Handover of towers lifts Sorouh's revenue
Better late than never when it comes to Sorouh Real Estate's towers on Reem Island, analysts say.
Buyers are finally moving into their homes this month in Sun and Sky Towers, which means Sorouh is now able to book revenue from the project, almost one year after work was completed.
Al Mal Capital this week initiated coverage on Sorouh with an "outperform" rating and a target price of Dh2.14, citing the company's position in Abu Dhabi, its attractive valuation and strong capital structure.
Sorouh's net income is forecast to grow to Dh750.2 million this year, compared with just Dh16.2m last year and increase to Dh1 billion next year, said Akram Annous, an analyst at Al Mal Capital in Dubai.
The developer is expected to be among the main beneficiaries as the Abu Dhabi Government focuses on adding residential units to ease a supply shortage.
The shortage was likely to continue until 2015, Mr Annous said. Sorouh would benefit further from an expected persistence of the Abu Dhabi housing shortage after the company had completed its government-sponsored residential projects, he said.
"The stock is trading at an attractive valuation, a discount of almost 30 per cent compared to its peers," Mr Annous said. "It has faced pressure, like most developers listed in the UAE, from a general lack of liquidity and interest in the stock market."
Abu Dhabi stocks were underperforming their peers in Dubai even before civil unrest hit North Africa and parts of the Gulf. On the whole, property stocks in the Mena region were trading at a discount of almost 50 per cent to their emerging-market peers in Asia, Russia and Latin America, Mr Annous said.
Sorouh's stock also offers exposure to substantial opportunities in Abu Dhabi's hospitality segment, he said.
The Abu Dhabi Government's efforts to promote tourism should lift the company's rental income from investment properties as the number of visitors to the capital is forecast to reach more than 2.1 million by 2013 from 1.5 million in 2009.