Emaar, Aldar, Union Properties and Arabtec likely to make MSCI cut

Four of the UAE’s construction and real estate companies are likely to be included in the MSCI Emerging Markets Index, according to a Deutsche Bank report.

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Four of the UAE's construction and real estate companies are likely to be included in the MSCI Emerging Markets Index on May 14.

Emaar Properties, Aldar Properties, Union Properties and Arabtec Holding are likely to make the cut, according to a Deutsche Bank report.

Emaar, which has the largest market capitalisation of any company in the UAE, meets all the criteria for inclusion in the index. With a market cap of Dh70.38 billion, the company has a 49 per cent foreign ownership limit, is sufficiently liquid and is traded frequently.

The company is trading at a price-to-earnings ratio of 23.01, considerably above the average of 11.74 for the index as a whole. It is trading at a price-to-book ratio of 1.91. Its stock price has also performed well over the past six months, climbing from Dh5.35 each to Dh9.83 each at close on Thursday.

Emaar, which reported a profit of Dh863 million during the first quarter, expects its profit to jump to Dh3.07bn next year and to Dh10.1bn by 2018.

The biggest listed real estate developer also has projects in other countries, including Egypt, Turkey and Saudi Arabia.

“We remain bullish on the outlook of Emaar. We expect 2014 to be another strong performing year for the company – on the back of better occupancy at hotels, higher retail footprint and strong performance in the real estate business,” said Cairo-based Naeem Brokerage in a note.

Abu Dhabi’s Aldar has a market capitalisation of Dh32.62bn. It has a foreign ownership of 40 per cent and is frequently traded. Its price-to-earnings ratio is 11.06, much more in line with the average. Aldar shares increased from Dh2.39 each to Dh4.72 each over the span of six months until the close of trading on Thursday.

The company reported a fourth-quarter net profit of Dh405.7m for last year and is predicted to report a net profit of Dh325.5m for the first quarter of this year.

“We forecast a healthy income and margin expansion from the retail and residential portfolio in the medium term,” the financial services firm JPMorgan said in a note. “[Aldar’s] hotel portfolio should also benefit from improving average daily rate as footfalls improve following the launch of Yas Mall.”

The Dubai developer Union Properties is on the cusp of meeting the criteria for inclusion in the index. With a market cap of Dh9.19bn, the company has a 15 per cent foreign ownership limit and said in February that it intended to increase that number to 25 per cent.

Union reported a net profit of Dh171.9m for the third quarter of last year, compared with Dh49.6m in the same period of 2012.

Meanwhile, the Dubai Financial Market-listed Arabtec Holding has a market capitalisation of Dh28.47bn and a foreign ownership of 49 per cent. Arabtec has a significantly high price-to-earnings ratio of 50.92 and a price-to-book of 5.16.

The company reported a net profit of Dh101.5m in the fourth quarter of last year. It is estimated to report a profit of Dh111.2m for the first quarter.

“We expect overachievement to continue over the coming years. The company’s backlog growth is in excess of 130 per cent since December last year,” said Naeem Brokerage.

Arabtec said in March that it had won a contract from the Egyptian government to build 1 million affordable houses in a project worth US$40bn.


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