Text size:

  • Small
  • Normal
  • Large

Likely Sorouh and Aldar merger a promising prospect

What's Up: Investors should buy Sorouh Real Estate shares as the Abu Dhabi developer's "inevitable" merger with larger rival Aldar Properties will boost the stock by about 20 per cent, said Arqaam Capital.

Investors should buy Sorouh Real Estate shares as the Abu Dhabi developer's "inevitable" merger with larger rival Aldar Properties will boost the stock by about 20 per cent, said Arqaam Capital.

A one-for-one share exchange is the most likely scenario, although it may dilute the value of Sorouh in the short term, wrote analysts led by Mohammad Kamal.

Abu Dhabi's two biggest developers said they were in advanced talks on the merger, which has the support of the Government and would create a company with US$15 billion in assets. Property companies in Abu Dhabi suffered losses and writedowns when prices in the sector halved in the aftermath of the global financial meltdown in 2008.

The merger will generate "substantial cost synergies in the medium term as overlapping functions are eliminated," the analysts wrote.

Arqaam raised its price estimate on Aldar to Dh1.45 from Dh1 with a hold recommendation to account for increased property sales to the Government as well as the transfer of assets to the state and the repayment of loans, according to the report.

Sorouh's price estimate was increased by about 45 per cent to Dh1.60 with a buy recommendation. Mr Kamal said the company's "margin picture" was underestimated in the past two quarters.

The two developers are not equal, and assuming they continue to complete planned projects, Aldar will be the larger contributor to recurring income, sales revenues and cash flows in the next two years, said Arqaam. However, Aldar will be a junior partner in the combined business in terms of land assets and long-term earnings per share.

A merger would benefit Abu Dhabi's property market as it "allows for a more coherent development plan for the emirate as land assets, balance sheets, and negotiation clout are consolidated", wrote Mr Kamal.

* Bloomberg News

Back to the top

More articles

Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 Three generations of the Hakimi family tend to their stall Crawford Market in Mumbai. Subhash Sharma for The National

In pictures: Shopper’s delight at Crawford Market in Mumbai

Crawford Market is an old British-style covered market dealing in just about every kind of fresh food and domestic animal imaginable. Later on renamed Mahatma Jotirao Phule, the market remains popular among locals and visitors by its old name, taken from Arthur Crawford who was the first municipal commissioner of the city.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.


To add your event to The National listings, click here

Get the most from The National