Dubai’s Emaar Properties, the developer of the world’s tallest tower in Dubai, announced that second-quarter profit more than doubled. Net income climbed to 614 million UAE Dirmahs (US$ 167 million) from 250 million dirhams a year earlier.
Emaar, which is publically traded in Dubai, had its shares rise moderately after the announcement, consolidating a trend over the past several months. Emaar shares have gone up by 26 percent so far this year, out performing the 12 percent gain for the Dubai Financial Market.
The positive results are partially due to reduction in costs by 9 percent and an increase in revenue by 2 percent, as the company also expands its international operations.
Also contributing to the difference between last year and this year’s results is that last year there was a writing off of a $46 m investment in Dubai Bank.
Similar positive results were reported by state-owned developer Nakheel and Union Properties.
July 29, 2012
Analysis and Forecast: Decreasing Risk
The positive results reported by Emaar may be seen as both indicative of a better performance by the company itself, as well as a reflection of the state of the Dubai economy.
Emaar is one of the most important indicators of the health of the Dubai economy, given the fact that it is the region's largest real estate developer. It has been behind many of Dubai's landmark projects. Its shares plummeted as a result of the crash of 2008.
The higher sales reflect both the performance of the Dubai real-estate market. As predicated by Political Capital in early 2011, the prices have leveled off and are showing modest signs of recovery. This is both due to locally improving economic conditions, as well as Dubai's attraction to investors from the region who see in Dubai a safer alternative to other countries undergoing unrest. We do not, however, believe that the likely negative impact of the Iran sanctions have filtered through yet, and may start appearing later in the year.
The results also reflect the external performance of Emaar, particularly in Egypt.
The results therefore are indicative of a cautious positive outlook and are likely to reflect more optimism in Dubai's prospects, as also confirmed to a lesser extent by the results of Nakheel and Union Properties.
Below is a figure showing the performance of the Emaar over the past 2 years.