Debt overhang to remain

We maintain Hold on Aldar, but lower our TP to Dh1.05 as we cut 2011-13F EPS by 19% mainly on our lower margin and higher SG&A expenses forecasts.

Results beat our expectations on asset sales to the government
Aldar reported total revenue of Dh3,133m, beating our estimate of Dh858m and consensus estimate of Dh957m. The significant jump in revenue was due to recognition of Dh2,600m from land sale to the government. We expected the gain from land sale to be recognized directly below gross profit as in the case of the gain from transfer of Ferrai world assets in 1H11. Revenue ex-land sales of Dh533m was 38% below our estimate of Dh858m as revenue from property sales of Dh247m missed our estimate by 55% and rental income missed our estimate by 6%. SG&A expenses and finance costs were in line with our estimates. Net income of Dh144m was 4% above our estimate of Dh138m as the gross profit miss on revenue ex-land sales was more than offset by a higher-than-expected gain from land sale to the government.

Maintain our Hold rating, but reduce our target price to Dh1.05 from Dh1.30
We lower our target price to Dh1.05 as we cut our 2011-13F EPS by 19% on verage. Although we expect topline to gain momentum from deliveries at Al Raha, bottomline will remain under pressure due to the significant interest burden arising from outstanding debt of Dh30bn as of 3Q11. We expect debt repayments of about h10bn over the next 15 months to remain an overhang on the stock.

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