Emaar earnings to drop

EFG-Hermes report forecasts bleak Q4 for Dubai developer, Union Properties and Dubai Islamic Bank.
Emaar earnings to drop
By Amy Glass
Tue 15 Jan 2008 11:41 AM

Dubai developer Emaar Properties is expected to see its fourth quarter earnings for 2007 hit by a shift in business strategy, Egyptian investment bank EFG-Hermes said on Monday.

In its 2007 fourth quarter earnings forecast, EFG-Hermes said Emaar's strategy of lower levels of land sales would impact on its bottom line.

“Emaar is expected to report a 7% year-on-year decline in earnings for the fourth quarter of 2007 and flat growth year-on-year for the full year," EFG-Hermes said in the report.

"This is owed principally to the change in Emaar’s strategy of moving away from high margin land sales, which have historically contributed strongly to the bottom line."

The Dubai Islamic Bank (DIB) is also expected to deliver weak fourth quarter results, bucking a positive regional banking sector trend, according to EFG-Hermes.

Earnings for the lender are projected to fall 2% year-on-year for the fourth quarter of 2007 due to anticipated weak growth in deposits. The deposits growth had become weak in the third quarter of 2007.

However, EFG-Hermes expects the banking sector's positive third quarter performance to continue into Q4, with the sector delivering strong results overall.

“The Commercial Bank of Dubai, one of our top picks in the sector, is expected to deliver the highest earnings growth of the sector at 53% year-on-year for the quarter and 49% year-on-year for the full year,” EFG-Hermes said.

Elsewhere in the real estate and construction sector, EFG-Hermes anticipates Arabtec to deliver another quarter of robust earnings growth.

“The ongoing shortage of qualified contractors should continue to drive very strong earnings growth for Arabtec, at 166% year-on-year for the quarter and 129% year-on-year for the full year," it said.

Union Properties was predicted to post more modest year-on-year growth, EFG-Hermes said, warning that the developer's results would likely be impacted by the timing of real estate project deliveries.

"Union Properties’ earnings are expected to benefit from fair value gains realised on revaluation of investment property and the remaining revenue recognized from high margin land sales," the investment bank said.

"However, the strong delivery of property projects in the fourth quarter of 2006, coupled with the company’s use of the completed contract method of accounting, should result in earnings growth of -40% year-on-year for the quarter, and 6% year-on-year for the full year.”

Meanwhile in the telecoms market, the firm expects Etisalat to report strong earnings growth, bolstered by its UAE and Saudi operations.

“We expect Etisalat to report robust earnings growth of 26% year-on-year for the quarter and 26% year-on-year for the full year also. We continue to expect strong results from its UAE operations, both in terms of both usage and subscriber growth.

“We estimate Du’s fourth quarter of 2007 net losses at Dhs179m, compared to net losses of 242 million dirhams in the third quarter of 2007.”

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