• 4Q2015 revenue and net income slightly beat our estimates EMG’s headline 4Q figures were slightly above our estimates (revenue beat: +4.3%, earnings beat: +6.1%). 4Q15 revenue was AED821 million in (up 3.0% Y-o-Y, 14.0% Q-o-Q) and AED2,992 million in 2015 (+11.1% Y-o-Y). The 4Q EBITDA margin was 71.3% (4Q14: 69.5%, 3Q15: 72.6%) and 75.2% in 2015 (exactly in line with our estimate). Net income was AED435 million in 4Q15 (+5.6% Y-o-Y, +15.7% Q-o-Q) and AED1,656 million in 2015 (+22.6% Y-o-Y). Aggregate footfall for EMG portfolio reached 124 million visitors (+8.8% Y-o-Y), implying 34 million visitors in 4Q15 (+3.3% Y-o-Y). Footfall in TDM was roughly unchanged Y-o-Y at 80 million in 2015.
• Q4 supports view that higher share of base rent will fuel growth We await the release of its full-year statements and its presentation to see more details regarding 4Q sales turnover and the share of net turnover rent of total revenue, which we expect was under pressure in line with the 9M15 trend (-11.2% Y-o-Y). That said, we note that 2015 rental revenue growth of 11.1% implies that the rise in base rent following the lease renewals throughout 2015 (c20% of GLAs expired last year) has further dominated the revenue mix, which we view positively, given the current uncertainty on future retail activity and sales turnover in Dubai.
• Awaiting sales turnover numbers for 2016; a stock catalyst in our view We expect growth to continue to be driven by a higher share of base rent as the full impact from 2015-renewed contracts hits the income statement, followed by scheduled lease renewals for 2016. We note that c18% of total GLAs will expire in 2016, which we expect will be renewed at 20-25% higher rates, further driving base rent growth. We reiterate our Buy rating as we believe the stock will outperform both the index and real estate stocks in 2016 given its strong earnings visibility amid the current uncertain environment. We believe investors are awaiting sales figures for 1Q16, which we believe could be a stock catalyst if it indicates no slowdown in retail activity.

Mai Attia
Sara Boutros