Although Aldar Properties is a "capital-intensive developer with serious operating headwinds", it still represents better value than Emaar Properties, its more established rival in Dubai, says Bank of America Merrill Lynch. The lender recommends a 12-month price objective of Dh4.90, 31 per cent more than Aldar's closing price of Dh3.74 on the ABu Dhabi Securities Exchange General Index yesterday.
"We think the share price has been excessively punished, having corrected 20 per cent since the beginning of the year," the US bank said in a research note yesterday, Aldar has underperformed Emaar by about 40 per cent since the Abu Dhabi Government stepped in to make the repayment on a Nakheel bond in December. The price target accounts for a 50 per cent haircut to Aldar's Dh9.1 billion receivables from the Abu Dhabi Government and applies a 7.5 per cent cost to its debt.
The developer this month posted a first-quarter net loss of Dh314.2m, its second consecutive quarterly net loss. Lack of property sales constrained revenue, and returns from investment properties were also lower, which made the losses larger than the forecasts from Deutsche Bank and Shuaa Capital. Aldar, the largest developer in the capital and the company responsible for projects such as the Yas Island projects, last year sold some of its assets to the Abu Dhabi Government. Some analysts questioned the firm's overall liquidity, but Bank of America Merrill Lynch is less concerned.
"Near term, we expect a benign solution to receivables and, over the medium term, we see significantly lower execution risk and a higher probability of the value of core projects being crystallized," the note said. The bank also sees evidence of improved sales at Aldar's Al Raha Beach project. Aldar shares are down about 42 per cent since their peak in October and about 4 per cent since the company announced its first-quarter loss.
The US lender yesterday also restarted coverage on Emaar, the largest developer in the GCC by market capitalisation, with a neutral rating and a 12-month price objective of Dh4.40. Emaar shares closed at Dh3.81 yesterday. firstname.lastname@example.org