Aldar shares slide after record loss

10/02/2011 00:00 AST

Shares in Abu Dhabi's Aldar Properties slid yesterday after the indebted developer reported a record quarterly loss. Trading in Middle East markets slumped, with little reason for traders to open new positions as the weekend neared and regional benchmarks almost unchanged.

Aldar dropped 3.2 percent to 1.82 dirhams after it made a fourth-quarter loss of 11.14 billion dirhams ($3 billion), having taken writedowns of 11.3 billion dirhams in 2010, most of which were booked in the final quarter.

Aldar has made losses for five straight quarters and its shares have fallen 55 percent over the past 12 months. Aldar announced the writedowns in January as part of a rescue package that includes selling various assets totalling $4.5 billion to Abu Dhabi's government, while state investment vehicle Mubadala will also buy a $763 million) convertible bond.

The money it will get from the asset sales and convertible bond will be used to repay debt and for development capital expenditure," said Ahmed Badr, Credit Suisse research analyst. "We think the recurring income from investment property won't be enough to derive equity value.

Credit Suisse has an underperform rating on Aldar and a fair value price of 1.59 dirhams. "We don't see an imminent turnaround in Aldar unless the property market recovers and that seems unlikely," Badr said. "The capital structure of Aldar was significantly over-leveraged and it was then hit by the property downturn.

Dubai house prices have fallen about 60 percent from a 2008 peak and Abu Dhabi prices have also tumbled, with both forecast to make further double-digit declines to 2012 as over-supply and weak demand weigh.

UAE bourses are heavily skewed to property, so a wider economic turnaround-the country's economy is forecast to grow 3.6 percent in 2011 according to economists polled by Reuters- may not be reflected on equity benchmarks. "UAE markets will continue to face challenges for years to come, not just one or two quarters," said Shahid Hameed, Global Investment House head of asset management for the Gulf region.

The real estate cycle is very long and I don't see a turnaround in the UAE property market any time soon, so local stock markets will probably remain sideways, although there will be spikes up or down depending on the news flow.

Abu Dhabi National Energy Co (Taqa) climbed 2.9 percent after it swung to a net profit in the fourth quarter, helped mainly by higher commodity prices, to beat analysts' forecasts. Qatar's index fell for a second day in three as volumes slumped to a two-week low. Qatar National Bank dropped 1.8 percent and Islamic lender Masraf Al Rayan fell 2 percent. The latter has gained 9.5 percent this week.

Islamic bank stocks are up after the central bank instructed conventional lenders to dispose of their Islamic banking assets by the end of 2011. "It will have a positive impact on Islamic banks, especially Masraf Al Rayan, which as a new bank is more aggressive and its growth capacity should accelerate because of this ruling," added Global's Hameed.

Reuters