Global concerns take toll on Emaar Properties

What's Down: Emaar Properties' outlook revised at Rasmala Investment Bank amid slowing global growth.

Emaar Properties had its outlook revised at Rasmala Investment Bank on expectation of weaker sales from international projects amid global growth concerns, low margins and refinancing risk.

The developer is the largest in the region with projects in Egypt, Saudi Arabia, Syria, Morocco, Lebanon and Jordan expected to be affected by global economic concerns.

"We expect handovers to materialise considerably below management guidance," said Saud Masud, a property analyst at Rasmala. Mr Masud cut the fair value of the stock to Dh3 from Dh3.50.

He also cut his prediction on handovers from international projects by an average of 20 per cent a year, resulting in a decline in total revenues of 6 per cent annually to Dh8.08 billion this year, Dh7.15bn next year and Dh5.28bn in 2013.

The forecast earnings per share was downgraded by an average of 13 per cent annually to 27 fils this year because of impairments, 31 fils next year and 30 fils in 2013.

Emaar Properties may seek refinancing options in the near term. The developer has debt repayments of about Dh6.7bn coming due by next year.

The company was under the spotlight last week after media reports suggested that the developer was using four of its malls, including the Dubai mall, as collateral for an US$800 million loan. The developer said the reports were incorrect but the shares still tumbled 8.6 per cent last week to Dh2.53.

Emaar is expected to incur capital expenditures on projects of Dh2.6bn and operating expenses and interest costs of Dh2.9bn. The total cash requirement is Dh12.2bn.

Meanwhile, Emaar is expected to generate a total of Dh12.9bn from its cash operations, along with existing cash and fixed deposits.

Considering a minimum dividend payout of 10 per cent, the company will need total near-term financing of Dh1bn, Mr Masud said.

"The company has a refinancing option of Dh2.6bn next year, but any attempt beyond this could signal deeper stresses," Mr Masud said.