Aldar Properties: Real estate

THE COMPANY: Aldar Properties is a real estate development, management and investment company with headquarters in Abu Dhabi, UAE. The establishment of Aldar Properties was approved in October 2004 by the Abu Dhabi Department of Planning and Economy, and the company’s incorporation was declared in February 2005. Since launching, the company has announced assignments worth more than $75bn, in a property development portfolio diverse in scope and style. Aldar’s first international expansion was announced in August 2007 via a tie-up with South Johor Investment Corporation in a deal that represents the largest foreign real estate development in Malaysia.

Aldar’s financial credibility has been recognised by international credit rating agencies. Most recently, Moody’s issuer rating was Ba3 while Standard & Poor’s credit rating was B+. With this, it was announced early in 2012 that UAE real estate developer Sorouh and Aldar were in talks for a potential merger supported by the federal government. A due diligence for the potential consolidation remains under way.

FINANCIAL PERFORMANCE: The delivery of land plots and residential units in major development projects along with the healthy growth in recurring income supported Aldar’s strong profit performance in the first half of 2012, when attributable profits rose over 180% to Dh896m ($243.88m).

Aldar handed over 1058 completed units at Al Raha Beach, spurring the performance of the development business. Meanwhile, its portfolio of investment properties continued to grow with both office and retail portfolio expansion as retail communities at Al Bandar, Al Zeina and Al Muneera became operational. Other investment properties, such as Ace Hardware at Yas Island and Motor City, have also been completed and are now operational.

In the first six months of 2012, Aldar realised more than Dh7.4bn ($2.01bn) from property development, including the sale of land plots and residential units. Recurring revenues (from investment property rental income as well as income from other operating businesses) increased by more than 13% to Dh699m ($190.26m). The improvement was primarily due to the growing income of the operational businesses, hotels and schools. It must be noted however, that a significant portion of Aldar’s overall top-line growth was due to the involvement of the Abu Dhabi government. Aldar earned a total of Dh5.85bn ($1.59bn) from the government, mostly through land and property sales as well as project management and rentals.

The bottom line for the interim was also supported by Aldar’s effective cost management, which led to the decline in operating expenses by almost 14% to Dh418m ($113.77m), although overall direct costs increased, in line with added revenues.

Aldar’s net assets (assets less liabilities) between end-2011 and end-June 2012, increased by 9% to Dh7.8bn ($2.12bn), as investment properties increased due to the completion of the retail sections of some investment properties (Al Bandar and Al Muneera). Trade receivables also expanded on the heels of the sale of development properties and some refundable costs to the Abu Dhabi government. During the previous interim Aldar also refinanced borrowings of Dh4.7bn ($1.28bn) and set in place a new Dh4bn ($1.09bn) revolving credit facility (of which Dh800m [$217.77m] has been drawn so far). As of end-June 2012, Aldar remains challenged with high financial leverage – it has a debt-to-equity ratio of more than 185%, versus its Middle East peer average of 62%.

SHARE PRICE PERFORMANCE: Shares of Aldar have rallied in 2012 after Abu Dhabi, the holder of most of the UAE’s oil reserves, said it plans to resume some stalled projects, including branches of the Louvre and Guggenheim museums. Aldar’s stock has surged by more than 38% year-to-date. Medium-term support is seen at Dh1.06 ($0.29), while resistance is seen at Dh1.48 ($0.40). Note that these sentimental barriers were spotted as of September 30, 2012 and were based on a closing price of Dh1.25 ($0.34) per share.