Eshraq shares rise, raising questions
The surprising doubling of the share price of Eshraq Properties over the past four weeks might appear a good thing, but a look at its results for last year suggests otherwise.
The Abu Dhabi developer raised eyebrows when it launched its Dh850 million initial public offering last year. For one, it came as Aldar Properties, the biggest developer in the emirate, was working on a restructuring with Mubadala Development, its biggest shareholder, and as property prices were plunging across the world. Mubadala is a strategic investment company owned by the Abu Dhabi Government.
Eshraq yesterday revealed its first full-year results as a public company. From the date of its listing last July 7 to December 31, the developer made a net loss Dh1.2m.
The company is also owed Dh400m from its land sales.
The figure represents an improvement on the Dh500m owed to the developer at the end of September, but these are payments that fell due last year and are now four months late.
Eshraq said it remained confident the money would be paid because it was owed by "customers who are reputable GCC nationals". But to be better regarded by investors the reassurance needs to be tied to a firm timetable for repayment, which it is not.
According to its financial statement, the only significant income Eshraq received in the six months to December 31 came from unexplained "sundries", amounting to Dh7.5m.
Yet despite such weak figures, Eshraq surprised investors yesterday by announcing it would pay them a generous dividend of 6 fils per share.This is baffling. Dividends are investors' share of the company's profit. As its results show, Eshraq has no profit. Investors, as part owners in the company, should ask how Eshraq can afford the payment.
The same strange story is retold in the company's share price. Eshraq shares sold for 51 fils when first listed last July. Since January 16, when local markets bottomed out, its share price has risen from 16 fils to yesterday's close of 33 fils, up 106 per cent.
Until Eshraq shows it has revenue upon which it can build a profit, , investors would be wise to ignore the lure of the headline grabbing share-price leap.
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