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شركة الدار العقارية
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3Q2009 Results: Revenues Improve, But Weak Quality Earnings Persists
• Better-than-Expected Revenue: Aldar reported 3Q2009 revenue of AED634.5 million, 15% higher than our estimate, but down 31% Y-o-Y and up 11% Q-o-Q. The company’s stronger-than-expected revenue was driven by both higher land sales and delivery. After three quarters and in what can be viewed as a sign of greater life in the Abu Dhabi real estate market, Aldar recognised during the quarter revenue of AED103 million from two plot sales.
• But Another Quarter of Operating Loss: However, despite better-than-anticipated revenues, SG&A continued to exceed estimates (23% ahead) and resulted in an operating loss of AED24.1 million. In spite of this disappointment, the blended impact of better-than-expected net interest income and valuation gains, Aldar reported net income of AED427.3 million (down 44% Y-o-Y and up 68% Q-o-Q), 57% higher than our estimate of AED272.5 million. However, similar to 2Q2009, these are low quality earnings. Going forward, the handover of more rental properties in 4Q2009e and the Yas hotels should boost Aldar’s recurring income streams, in our view.
• High Leverage, but Relief Could be Imminent: During the quarter, Aldar raised a further AED2,600 million in new debt, increasing total debt to AED36.8 billion. This amounts to a 9M2009 net debt-toequity ratio of 1.5x. While the company’s leverage continues to make us cautious, we believe there could be some restructuring of debt (more towards long-term maturities), as well as realisation of the market’s speculation regarding the sale of its F1 race track. Both aspects could alleviate some cash flow concerns. Moreover, ongoing additions to its rental and hospitality portfolio, combined with more unit deliveries from here on out, look set to assist operating cash flows. Moreover, its cash burn rate of an estimated AED16 billion in 2009e is expected to halve to AED7-8 billion in 2010e. With AED11 billion in cash and undrawn facilities of AED4.4 billion, these development needs look set to be met.
• Maintain ST Neutral / LT Accumulate: On the back of the recent land sales, a trend which seems will extend into 4Q2009e and early 2010e, we believe there is some slight upside potential to our FY2009e numbers. However, while these results were ahead in terms of revenue, they remained weak on quality in terms of earnings. Hence, we maintain our ST Neutral recommendation. Also as it stands, the company’s leverage remains high, such that in the short to medium term, we highlight that Aldar may find debt repayment difficult, necessitating the issuance of further, potentially dilutive, new funding. Of course, any asset sale or other financial assistance would reduce some of these concerns. With an unchanged view that Aldar is a long-term play on the structurally sound Abu Dhabi real estate story, complimented by its government parentage, we maintain our LT Accumulate rating and our LTFV of AED6.14.
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