Sorouh enjoys major dividend

Sorouh Real Estate said its third-quarter net profits more than tripled compared with a year ago, driven primarily by land sales in Shams Abu Dhabi. Profits for the quarter ended Sept 30 were Dh760.4 million (US$207m) compared with Dh216.91m in the quarter a year earlier, the Abu Dhabi property developer said in a statement today. "The third-quarter growth in profits is purely from sales on the Shams project and our share of profits from our associated companies. There was also some other income, but that was not as big," Ala Khanak, the chief financial officer of Sorouh, told Reuters. Mr Khanak added that "there is no reason to believe we cannot achieve similar growth in fourth-quarter profits." "A large majority of their [Sorouh's] profit is recognised from plots of land they have sold in Shams Abu Dhabi," Sajeer Babu, a property analyst at the National Bank of Abu Dhabi, said. "This is not surprising since land prices in Abu Dhabi have gone up more than 75 per cent compared to last year." The company said profits for the first nine months of the year rose 125 per cent to Dh1.74 billion, or Dh0.73 per share, compared with Dh773.47m, or Dh0.31 per share, for the January to September period of last year. Revenue over the same period also more than doubled, to Dh3.19bn from Dh1.48bn. "The results were better than expected," Sana Kapadia, an analyst at EFG-Hermes said. "This reflects how the business is shaping operationally, with better contributions from land sales, from rental income." The company's total assets grew to Dh16.7bn as of Sept 30, from Dh7.2bn at the end of last year. While the global financial crisis is raising concerns about developers' ability to fund their projects, Sorouh has recently secured ­funding. "People are concerned because some projects may be delayed or even cancelled due to funding issues," Mr Babu said. "But in the case of Sorouh, during the third quarter of 2008 they have issued an asset-backed sukuk of Dh4.02bn through securitisation of its receivables from the sale of certain plots in Saraya and Shams." According to the analyst, this has increased the company's total cash position to Dh7.7bn, "providing enough liquidity over the next 18 months for all projects under development". "The strong demand in the Abu Dhabi real estate market means that it is comparatively well-cushioned against the global economic situation," Mounir Haidar, Sorouh's chief executive, said. "Construction is progressing well at Shams Abu Dhabi on Reem Island, with the first phase on track for completion in the first quarter of 2010, and we have just broken ground at Al Ghadeer [on the Dubai-Abu Dhabi border]." Analysts remain positive about future results for the company. "If they maintain this momentum, which we believe that they are very likely to, the earnings numbers do remain underpinned," Ms Kapadia said. "Perhaps, sales activity will not be as fast as what we have seen in previous quarters, but the company continues with its keen focus on project execution." Sorouh has a portfolio of more than Dh70bn worth of projects under development, mainly in the UAE. The company's shares were trading at Dh4.93 on the Abu Dhabi market yesterday afternoon, compared with a Dh9.93 peak on June 16. ngillet@thenational.ae