Abu Dhabi's two biggest developers unveiled bumper profits yesterday but kept investors waiting on a definitive date for their proposed merger.
Aldar Properties and Sorouh Real Estate yesterday released identical statements concerning the proposed Dh55.09 billion (US$15bn) merger. "Discussions regarding the possible merger continue to progress and are at an advanced stage," they said. "A decision will be taken by the company's board of directors as to whether or not to recommend the merger to the company's shareholders in due course."
It came as Sorouh announced a 84.2 per cent increase in profits for the three months to the end of September and Aldar announced a 30 per cent profits increase for the period, both beating analysts' expectations and both off the back of public sector sales.
Aldar, the emirate's largest developer, whose schemes include the soon-to-open Yas Waterworld and the Al Raha Beach housing development, said profits attributable to shareholders for the third quarter rose from Dh144 million to Dh205.7m as the company reaped the benefits from asset sales to the Abu Dhabi Government. However, sales for the period dropped from Dh3bn to Dh1.6bn.
Sorouh, the second-largest developer, which is developing much of Reem Island as well as the Al Watani national housing scheme, reported that profits attributable to shareholders rose from Dh67.3m in the third quarter last year to Dh124.4m.
Sorouh said this was boosted by revenues from the firm's national housing programme and the release of Dh40m of development contingencies held against the developer's Sun and Sky scheme on Reem Island which is now complete. Sales for the period were also down from Dh890.4m to Dh803.4m.
"At first glance these results look very positive," said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi. "But when you drill down into the reasons behind the increase in profits, for both companies it's very much driven by the Government of Abu Dhabi.
"In general the numbers for both companies look good despite the fact they are boosted by a one-off item," said Tariq Qaqish, the deputy head of asset management at Al Mal Capital.
"However, we believe Abu Dhabi still suffers from a residential and commercial property oversupply situation. We believe the merger remains to be a good idea from the companies' point of view as the new entity will control the supply chain, there will be cost synergies and they will enjoy margin improvement."
For the first nine months of the year both companies also reported profit increases.
Sorouh said net profit rose 32.1 per cent from Dh242m last year to Dh356.3m this year on the back of a slight decrease in sales from Dh2.6bn in 2011 to Dh2.5bn.
Aldar said that over the same period net profit increased 54.2 per cent from Dh491m to Dh1.1bn on the back of sales that increased from Dh4.7bn in 2011 to Dh9.8bn in 2012.
In its results, Sorouh, whose Al Rayyana housing complex close to the Abu Dhabi Golf Club course was evacuated after a courtyard car park in the complex collapsed last month, added that "further leasing activity [at the development] has been deferred pending completion of remediation works at the development. All existing tenants have been relocated and are expected to be able to move back into the development in the summer of 2013."
"We have moved from strength to strength - both financially and operationally - and remain well positioned to execute our business plan and confirm our position as Abu Dhabi's premier developer," said Ali Eid AlMheiri, the chairman of Aldar Properties.
"The quality of the business's overall earnings continues to mature as we build more sustainable revenues and a stronger investment portfolio," said Abubaker Seddiq Al Khouri, the managing director of Sorouh.