By Brenton Cordeiro
Deutsche Bank sees Abu Dhabi government continuing support to Aldar in the future.
Deutsche Bank lowered its price target on Aldar Properties' stock to AED5 dirhams from AED7.10, citing increased uncertainties on Yas Island receivables and the nature of future government support for the developer.
Separately, Citigroup raised its risk code on Aldar, Abu Dhabi's biggest property developer by market value, to "buy/high risk" from "buy/medium risk," on the back of Moody's recent downgrade of Aldar's rating to Ba1 from Baa2 with a negative outlook.
Last week, Moody's lowered ratings for seven leading Abu Dhabi government-linked companies, including Aldar, given that no explicit formal agreement existed obligating the government to support them under all circumstances.
However, Deutsche Bank said it believed the Abu Dhabi government would continue to support Aldar in the future.
"Not doing so could close Aldar's doors to the capital markets and jeopardize the fulfilment of Abu Dhabi's 2030 plan," the brokerage said in a note dated March 8.
Analysts at Deutsche Bank also said while the company has not confirmed whether 100 percent of Yas receivables would be settled in cash, they believed chances for this to happen were high, given that the Abu Dhabi government was cash rich.
The company said in February that it sold certain infrastructure and other property assets at its Yas Island project to the Abu Dhabi government. (Reuters)