18-May-2017
Emaar - 1Q17: Local sales and hospitality surprise positively; net income meets estimate
Rating: Buy
Target Price: AED10.3
Closing Price: AED7.5
1Q17 local sales of AED6.0bn, international sales weighed down by EGP depreciation
Contracted sales in Dubai surprised positively, coming in at AED6.0bn in 1Q17 (+44.3% Y-o-Y, +115.3% Q-o-Q, EFGe: +34.4%). The company launched seven projects in the quarter mostly in Downtown Dubai and Dubai Creek. The total sales value of the launched projects was AED5.6bn, implying that cAED0.4bn was sold from inventory (81% of total 2015/16/17 launches are sold). International sales totaled AED371mn (-61.2% Y-o-Y, -54.3% Q-o-Q). Net sales from Egypt totalled AED314mn (-54% Y-o-Y in AED, flat in EGP terms) with a lower number of units being launched in the quarter. There were no deliveries in Dubai in the quarter.
Strong growth in revenue from property sales drives growth in reported numbers
On the reporting level, total revenue was AED4,072mn (+15.4% Y-o-Y, -8.2% Q-o-Q, EFGe: +13.1%), driven by strong growth in revenue from property sales, which came in at AED2,480mn (+25.6% Y-o-Y, -9.5% Q-o-Q). Development revenue from int’l operations was up 65% Y-o-Y due to the recording of revenue from the Indian operation (first consolidated in 2Q16). GPM averaged 50.1% (1Q16: 54.0%, 4Q16: 51.9%), with some pressure coming from the property sales segment (1Q17: 32.9%, 1Q16: 38.5%, 4Q16: 36.5%); which we attribute to: i) higher contribution of lower margin international development revenue (GPM of 26.9% in 1Q17, 36.0% in 1Q16) with margins negatively impacted by revenue from India; and ii) lower margins on local development revenue (35.9% in 1Q17, 39.3% in 1Q16), which we expect to be due to the start of recording revenue from Dubai Creek projects that would carry lower margins compared to its Downtown projects. Net income came in at AED1.45bn (+14.9% Y-o-Y, -14.2% Q-o-Q, EFGe: +2.5%).
Within non-development segments, hospitality segment surprised positively
EMG saw no Y-o-Y revenue growth, coming in at AED836mn, with the base rent growing only 4% Y-o-Y to reach AED556mn and turnover rent taking a 53% hit, to reach AED36mn, representing 4.3% of total revenue (vs. 14% in FY13). Revenue from hospitality grew 7.7% Y-o-Y, showing its first Y-o-Y growth in four quarters, to reach AED437mn, with occupancy rates across the portfolio falling 4pps to 89% and 1pps to 92% for the Address Hotels. Revenue from the leasing segment added 1.1% Y-o-Y to reach AED318.6mn. Gross profit margins across all non-property segments were strong.
Mai Attia
Sara Boutros
Target Price: AED10.3
Closing Price: AED7.5
1Q17 local sales of AED6.0bn, international sales weighed down by EGP depreciation
Contracted sales in Dubai surprised positively, coming in at AED6.0bn in 1Q17 (+44.3% Y-o-Y, +115.3% Q-o-Q, EFGe: +34.4%). The company launched seven projects in the quarter mostly in Downtown Dubai and Dubai Creek. The total sales value of the launched projects was AED5.6bn, implying that cAED0.4bn was sold from inventory (81% of total 2015/16/17 launches are sold). International sales totaled AED371mn (-61.2% Y-o-Y, -54.3% Q-o-Q). Net sales from Egypt totalled AED314mn (-54% Y-o-Y in AED, flat in EGP terms) with a lower number of units being launched in the quarter. There were no deliveries in Dubai in the quarter.
Strong growth in revenue from property sales drives growth in reported numbers
On the reporting level, total revenue was AED4,072mn (+15.4% Y-o-Y, -8.2% Q-o-Q, EFGe: +13.1%), driven by strong growth in revenue from property sales, which came in at AED2,480mn (+25.6% Y-o-Y, -9.5% Q-o-Q). Development revenue from int’l operations was up 65% Y-o-Y due to the recording of revenue from the Indian operation (first consolidated in 2Q16). GPM averaged 50.1% (1Q16: 54.0%, 4Q16: 51.9%), with some pressure coming from the property sales segment (1Q17: 32.9%, 1Q16: 38.5%, 4Q16: 36.5%); which we attribute to: i) higher contribution of lower margin international development revenue (GPM of 26.9% in 1Q17, 36.0% in 1Q16) with margins negatively impacted by revenue from India; and ii) lower margins on local development revenue (35.9% in 1Q17, 39.3% in 1Q16), which we expect to be due to the start of recording revenue from Dubai Creek projects that would carry lower margins compared to its Downtown projects. Net income came in at AED1.45bn (+14.9% Y-o-Y, -14.2% Q-o-Q, EFGe: +2.5%).
Within non-development segments, hospitality segment surprised positively
EMG saw no Y-o-Y revenue growth, coming in at AED836mn, with the base rent growing only 4% Y-o-Y to reach AED556mn and turnover rent taking a 53% hit, to reach AED36mn, representing 4.3% of total revenue (vs. 14% in FY13). Revenue from hospitality grew 7.7% Y-o-Y, showing its first Y-o-Y growth in four quarters, to reach AED437mn, with occupancy rates across the portfolio falling 4pps to 89% and 1pps to 92% for the Address Hotels. Revenue from the leasing segment added 1.1% Y-o-Y to reach AED318.6mn. Gross profit margins across all non-property segments were strong.
Mai Attia
Sara Boutros