Rating: Sell 
Target Price: AED2.63
Closing Price: AED4.03

Maintain our TP; downgrade to Sell following recent stock rally
We maintain our target price (TP) of AED2.63 (set at 1.0x 2017e NAV) and downgrade our rating to Sell (stock up 32% in the last 15 sessions and +57% YTD). Our TP offers 35% downside potential. The stock trades at 53% premium to its 2017e NAV compared to an average trading discount of 15% since its listing, while its closest peer, Emaar, trades at 53% discount to its NAV. We see no significant changes in the operational environment, nor in the company’s business model or market presence that would prompt us to upgrade our numbers. We highlight that the recent announcement of the planned project in Oman is not included in our numbers, awaiting more details. However, we do not expect significant upgrades in our numbers from the project, with management guiding that Damac’s share in revenue would be in the range of USD1bn over five years (affecting our revenue numbers by +c10% p.a). 
 
Maintain our estimates broadly unchanged 
Our estimates remain broadly unchanged; we still expect 2017 contracted sales to come in almost flat Y-o-Y, forecasting sales of AED7.1bn in 2017 and AED7.2bn in 2018. We forecast total receivables from previous sales at AED10.8bn, with payments mainly concentrated in 2017-18. Revenue and net earnings will increase at 2016-20e CAGR of 2.5% and -0.5%, in our numbers. We note that our 2017-19 EPS estimates are slightly below consensus numbers; we assume no income from units’ cancellation during our forecast horizon and expect more sales focus on Aykon City; therefore, revenue recognition would be under pressure, given lower contribution from land revenues that would typically be recognised upon sales of villas in Damac Hills and/or Akoya Oxygen.  

 What does the market price imply?
 Implied price/sqm of AED4,875 for residual land bank (4mn sqm), after excluding the NPV of receivables for already booked sales, which we calculate at AED4.8bn (discounted at 6% and assuming a 50% developer margin). Our valuation implies AED2,750/sqm
Total sales of AED49bn, assuming selling price of AED1,600/sqft. in Damac Hills and Akoya Oxygen. Market price assumes sales from current development portfolio at AED49bn (+40% vs. our estimates). Given the relatively limited sellable area in both projects, higher sales numbers would be driven, in our view, by increases in selling prices. This would, in turn, translate into an average price of AED1,600/sqft. in Damac Hills and Akoya Oxygen (c60% higher than current prices)