• Decent growth in revenue, net income; EBITDA at 75%+ Emaar Malls Group (EMG) has reported its 2Q16 headline figures. Revenue came in at AED785mn in 2Q16 (+8.9% Y-o-Y, -5.8% Q-o-Q, EFGe: -1.9%) and AED1.62bn in 1H16 (+11.4% Y-o-Y). Gross profit was AED579mn (+11.5% Y-o-Y, -9.0% Q-o-Q), translating into a Gross Profit Margin (GPM) of 73.8% (+175bps Y-o-Y, -257bps Q-o-Q). SG&A expenses saw a significant rise in 2Q16 (+60.3% Y-o-Y, +31.0% Q-o-Q; 1H16: +41.5%), which we highlight as the main negative aspect of the results. We await the release of the full statements for more light on the reasons behind such rise. EBITDA margin was maintained above the 75% mark (2Q16: 76.4%, -86bps Y-o-Y, -394bps Q-o-Q; 1H16: 78.5%, -25bps) despite the rise in the SG&A expenses. Net income came in at AED458mn in 2Q16 (+11.3% Y-o-Y, -13.4% Q-o-Q) and AED987mn in 1H16 (+16.8% Y-o-Y). We expect AED3.3bn in revenue in 2016e (+9.9% Y-o-Y) and AED1.86bn in net income (+12.2% Y-o-Y).
• Numbers confirm resilience to weak tenant sales, but valuation is full We view the growth in the reported numbers positively, with revenue and net income showing decent growth rates and EBITDA margins being maintained at the high range compared to global mall operators. That said, we maintain our Neutral recommendation on rich multiples and slim upside potential.
• Footfall, tenant sales numbers are yet to be released Footfall and tenant sales numbers are not yet released, but we note that management had indicated previously that tenant sales had softened in 2Q16 by a single digit Y-o-Y. Our numbers incorporate a 7% Y-o-Y drop in tenant sales in 2016e.

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