03-Aug-2017
Aldar Properties - “The Bridges” supports contracted sales figure; net income meets estimate
Rating: Buy
Target Price: AED2.81
Closing Price: AED2.34
“The Bridges” supports contracted sales figure; minimal surprises in reported numbers
Contracted sales totaled AED813mn (-19% Y-o-Y, -17.0% Q-o-Q), with sales at The Bridges representing the bulk (AED600mn). Revenue came in at AED1.35bn (-20.2% Y-o-Y, -14.2% Q-o-Q, EFGe: -9.7%), with some weakness coming from the property development segment, which brought in AED429.4mn in revenue (-45.2% Y-o-Y, -19.6% Q-o-Q). Gross profit margin averaged 40.0% in 2Q17 (2Q16: 40.8%, 1Q17: 47.7%), in absence of significant land sales. EBIT totaled AED414.7mn (-28.0% Y-o-Y, -34.1% Q-o-Q); EBIT margin was 30.6% (2Q16: 34.0%, 1Q17: 39.9%, EFGe: 30.6%). Net income was at AED620.2mn (-5.7% Y-o-Y, -2.5% Q-o-Q, EFGe: +3.4%). 1H17 contracted sales totaled AED1.8bn (1H16: AED1.9bn, EFGe 2017 and management guidance: AED3.0bn). Revenue was unchanged Y-o-Y at AED2.9bn in 1H17, and net income was down 3.9% Y-o-Y to AED1.3bn.
2017 NOI target requires strong 4Q hospitality numbers
Revenue from the investment portfolio was marginally down (1.6% Y-o-Y and 2.5% Q-o-Q), coming in at AED418.5mn. Hotel segment continued to report lower revenue (AED100.6mn, -9.8% Y-o-Y, -23.2% Q-o-Q) and AED231.7mn in 1H17 (-10.2% Y-o-Y). This is despite improved occupancies of 78% (1H16: 76%, market average in 1H17: 70%), implying continued pressure on room rates. The occupancy rate at the residential segment held up during the quarter (2Q17 and 1Q17: 90%, 4Q16: 92%, 3Q16: 95%, 2Q16: 96%, 1Q16: 97%), but some pressure was seen on the office segment (-3pps on occupancy rate Q-o-Q to 92%) and, to a lesser extent, Yas Mall (-1pps to 94%). GPM on investment portfolio was maintained above 80% mark. Recurring portfolio NOL was AED357mn (-6.3% Y-o-Y, -11.2% Q-o-Q) and AED759mn in 1H17 (-5.0% Y-o-Y). Management has maintained its AED1.6bn guidance for NOI in 2017, while stressing that 4Q17 hospitality performance will be key for achieving such target.
Still Buyers of the name: 4.7% 2017 DY and good potential for growth
We are Buyers of Aldar, as we think the stock offers both good growth potential and a decent dividend yield, with scheduled deliveries planned for 2017 (implying hand-over payment being due --usually 60% of units’ value) and collection of due government receivables supporting the planned dividends. These would compensate for the weakness seen in the recurring income portfolio (the residential portfolio, in particular). We expect dividends of AED0.11/share for 2017, offering a dividend yield of 4.7%.
Mai Attia
Sara Boutros
Target Price: AED2.81
Closing Price: AED2.34
“The Bridges” supports contracted sales figure; minimal surprises in reported numbers
Contracted sales totaled AED813mn (-19% Y-o-Y, -17.0% Q-o-Q), with sales at The Bridges representing the bulk (AED600mn). Revenue came in at AED1.35bn (-20.2% Y-o-Y, -14.2% Q-o-Q, EFGe: -9.7%), with some weakness coming from the property development segment, which brought in AED429.4mn in revenue (-45.2% Y-o-Y, -19.6% Q-o-Q). Gross profit margin averaged 40.0% in 2Q17 (2Q16: 40.8%, 1Q17: 47.7%), in absence of significant land sales. EBIT totaled AED414.7mn (-28.0% Y-o-Y, -34.1% Q-o-Q); EBIT margin was 30.6% (2Q16: 34.0%, 1Q17: 39.9%, EFGe: 30.6%). Net income was at AED620.2mn (-5.7% Y-o-Y, -2.5% Q-o-Q, EFGe: +3.4%). 1H17 contracted sales totaled AED1.8bn (1H16: AED1.9bn, EFGe 2017 and management guidance: AED3.0bn). Revenue was unchanged Y-o-Y at AED2.9bn in 1H17, and net income was down 3.9% Y-o-Y to AED1.3bn.
2017 NOI target requires strong 4Q hospitality numbers
Revenue from the investment portfolio was marginally down (1.6% Y-o-Y and 2.5% Q-o-Q), coming in at AED418.5mn. Hotel segment continued to report lower revenue (AED100.6mn, -9.8% Y-o-Y, -23.2% Q-o-Q) and AED231.7mn in 1H17 (-10.2% Y-o-Y). This is despite improved occupancies of 78% (1H16: 76%, market average in 1H17: 70%), implying continued pressure on room rates. The occupancy rate at the residential segment held up during the quarter (2Q17 and 1Q17: 90%, 4Q16: 92%, 3Q16: 95%, 2Q16: 96%, 1Q16: 97%), but some pressure was seen on the office segment (-3pps on occupancy rate Q-o-Q to 92%) and, to a lesser extent, Yas Mall (-1pps to 94%). GPM on investment portfolio was maintained above 80% mark. Recurring portfolio NOL was AED357mn (-6.3% Y-o-Y, -11.2% Q-o-Q) and AED759mn in 1H17 (-5.0% Y-o-Y). Management has maintained its AED1.6bn guidance for NOI in 2017, while stressing that 4Q17 hospitality performance will be key for achieving such target.
Still Buyers of the name: 4.7% 2017 DY and good potential for growth
We are Buyers of Aldar, as we think the stock offers both good growth potential and a decent dividend yield, with scheduled deliveries planned for 2017 (implying hand-over payment being due --usually 60% of units’ value) and collection of due government receivables supporting the planned dividends. These would compensate for the weakness seen in the recurring income portfolio (the residential portfolio, in particular). We expect dividends of AED0.11/share for 2017, offering a dividend yield of 4.7%.
Mai Attia
Sara Boutros