x Abu Dhabi, UAESaturday 22 July 2017

Shareholders focus on annual meetings

With Arabtec's annual general meeting kicking off and Emaar's set to be held on Tuesday, it is shaping up to be a big week for shareholders in the UAE's property and construction sectors.

Property and construction stocks have been enjoying a bull market as investors vie to get a slice of the resurgence in Dubai housing. Pawan Singh / The National
Property and construction stocks have been enjoying a bull market as investors vie to get a slice of the resurgence in Dubai housing. Pawan Singh / The National

With Arabtec's annual general meeting (AGM) kicking off as The National went to press and Emaar's AGM set to be held on Tuesday, it's shaping up to be a big week for shareholders in the UAE's property and construction sectors.

Property and construction stocks on both the Dubai and Abu Dhabi bourses have been enjoying a bull market so far this year as investors vie to get a slice of the resurgence in the Dubai housing market.

The DFM real estate index of stocks including Emaar, Arabtec, Drake & Scull International, Union Properties and Deyaar has risen 20.5 per cent over the past year, growing from 3,389 points at the start of 2013 to a high of 4,511 at the end of February before falling back to around the 4,040 mark last week.

And the Abu Dhabi Securities Exchange's real estate index of stocks including Aldar, Sorouh and RAK Properties showed a similar picture, rising from less than 1,900 points at the start of the year to 2,780 in mid-February before sinking back slightly near the 2,330 mark last week.

The government-backed Emaar, as the darling of the DFM, has already proved an attractive stock for hard-pushed international investors searching for a return, with buyers including Schroders, Nomura and BlackRock. Aabar-backed Arabtec also has its share of big-name backers including Eaton Vance, Prudential Financial and Investec Asset Management, Bloomberg data show.

With apartment prices in Dubai surging by a reported 12 per cent in the first three months of the year alone, analysts predict that shareholders in the UAE are likely to start to press for higher dividend payments.

Emaar's stocks rallied this year, rising from a low of Dh3.57 last November to Dh5.65 in March before falling back around the Dh5.30 mark after the company, Dubai's largest listed firm by market cap, announced in February that it would be paying out a dividend of 10 fils per share - the same level it had been for the past two years.

According to analysts, this equates to a dividend yield of about 1.9 per cent, lower than most UAE companies and lower than many shareholders' expectations.

"People always do want higher dividend payouts and Emaar is a positive story at the moment due to the turnaround in the Dubai property market, so the pressure to pay out more is there," says Mohammad Kamal, the director of equity research at Arqaam Capital.

"But the market has already priced the 10 fils per share dividend into what it is expecting so I don't suppose that Emaar will pay any higher than the amount it has announced."

And with the company reportedly investigating ways of spinning off its lucrative malls and hospitality businesses and its Turkish operation in an attempt to boost returns, shareholders will also be looking closely at Emaar's strategy to find out what this could mean for the company's risk profile.

Proponents of the move say that the steady income stream of the malls and hospitality businesses is incompatible with the "lumpy" property sales model and that this part of the business therefore ends up being undervalued by the market.

However, opponents point to the fact that the steady retail income stream was one of the key factors keeping the company stable during the difficult years of the Dubai property crash.

Meanwhile, the Arabtec shareholders meeting yesterday had a very different agenda, to scrutinise the new strategy adopted by Dubai's biggest contractor as the Abu Dhabi investment fund Aabar puts in place its plans for the property slump-hit business.

Shares in Arabtec also surged during the first two months of the year, gaining about a third between the start of January and February 25, when they stood at a high of Dh3.05 a share.

But after the contractor behind Burj Khalifa announced a new strategy to aggressively expand into the oil and gas sector, financed by a Dh4.7 billion rights issue and bond issue, the company's share price tanked.

Stabilising only after the company agreed to scrap its plan to issue convertible bonds, the share price has yet to return to its pre-announcement highs and remains subdued around the Dh2.08 mark.

"Perhaps it is a good idea for the company to invest heavily into the oil and gas markets, but shareholders need more information about this and how the company will compete with very fierce competition from the large international companies who already operate in this sphere," said Sebastien Henin, the frontier markets portfolio manager at The National Investor.