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Abu Dhabi, UAEThursday 20 September 2018

Missing analysts' estimates Damac reports 21 per cent plunge in second quarter profit    

 The property developer's first half booked sales stood at Dh4 billion

Hussain Sajwani says Dubai continues to show economic growth in spite of turbulent times brought on by the slump in oil prices and sluggish global growths Paulo Vecina / The National
Hussain Sajwani says Dubai continues to show economic growth in spite of turbulent times brought on by the slump in oil prices and sluggish global growths Paulo Vecina / The National

Damac Properties, the Dubai-based real estate developer and business partner of US President Donald Trump in the emirate, said second quarter net profit fell 21 per cent, missing analysts' expectations, on the back of a slowing property market.

Net profit fell to Dh704.8 million the three months ended June compared to Dh886.8 m in the same period last year. Revenues fell 11 per cent to Dh1.57b compared to Dh1.75b in the corresponding period last year, it said.

Analysts polled by Bloomberg forecast an average profit of Dh832m for the second quarter. Shares of Damac closed 2 per cent lower to Dh3.84 in Dubai.

“Damac’s 14 per cent drop in development income from first quarter, or 34 per cent from the same period last year, suggests that projects are taking longer to complete, and imply that Damac may miss its target handovers of 2.5-2.7k units by 20 per cent, if we were assume that the handovers achieved in the first half are to be replicated in the second half of the year,” said Mohammad Kamal, an analyst at the Dubai-based investment bank Arqaam.

“New sales, which are an indicator of future earnings, are also down 18 per cent quarter on quarter, but remain 10 per cent higher than what was achieved in the second quarter 2016. At this run rate, Damac’s guidance for a full year sales target of Dh7bn can be readily met.”

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Damac Properties Chairman Hussain Sajwani declined to comment on the results when contacted by The National. Company spokespeople were not immediately available to comment.

In the company's regulatory filing, Mr Sajwani said "the property market in Dubai continues to demonstrate further stabilization and our medium to long term outlook remains positive as Damac continues to develop innovative products that appeal to both end users and investors."

"Dubai continues to show economic growth in spite of the turbulence seen in 2016 with the drop in oil prices and sluggish global growth," he added.

Though its earnings may have missed analysts' estimates, the company said its booked sales for the first half of the year stood at Dh4b and that it delivered 1,071 units in Damac Hills, a real estate project in Dubai.

Sanyalaksna Manibhandu, head of research, at NBAD Securities said the profit was well below both his and consensus estimates but said that they were encouraging for Dubai real estate going forward.

"Recovery in the Dubai property market, as demonstrated by rising property transactions aided by higher volumes as well as rising unit prices, is a positive," Mr. Manibhandu said.

While Dubai property has felt the brunt of low prices and a strong dollar over the past couple of years, there has been strong signs of recovery this year.

Dubai’s real estate sector recovered in the first half of this year with deals transacted rising 16.8 per cent in value, according to the Dubai Land Department. The total value of real estate transactions reached Dh132 billion in the first half compared with Dh113bn in the year-earlier period.

To take advantage of the resurgence Damac announced at the beginning of the month it has awarded a Dh628 million contract to build 1,296 villas and a 55 million square foot green development to Arabtec Construction.

Arabtec will begin work on the project in the third quarter of this year with an expected completion period of within 24 months.

Damac has previously told The National that deliveries on various clusters within Akoya Oxygen will start from the second half of 2018 through to 2022.

The golf course at Akoya Oxygen is being operated by Donald Trump’s Trump Organisation and is being designed by Tiger Woods Design.

Earlier this year, China State Construction Engineering Corporation picked up a Dh117.5m contract for infrastructure work at Akoya Oxygen.

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