Emaar expects about $2.2bn in earnings this year

Company issues guidance after outline projections by credit rating agency

Dubai, United Arab Emirates - November 25, 2019: Standalone. Visitors to Dubai mall take pictures of the Burj Khalifa while covering up from the sun on a beautiful day in Dubai. Monday, November 25th, 2019 at Dubai Mall, Dubai. Chris Whiteoak / The National

Emaar Properties, the biggest listed property company in the UAE by market value, expects to make earnings before interest, tax, depreciation and amortisation of about Dh8 billion ($2.2bn) this year.

The company made the announcement in a regulatory filing on Tuesday after a report by credit rating agency S&P Global earlier this week, which changed the outlook on Emaar to stable from negative.

The rating agency said its decision is based on a likely improvement in the property developer's financial performance given the strengthening position of the emirate's property market.

Dubai-listed Emaar's market value was more than Dh30.14bn as of 1.10pm UAE time on Tuesday.

"Based on current market trends and business initiatives planned, the projected ebitda for Emaar Group is expected to be approximately Dh8bn. The performance is dependent on a number of external factors and is therefore an indication only of the possible performance of the group," the company said in a statement to the Dubai Financial Market, where its shares trade.

Monthly property transactions in Dubai hit a four-year high of Dh11.1bn last month, according to Property Finder.

Earlier this month, Emaar said it sold homes worth Dh10.5bn between January and May, a 250 per cent increase on the same period last year.

First-quarter transaction data for Dubai "suggests that the residential real estate market in Dubai has bottomed out and now offers attractive opportunities for developers, especially for premium properties", according to S&P Global Ratings.

Emaar is best placed to capitalise on this, given that it is responsible for more than half of new property sales and that it is focused on the premium end of the market, which is leading the recovery.

In 2021 the company "resumed new projects in response to higher demand ... we think that full-year sales will likely outpace the Dh14.8bn recorded in 2019," S&P Global's report said.

"With expected ebitda of Dh8bn in 2021, up from Dh4.1bn in 2020, we anticipate that the ebitda margin will improve to about 30 per cent, after a low 20.8 per cent in the previous year."

The improved profit is also expected to generate more cash, with funds from operations of close to 30 per cent this year and next, compared to 16.8 per cent in 2020, the rating agency said.

Although free operating cash flow is likely to remain negative this year, due to Dh6bn of working capital outflow and Dh3.7bn of capital expenditure, "from 2022 onward, we think that working capital will now longer hinder [free operating cash flow] because handover payments should outpace construction expense".

Emaar is expected to handover 6,000 units this year, up from 4,800 last year. This will increase to 10,000 next year based on its current project completion pipeline, the rating agency said.

On Monday, the company said it may issue a benchmark sukuk from its existing $2bn Trust Certificate Issuance Programme, subject to market conditions.

A benchmark bond or sukuk issue is considered to be one with a value of at least $500 million.

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