 2017, it is still early to confirm. We estimate a dividend of AED0.11/share, implying 4.7% yield.
Guidance unchanged for NOI for recurring income portfolio at AED1.6bn
Office segment occupancy rates were down to 92% (down from 95% in 1Q17), as 5% of the gross leasable area (GLA) was due for expiry. Management is confident that the vacant space will duly fill. Discussions with tenants in Yas Mall are ongoing, with not much to be shared at this point. We note that this year will mark the first lease renewals with tenants. On the residential portfolio, demand for “bulk leases” is seen, which should reflect positively on occupancy rates in 2H17. Performance of the hospitality segment in 4Q17 will be key to achieve 2017 NOI target (from recurring income sources) of AED1.6bn, as indicated by management. Guidance for NOI is unchanged, following the implementation of VAT; management expects the retail base to be more affected than the commercial base, given that the tenant base for the second is mostly government entities.
No commercial risk to be taken on AED1bn Yas South development
Aldar has been hired by the government as the development manager for new AED1bn project on Yas South development. The project is currently in the design phase, which should be concluded within six-nine months, with completion set for 2019-20. The financing plan for the project is still ongoing, but it will likely be on a BoT basis. Management fees for the project are yet to be disclosed.
Mai Attia
Sara Boutros