GCC real estate
Sector note
GCC real estate Real estate | GCC
MENA research
Revising forecasts; DAAR remains our top pick
Despite improving liquidity and rental yields in the UAE, we maintain our neutral view on the sector as excess supply remains a concern Aldar, trading at 0.9x floor BV, looks appealing as both liquidity and asset quality have been clearly addressed… …however, over the medium-term, we prefer DAAR and Mabanee on supportive sector fundamentals, defensive profiles, and more attractive valuations
Dar Al Arkan: Raise TP to SAR17.6/share from SAR16.9/share and maintain Overweight rating. Despite its recent run (+20% since November), DAAR remains our top pick in MENA on valuation grounds as we feel that liquidity concerns are overstated in light of supportive fundamentals for plot sales with volumes picking up. DAAR’s developed land portfolio (no CAPEX required) stands at SAR3.5bn, which alone could cover most of the company’s debt of cSAR8bn, assuming historic margins of 45%. Also, we feel that it is the only builder in Saudi Arabia that provides direct exposure to the low-mid income segment through land sales (SAR500/sqm). We revise our EPS estimates downward by 10% in 2010e on the sale of less prime land, while maintaining margins. We push back the delivery of phase 1 of Shams Al Riyadh into 2012e and cut our EPS estimates for 2011e by 28%. Mabanee: Maintain TP at KWd1,100/share and Overweight rating. Mabanee is a REIT that provides direct exposure to the underserved Kuwaiti retail market. Also, unlike other Kuwaiti corporates, with a limited investment portfolio, Mabanee offers a pure play on core operations, rather than indirect exposure to the KSE. The stock trades at 0.75x 2012e NAV when phase III is delivered and 0.65x 2013e NAV when occupancy levels normalize. Following an upward revision in management guidance on rental rates (+20% to an average of KWD450/sqm) and gross leasable area for phase III (to 95,000 from 85,000), we recently raised our rental income forecast (please refer to our note Mabanee: Back in fashion, published on 7 January 2011). Aldar: Maintain TP at AED2.9/share and Overweight rating. Following the funding framework, Aldar emerges as a leaner company with an improved capital structure, allowing the market to focus on fundamentals, in our view. The transaction, we estimate, yields an uniflated BV of AED2.3/share on a fully diluted basis, which we feel provides a realistic floor valuation. In our most recent note, Aldar: Turning a new leaf, published on 14 January 2011, we reintroduce DCF in lieu of book NAV, which we used previously. While the impairments significantly impact the company’s book, from a DCF
Dar Al Arkan Target price (SAR) Potential return Mabanee
Overweight 17.6 75% Overweight
Target price (KWd) Potential return Aldar
1,100 39% Overweight
Target price (AED) Potential return Emaar
2.9 38% Neutral
Target price (AED) Potential return Al Akaria
3.8 11% Neutral
Target price (SAR) Potential return Sorouh
27.8 9% Neutral
Target price (AED) Potential return
1.6 3%
Note: Returns based on prices as of 18 January 2011
19 January 2011 Majed Azzam Analyst +971 4 2935 385 [email protected] Ankur Khetawat Analyst +971 4 2935 387 [email protected] Nermeen Abdel Gawad Analyst +20 2 3535 7362 [email protected] Sapna Sharma Analyst +971 4 2935 382 [email protected] Disclaimer: See page 41
GCC real estate Real estate | GCC 19 January 2011
perspective the impact is less pronounced, considering that fair value gains/losses are noncash items and the street is not assuming any land sales, in our view. In contrast, the sale of Yas low yielding assets at a c15% profit we believe offsets the impact of the impairment and provides a cash injection, significantly reducing debt burden and interest costs. We cut our revenue estimates for 2010e by 56% to take into account delivery delays at Al Bandar and Al Gurm. We also adjusted our EPS forecasts downward to include AED10.5bn in asset impairments to be recognized in 4Q10. We raise our 2011e EPS estimates by 35% largely as a result of a one-off cAED2bn gain on disposal of assets. Emaar: We exclude KAEC from our valuation on widening losses and cut our TP to AED3.8/share from AED4.1/share but maintain Neutral rating. On our estimates, current price levels reflect the company’s rental assets and property sales backlog, with the upside largely driven by investments (e.g. KAEC and MGF). Given the funding uncertainties in the case of MGF and potential impairments of investments/loans to associates similar to what we saw with Aldar, we feel that the market is unlikely to price them in. MGF is likely to continue to be a drag on Emaar’s cash flows as the IPO is unlikely to go through in the near term. Plans to raise USD2bn through a Sukuk issuance highlight the company’s growing funding needs. Also, funding costs are on the rise (7.5% on CB and likely to be higher on planed USD2bn sukuk). KAEC losses are continuing to widen, raising concerns about the project’s viability in the current environment. Accordingly, we exclude KAEC from our valuation and cut our TP to AED3.8/share but maintain Neutral rating. We revise our EPS estimates downward by 12% in 2010e as we now factor in (1) slower deliveries at Burj Khalifa, (2) margin compression on higher international contribution, and (3) push back the delivery of commercial units in Emaar Square. As such, we raise our EPS forecast for 2011e by 30%. Al Akaria: Raise TP to SAR27.8/share from SAR26.2/share but maintain Neutral rating. We believe the rental portfolio is fully priced in to Al Akaria’s current share price and that without a coherent plan the market will not give any value to the company’s land bank where the current upside lies. We raise our EPS estimates by 115% in 2010e on higher occupancy at Al Akaria Plaza (70% versus 60% previously) and the sale of the Al Basateen developed land plot in Riyadh for SAR230m. We treat this land sale as a one-off given the company’s history and considering that this sale has exhausted land held for sale, on our estimate. Therefore, we no longer assume any plot sales in 2011e and cut our EPS forecast by 8%. We raise our 2012e EPS estimates by 30% as the company recently revised the number of units at Diplomatic Quarters 2 upward to 420 from 292 previously with phase 1 expected to be delivered in 2012e. Sorouh: Cut TP to AED1.6/share from AED1.9/share but maintain Neutral rating. Given that Sorouh’s business model has historically been highly skewed towards sales with a limited buildup of recurring income properties, we feel that its growth prospects are limited. Sorouh trades at 0.7x 2010e BV, which implies that the market is pricing in AED2.2bn of asset impairments. While Sorouh follows cost accounting and its historic land sale prices averaged AED2,500/sqm versus AED4,500/sqm for Aldar, the magnitude of Aldar’s impairments (70% of equity) raises concerns. 3Q10 numbers showed deterioration in overdue receivables. Accordingly, to be conservative, we now assume 50% of land receivables are unrecoverable up from 20% previously. We cut our EPS estimates for 2010e by 49% as the delivery of Sun and Sky Towers has now been pushed back to early 2011e. As a result, we double our EPS forecasts for 2011e. 2
GCC real estate Real estate | GCC 19 January 2011
Revising estimates Estimates revision 2010e
2011e
2012e
New Dar Al Arkan (SARm) Revenue 4,349 Gross profit 1,917 GPM 44% Net profit 1,548
Old
%Δ
Cons.
New
Old
%Δ
Cons.
New
Old
%Δ
Cons.
4,796 2,102 44% 1,729
-9% -9%
4,758
5,695
2,040
6,753 2,983 44% 2,598
7,935
-28%
6,328 2,821 45% 2,411
-6% -5%
1,709
6,225 2,690 43% 2,247
-29% -25%
-10%
4,449 2,021 45% 1,610
-7%
2,738
Mabanee (KWd ‘000) Revenue 35,253 Gross profit 28,334 GPM 80% Net profit 19,453
34,452 27,690 80% 19,372
2% 2%
32,925
35,200
19,650
60,990 52,945 87% 39,498
54,825
5%
70,359 60,476 86% 44,599
15% 14%
18,700
34,298 27,566 80% 18,037
5% 5%
0%
35,901 28,855 80% 18,872
13%
33,675
Aldar (AEDm) Revenue 1,321 Gross profit 217 GPM 16% Net profit (12,218)
2,987 735 25% (254)
-56% -71%
2,543
4,070
(396)
8,517 2,613 31% 3,507
5,130
35%
8,757 2,473 28% 1,501
3% -5%
(951)
2,466 902 37% 1,772
53% 1%
-
3,761 913 24% 2,398
-57%
375
Sorouh (AEDm) Revenue 1,106 Gross profit 799 GPM 72% Net profit 502
3,421 1,311 38% 980
-68% -39%
2,550
2,876
775
5,738 1,889 33% 1,630
3,065
205%
5,738 1,884 33% 1,700
0% 0%
487
783 662 85% 300
311% 81%
-49%
3,220 1,196 37% 913
4%
799
Emaar (AEDm) Revenue 10,991 Gross profit 4,662 GPM 42% Net profit 2,815
11,250 5,038 45% 3,202
-2% -7%
10,980
9,200
2,692
7,498 4,128 55% 2,437
9,452
31%
6,426 3,229 50% 1,555
-14% -22%
3,356
6,672 3,495 52% 1,801
38% 16%
-12%
9,211 4,044 44% 2,367
-36%
2,969
116% 96%
287
231
114
482 283 59% 178
300
-16%
294 206 70% 113
-39% -27%
122
304 192 63% 141
-18% -9%
79%
250 175 70% 118
-37%
123
Al Akaria (SARm) Revenue Gross profit GPM Net profit
442 281 63% 180
205 143 70% 101
Source: AlembicHC, Bloomberg and Reuters consensus
Recommendations overview Recommendation DAAR Mabanee Aldar Emaar Al Akaria Sorouh
Overweight Overweight Overweight Neutral Neutral Neutral
Action
New TP/share
Old TP/share
SAR17.6 KWd1,100 AED2.9 AED3.8 SAR27.8 AED1.6
SAR16.9 KWd1,100 AED2.9 AED4.1 SAR26.2 AED1.9
TP change
Source: AlembicHC
3
GCC real estate Real estate | GCC 19 January 2011
MENA real estate and construction valuation multiples Company
BB code
Cur
CMP(1)
MCap (USDm)
Rec
TP
Upside
Real estate KSA Dar Al Arkan Al Akaria Average UAE Aldar Emaar Sorouh Average Egypt TMGH SODIC Nasr City PHD ODH (2) Heliopolis Egypt Resorts Average Kuwait Mabanee
P/BV
P/E
ROE
09a
10e
11e
09a
10e
11e
09a
10e
11e
09a
10e
11e
AL ARKAN AB SRECO AB
SAR SAR
10.1 25.6
2,894 819
OW N
17.6 27.8
75% 9%
0.8x 1.0x 0.9x
0.8x 1.0x 0.9x
0.7x 0.9x 0.8x
0.4x 0.5x 0.5x
0.4x 0.5x 0.4x
0.4x 0.4x 0.4x
5.1x 32.3x 18.7x
7.0x 17.0x 12.0x
6.7x 26.1x 16.4x
15% 3% 9%
11% 6% 8%
10% 4% 7%
ALDAR UH EMAAR UH SOROUH UH
AED AED AED
2.1 3.4 1.6
2,344 5,671 1,115
OW N N
2.9 3.8 1.6
38% 11% 3%
0.4x 0.7x 0.7x 0.6x
2.0x 0.7x 0.7x 1.1x
0.9x 0.6x 0.6x 0.7x
0.2x 0.3x 0.3x 0.2x
0.2x 0.2x 0.3x 0.2x
0.2x 0.2x 0.2x 0.2x
5.4x 63.6x 4.2x 24.4x
0.0x 7.4x 8.2x 7.8x
2.5x 8.8x 4.5x 5.2x
8% 1% 16% 8%
-451% 9% 8% -144%
36% 7% 13% 19%
TMGH EY OCDI EY MNHD EY PHDC EY ODHN EY HELI EY EGTS EY
EGP EGP EGP EGP CHF EGP EGP
8.0 100.5 30.5 5.9 55.2 24.2 2.0
2,757 614 523 1,064 1,623 462 352
OW OW OW OW N N N
10 130 39 7.5 69 27.4 2.2
25% 29% 28% 27% 25% 13% 13%
0.7x 1.7x 12.5x 2.0x 1.5x 13.9x 1.9x 4.9x
0.7x 1.5x 10.1x 1.4x 1.3x 7.7x 1.9x 3.5x
0.6x 1.2x 6.5x 1.1x 1.2x 6.5x 1.9x 2.7x
0.6x 0.7x 0.4x 0.4x 0.4x 0.3x 0.2x 0.4x
0.5x 0.9x 0.4x 0.7x 0.5x 0.3x 0.2x 0.5x
0.5x 0.7x 0.4x 0.6x 0.5x 0.3x 0.2x 0.5x
16.0x 0.0x 28.2x 8.3x 12.1x 13.5x 0.0x 15.6x
16.0x 16.2x 38.4x 14.8x 9.5x 20.4x 0.0x 19.2x
6.1x 4.6x 17.9x 5.4x 7.5x 11.8x 0.0x 8.9x
4% -7% 44% 23% 12% 68% 0% 21%
4% 9% 26% 10% 14% 65% -1% 18%
10% 25% 36% 21% 15% 44% -1% 22%
MABANEE KK
Kwd
790
1,422
OW
1100
39%
3.6x 3.6x 2.5x
3.2x 3.2x 2.2x
2.8x 2.8x 1.8x
1.2x 1.2x 0.6x
1.1x 1.1x 0.6x
1.1x 1.1x 0.5x
26.1x 26.1x 21.2x
20.5x 20.5x 14.9x
21.1x 21.1x 12.9x
14% 14% 13%
15% 15% -26%
13% 13% 15%
Sector average Construction DSI DSI (ex goodwill) Arabtec Sector average
P/NAV
P/BV DSI UH DSI UH ARTC UH
AED AED AED
1.1 1.1 1.9
640 640 602
OW OW N
1.2 1.2 2.4
11% 11% 30%
09a 0.9x 1.4x 0.9x 1.1x
10e 0.9x 1.5x 0.8x 1.1x
EV/EBITDA 11e 0.9x 1.3x 0.7x 0.9x
09a 8.2x 8.2x 4.1x 6.8x
10e 10.1x 10.1x 3.9x 8.1x
P/E 11e 9.4x 9.4x 3.8x 7.5x
09a 7.1x 7.1x 4.5x 6.2x
10e 12.9x 12.9x 4.4x 10.0x
ROE 11e 11.5x 11.5x 5.0x 9.3x
09a 13% 20% 21% 18%
10e 7% 11% 18% 12%
11e 8% 11% 14% 11%
Source: Bloomberg, AlembicHC Note: (1) Prices as of 18 January 2011 (2) Adjusted for bonus shares
4
GCC real estate Real estate | GCC 19 January 2011
Dar Al Arkan: Overweight, TP SAR17.6/share Revenue breakdown (SARm)
EPS (SAR/share)
10,000
48%
9,000
47%
8,000
0%
3.0 2.5
-7%
46%
7,000 6,000
45%
5,000
44%
4,000
43%
3,000
42%
2,000 1,000
41%
-
40% 2010e
2011e
2012e
2013e
2014
2015e
Sale of Properties
Rental Income
GPM
2.0
-19%
-8% -10%
-15%
1.0
-20%
0.5
-25% -30% 10e 10e Old New EPS (SAR)
Cons
11e 11e Cons 12e 12e Cons Old New Old New % Change new/old and new/consensus( RHS)
Source: AlembicHC, Reuters
Valuation breakdown (SAR/share)
NAV breakdown (SAR/share)
25
investments
-5%
30
valuation
3.2 1.1
3.0
-10% 25
-15% -20%
20
2.0
15
0%
35
Future projects &
20
-10%
1.5
Source: AlembicHC
AlembicHC
-25%
1.9 15
-30%
10 10
13.7 5
-35% -34% -45%
5
0
-38%
Plot sales Sale projects
Source: AlembicHC
-5%
-28%
0.0
Sale of Land
30
-9%
Lease projects
Investments
Qasr Khozam
Shams Al Arous
2010e Equity Land
-40% -45%
-43%
2011e 2012e Investment properties
-50% 2013e DCF discount to NAV
Source: AlembicHC
5
GCC real estate Real estate | GCC 19 January 2011
Cash flow (SARm) 12,000 10,000 8,000 6,000 4,000 2,000 (2,000) (4,000) (6,000) 2010e Operating Activities
2011e
2012e Investing Activities
2013e Financing Activities
2014e
2015e Net cashflow
Source: AlembicHC
6
GCC real estate Real estate | GCC 19 January 2011
Income statement (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Sale of land Sale of properties Rental income Revenue
4,620 990 5,611
4,945 519 5,464
3,855 467 26 4,349
4,066 251 131 4,449
4,526 1,532 269 6,328
4,781 3,462 322 8,565
4,990 3,566 341 8,898
4,990 352 5,341
(2,199) (567) (2,766) 49%
(2,559) (398) (2,957) 54%
(2,027) (397) (8) (2,432) 56%
(2,189) (199) (39) (2,428) 55%
(2,448) (978) (81) (3,507) 55%
(2,600) (2,215) (96) (4,911) 57%
(2,722) (2,215) (102) (5,040) 57%
(2,722) (105) (2,828) 53%
Gross profit Margin
2,845 51%
2,507 46%
1,917 44%
2,021 45%
2,821 45%
3,654 43%
3,858 43%
2,514 47%
Operating expenses SG&A expenses Other Depreciation and amortization Operating expenses
(150) (1) (50) (201)
(146) (41) (186)
(123) (46) (169)
(133) (58) (191)
(190) (63) (253)
(257) (62) (319)
(267) (62) (329)
(160) (61) (221)
EBIT (incl revaluation gain) Margin
2,644 47%
2,321 42%
1,748 40%
1,829 41%
2,569 41%
3,335 39%
3,529 40%
2,292 43%
(245)
(146)
(190)
(187)
(109)
(36)
72
239
17 2,417 (60)
(2) 2,173 (54)
30 1,588 (40)
9 1,651 (41)
13 2,473 (62)
17 3,316 (83)
18 3,619 (90)
11 2,542 (64)
-
-
-
-
-
-
-
-
2,356 42% 3.3
2,118 39% 2.0
1,548 36% 1.4
1,610 36% 1.5
2,411 38% 2.2
3,233 38% 3.0
3,528 40% 3.3
2,478 46% 2.3
2.3 0%
0.0 0%
1.0 0%
0.0 0%
0.0 0%
0.0 0%
0.0 0%
0.0 0%
2,696 48%
2,321 42%
1,772 41%
1,887 42%
2,631 42%
3,397 40%
3,591 40%
2,353 44%
Cost of land Cost of properties Direct rental expenses Total cost % of sales
Net financing cost (Islamic Murabha/Sukuk charges) Other income Profit before taxes Income tax Minority shareholders’ interest Net profit (loss) Margin Basic EPS DPS Payout ratio EBITDA Margin Source: Company data, AlembicHC
7
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Cash and cash equivalents Due from related parties Prepaid expenses and others Trade and other receivables Developed land, short term and long term Investment in land Land WIP Development properties WIP Current assets
716 57 1,737 949 3,099 3,727 3,726 4,195 18,206
2,223 3 233 846 4,458 3,683 5,245 4,023 20,715
1,375 9 420 414 2,986 4,775 6,285 3,642 19,906
1,851 9 268 263 796 5,541 6,881 4,840 20,449
1,261 9 115 113 6,731 5,230 5,193 18,651
10,168 9 6,058 3,303 2,215 21,753
17,906 9 4,712 1,927 (0) 24,553
21,439 9 3,366 551 (0) 25,365
1,120 127 120 591 1,958
1,162 98 103 1,518 2,882
1,162 2 115 2,021 3,301
1,162 2 152 2,351 3,668
1,162 2 188 2,293 3,645
1,162 2 222 2,236 3,623
1,162 2 256 2,180 3,601
1,162 2 290 2,126 3,580
20,164
23,597
23,206
24,117
22,296
25,376
28,154
28,945
Liabilities Trade and other payables Borrowings and short-term debt Other Current liabilities
171 1,635 613 2,420
471 2,700 635 3,806
196 550 1,164 1,943
125 550 1,164 1,844
53 550 1,164 1,768
550 1,164 1,714
550 1,164 1,714
550 1,164 1,714
Borrowing and long-term debt Provision for end of service indemnities Noncurrent liabilities
6,000 8 6,008
5,655 12 5,667
6,655 13 6,668
6,055 13 6,068
1,900 13 1,913
1,800 13 1,813
1,050 13 1,063
(638) 13 (625)
-
265
265
265
265
265
265
265
Paid up capital Statutory and other reserves Retained earnings Shareholders’ equity
7,200 3,600 936 11,736
10,800 462 2,597 14,124
10,800 462 3,068 14,595
10,800 462 4,677 16,204
10,800 462 7,088 18,615
10,800 462 10,321 21,848
10,800 462 13,850 25,377
10,800 462 16,328 27,855
Total liabilities and equity
20,164
23,597
23,206
24,117
22,296
25,376
28,154
28,945
Investments in associates Deferred charges net Property, plant, and equipment Investment properties (incl WIP) Noncurrent assets Total assets
Minority interest in subsidiaries
Source: Company data, AlembicHC
8
GCC real estate Real estate | GCC 19 January 2011
Cash flow (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Net profit before minorities Depreciation and amortization Change in working capital Change in provisions Net financing cost Interest income (expense) Net cash generated from operating activities
2,417 50 296 4 2,766
2,173 41 2,236 5 4,455
1,548 46 455 2 (91) 190 2,150
1,610 58 (167) (187) 187 1,501
2,411 63 1,132 (109) 109 3,605
3,233 62 5,752 (36) 36 9,048
3,528 62 4,937 72 (72) 8,527
2,478 61 2,722 239 (239) 5,262
Investments activities CAPEX (land) CAPEX (investments) CAPEX (excl IP and hotels)/PPE CAPEX (IP WIP) Net cash generated from investment activities
(744) (3,798) (3) (425) (4,971)
(1,193) (930) (1) (1,818) (3,942)
(214) (21) (526) (761)
(40) (385) (425)
(40) (40)
(40) (40)
(40) (40)
(40) (40)
Financing activities Dividends paid Bank borrowings raised Others Net cash generated from financing activities
(1,620) 1,235 (41) (426)
720 270 990
(1,080) (1,067) (2,147)
(600) (600)
(4,155) (4,155)
(100) (100)
(750) (750)
(1,688) (1,688)
Net addition (deduction) in cash Cash at beginning Cash at end of fiscal year
(2,630) 3,347 717
1,507 717 2,224
(758) 2,224 1,466
476 1,466 1,941
(590) 1,941 1,351
8,908 1,351 10,259
7,737 10,259 17,996
3,534 17,996 21,530
Source: Company data, AlembicHC
9
GCC real estate Real estate | GCC 19 January 2011
DCF (SARm) EBIT Tax rate EBIT∗(1−T) Depreciation and amortization Capital expenditure Changes in working capital Free cash flow: Explicit period Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
2644 3% 2,578 50 (4,971) 296 -2,046
2321 3% 2,263 0 (3,942) 2,236 557
1748 3% 1,704 25 (761) 455 1,422
1829 3% 1,783 58 (425) -167 1,249
2569 3% 2,504 63 (40) 1,132 3,659
3335 3% 3,251 62 (40) 5,752 9,026
(2,046)
557
1,422
1,249
3,659
9,026
...
2027 TY 280 3% 273 56 (40) 0 289 3.0% 3,303 3,592
Source: AlembicHC
Valuation and WACC Terminal growth rate NPV: FCF (SARm) Net debt (SARm) Equity (SARm) Outstanding shares DCF value (SAR/share)
3.0% 24,793 5,830 18,963 1,080 17.6
WACC Beta Risk free rate Country risk premium Cost of equity After tax cost of debt Weights (SARm) Equity market capitalization Debt Total Tax rate WACC
1.5 4.5% 6.5% 14.3% 7.0% 6.8% 10,800 8,355 19,155 2.5% 12.0%
Source: Company data, AlembicHC
10
GCC real estate Real estate | GCC 19 January 2011
Mabanee: Overweight, TP KWd1,100/share Revenue breakdown (KWDm)
EPS (KWd/share)
80
88%
70
86%
60 84%
50
100
30%
90
30%
80
25% 17%
70
20%
60
40
82%
30
80%
15%
50 3%
40
6%
4%
10% 5%
30
20 78%
10 -
76% 2010e
2011e
2012e
2013e
2014e
The Avenues phase 1 & 2 The Avenues phase 3 Advertising fees
0%
20 10
-10% -15% 10e Old
Mabanee office building Placement fees GPM RHS
10e New
Cons
EPS (AED)
11e 11e Old New
Cons
Source: AlembicHC, Reuters
Valuation breakdown (KWd/share)
NAV breakdown (KWd/share)
1,400 1,200
1,200
60% 50%
1,000
1,000 343
40%
800
800 12 600
Cons
49%
290 33
12e 12e Old New
% change new/old and new/consensus
Source: AlembicHC
HC valuation
-5%
-11%
-
2015e
35%
30%
69
600 20%
400
400
641 200
5%
200
10% -5%
0%
The Mabanee Avenues Office phase 1 & 2
Source: AlembicHC
Salmiyah Plot
Avenues Investment The phase 3 in associate Avenues phase 4
2010e 2011e Book value Investment properties
-10% 2012e Land
2013e DCF prem/disc to NAV
Source: AlembicHC
11
GCC real estate Real estate | GCC 19 January 2011
Cash flow (KWDm) KWD 90m in project finance
80
50
60
40
40
30
20
20
10
(20) Redemption of KWD18.6m of held for sale investments
(40) (60)
(10)
(80)
(20) 2010e Operating activities
2011e
2012e Investing activities
2013e Financing activities
2014e Net cashflows (RHS)
Source: AlembicHC
12
GCC real estate Real estate | GCC 19 January 2011
Mabanee income statement (KWD ‘000) Year to 31 December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Rental income Placement fees Advertising services Revenue
23,556 11,007 1,750 36,312
30,731 1,545 2,213 34,489
32,947 2,306 35,253
33,552 2,349 35,901
57,065 10,000 3,295 70,359
60,240 4,217 64,457
63,210 4,425 67,634
63,210 4,425 67,634
Direct rental expenses Gross profit % of sales
(5,588) 30,724 85%
(6,941) 27,547 80%
(6,919) 28,334 80%
(7,046) 28,855 80%
(9,884) 60,476 86%
(12,650) 51,806 80%
(13,274) 54,360 80%
(13,274) 54,360 80%
(2,528) (2,401) (13,485) 12,310 34%
(3,051) (2,530) (487) 21,480 62%
(3,182) (3,034) 22,119 63%
(3,890) (3,052) 21,914 61%
(4,339) (7,036) 49,100 70%
(4,277) (6,446) 41,084 64%
(4,214) (6,763) 43,382 64%
(4,153) (6,763) 43,444 64%
(6,068) (274) 500 6,467
(4,938) (315) (1,033) 854 25 16,074
(1,738) 43 20,424
(2,150) 50 19,814
(2,347) 71 46,824
(1,775) 90 39,399
(1,085) 95 42,392
(354) 95 43,185
(59) (130) (52) 6,225
(160) (427) (176) 15,310
(204) (543) (224) 19,453
(198) (527) (217) 18,872
(467) (1,245) (513) 44,599
(393) (1,048) (432) 37,527
(423) (1,127) (464) 40,378
(431) (1,148) (473) 41,133
-
-
-
-
-
-
-
-
6,225
15,310
19,453
18,872
44,599
37,527
40,378
41,133
25,794
23,556
-
-
-
-
-
-
14.9
33.3
38.5
37.4
88.3
74.3
80.0
81.4
0.0 0%
0.0 0%
0.0 0%
10.0 26%
10.0 27%
10.0 11%
10.0 13%
0.0 0%
Depreciation SG&A expenses (excl depreciation) Fair value gains (losses) EBIT % of sales Net financing cost Associate income Allowance for doubtful debt Foreign exchange gains (losses) Other income (expense) Profit before taxes Contribution to KFAS Contribution to NLST Income taxes/Zakat Net income before minority interest Minority interest Net income attributable to shareholders EBITDA (excl revaluation) EPS DPS (KWD) Payout ratio Source: Company data, AlembicHC
13
GCC real estate Real estate | GCC 19 January 2011
Mabanee balance sheet (KWD ‘000) Year to 31 December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Assets Cash and cash equivalents Accounts receivable Held for trading investments Current assets
24,017 6,489 763 31,268
10,172 4,258 14,430
9,909 4,854 14,763
3,431 3,640 7,071
44,555 2,427 46,982
78,716 1,213 79,930
115,661 115,661
160,846 160,846
Available for sales investments Investment in associates Property, plant, and equipment Investment properties Long-term assets
25,504 16,366 558 157,122 199,550
18,663 17,049 673 169,797 206,183
10,589 16,914 1,003 225,826 254,333
16,914 1,167 289,058 307,138
16,914 1,415 284,738 303,067
16,914 1,490 280,483 298,887
16,914 1,568 276,292 294,774
16,914 1,646 272,163 290,722
Total assets
230,819
220,613
269,096
314,209
350,049
378,816
410,435
451,568
16,852 66,184 83,036 40,779
17,449 61,730 79,179 20,179
14,836 51,874 66,710 66,633
11,127 51,874 63,001 101,633
7,418 51,874 59,292 101,633
3,709 51,874 55,583 101,633
51,874 51,874 101,633
51,874 51,874 101,633
9,113
9,414
9,009
9,009
9,009
9,009
9,009
9,009
284 50,175
447 30,039
319 75,961
319 110,961
319 110,961
319 110,961
319 110,961
319 110,961
-
-
-
-
-
-
-
-
41,745 17,027 36,621 (2,300) 4,634 (119) 97,608
45,920 20,255 44,528 (2,645) 4,418 (1,082) 111,394
50,511 20,255 55,504 (2,732) 4,313 (1,426) 126,425
50,511 20,255 69,326 (2,732) 4,313 (1,426) 140,247
50,511 20,255 108,875 (2,732) 4,313 (1,426) 179,796
50,511 20,255 141,351 (2,732) 4,313 (1,426) 212,273
50,511 20,255 176,679 (2,732) 4,313 (1,426) 247,600
50,511 20,255 217,812 (2,732) 4,313 (1,426) 288,733
230,819
220,613
269,096
314,209
350,049
378,816
410,435
451,568
Liabilities Trade and other payables Short-term borrowings Current liabilities Borrowing and long-term debt Other noncurrent liabilities (security deposits) Provision for employee services Long-term liabilities Minority interest in subsidiaries Paid up capital Statutory and other reserves Retained earnings Treasury shares Gain on sale of treasury shares Treasury shares reserve Fair value reserve Shareholders’ equity Total liabilities and equity Source: Company data, AlembicHC
14
GCC real estate Real estate | GCC 19 January 2011
Mabanee cash flow statement (KWD ‘000) Year to 31 December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
6,519 2,601 (7,889) 192 6,068 8,086
16,144 3,170 1,544 1,199 (617) 517
19,453 3,182 892 101 (1,125) 1,738
18,872 3,890 8,094 (2,150) 2,150
44,599 4,339 (2,496) (2,347) 2,347
37,527 4,277 (2,496) (1,775) 1,775
40,378 4,214 (2,496) (1,085) 1,085
41,133 4,153 (354) 354
15,577
21,957
24,242
30,856
46,443
39,308
42,097
45,286
(30,823) 1,444
(234) (15,109) 5,156
(338) (59,203) 4,152
(180) (67,105) -
(268) -
(97) -
(101) -
(101) -
(29,379)
(10,186)
(55,389)
(67,284)
(268)
(97)
(101)
(101)
Financing activities Dividends paid Share issue Bank borrowings raised Others Net cash generated from financing activities
39,271 (2,301)
(26,628) (561)
(4,564) 36,168 (193)
(5,050) 35,000 -
(5,050) -
(5,050) -
(5,050) -
-
36,970
(27,189)
31,411
29,950
(5,050)
(5,050)
(5,050)
-
Net addition (deduction) in cash Cash at beginning Cash at the end of fiscal year
23,169 (2,623) 20,547
(15,418) 20,547 10,172
264 10,172 10,436
(6,478) 10,436 3,958
41,124 3,958 45,082
34,161 45,082 79,243
36,945 79,243 116,188
45,184 116,188 161,373
Net profit before minorities Depreciation and amortization Change in working capital Change in provisions Net financing cost Interest income (expenditure) Others Net cash generated from operating activities Investments activities CAPEX (PPE) CAPEX (investment properties) Others Net cash generated from investment activities
Source: AlembicHC
15
GCC real estate Real estate | GCC 19 January 2011
Mabanee (KWD ‘000 ) EBIT Tax rate EBIT∗(1−T) Depreciation and amortization Capital expenditure Revaluation of investment properties Changes in working capital Free cash flow: Explicit period % change y-o-y Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
12,310 (242)
21,480 (764) 20,716 -3,051 (10,186) (487) 1,544
22,119 (970) 21,148 1,589 (55,389) 0 892
21,914 (941) 20,972 3,890 (67,284) 0 8,094
49,100 (2,225) 46,875 4,339 (268) 0 (2,496)
41,084 (1,872) 39,212 4,277 (97) 0 (2,496)
54,370 (3,194) 51,176 3,535 (115) 0 0
(50,753)
8,537 -116.8%
(31,760) -472.0%
(34,329) 8.1%
48,451 -241.1%
40,896 -15.6%
(50,753)
8,537
(31,760)
(34,329)
48,451
40,896
54,596 -0.1% 3.0% 969,586 1,024,183
0 (29,379) (13,485) (7,889)
...
2027 TY
Source: AlembicHC
Mabanee Valuation and WACC Terminal growth rate NPV: FCF (KWD ‘000) Net debt/cash (KWD ‘000) Equity (KWD ‘000) Outstanding shares (m) DCF value (KWd/share) Value of land (KWD ‘000) Investment in associates (KWD ‘000) Value of land and investments (KWD ‘000) Value of land and investments(per share) Total value (KWd/share)
3.0% 653,018 150,076 502,942 505 996 35,000 16,914 51,914 103 1,099
WACC Beta Risk free rate Country risk premium Cost of equity Cost of debt After tax cost of debt Weights (KWD '000) Equity market capitalization Debt Total Tax rate WACC
1.1 4.0% 5.5% 10.1% 5.0% 4.8% 383,887 118,506 502,393 5.0% 8.8%
Source: Company data, AlembicHC
16
GCC real estate Real estate | GCC 19 January 2011
Aldar: Overweight, TP AED2.9/share Revenue breakdown (AEDm)
Fully diluted EPS (AED/share)
10,000
60%
2
50%
1
9,000 8,000 7,000
40%
6,000 30%
5,000 4,000
80% 72%
60%
-
40%
(1)
20%
(2)
0%
(3)
-20%
20%
3,000 2,000
10% (4)
1,000 -
0% 2010e
2011e
2012e
2013e
Sale of Properties Hotel Revenue
2014e
2015e
-40% -45%
(5) 10e Old
Rental Income GPM RHS
10e Cons New EPS (AED)
11e Old
Source: AlembicHC
Source: AlembicHC, Reuters
Valuation breakdown (AED/share)
NAV breakdown (AED/share)
3.5 3.0 0.2 2.5
-60%
11e Cons 12e 12e Cons New Old New % change new/old and new/consensus
16
-68%
14
-70%
12
-72%
0.5 10
2.0
-74% 8
1.5 1.0
-76% 6
2.2
-78%
4
0.5 0.0 Rental properties
Source: AlembicHC
Hotels
Sale properties
2
-80%
0
-82% 2010e Adjusted BV* Land
2011e 2012e Market value of IP DCF discount to NAV
2013e Market value of hotels
Source: AlembicHC
17
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) 15,000 10,000 5,000 (5,000) (10,000) (15,000) 2010e Operating Activities
2011e
2012e Investing Activities
2013e Financing Activities
2014e
2015e Net cash flow
Source: AlembicHC
18
GCC real estate Real estate | GCC 19 January 2011
Income statement (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Sale of land Sale of properties Rental income Hotel revenue Other income Revenue
3,737 1,115 87 39 4,978
103 1,470 394 12 1,979
690 353 277 1,321
2,491 700 570 3,761
6,825 1,001 931 8,757
764 1,413 1,205 3,382
1,834 1,459 3,293
1,926 1,574 3,500
(1,142) (1,104) (35) (14) (2,295) 46%
(1,270) (266) (1,537) 78%
(501) (128) (150) (325) (1,104) 84%
(1,986) (350) (513) (2,849) 76%
(5,231) (400) (652) (6,284) 72%
(556) (424) (844) (1,823) 54%
(550) (1,021) (1,571) 48%
(578) (1,102) (1,680) 48%
Gross profit Margin Is something supposed to be here? SG&A expenses Fair value gains (losses/provisions) Other income Operating expenses
2,683 54% 0% (926) 1,533 607
443 22% (1,617) 1,961 114 459
217 16% (1,133) (10,930) 14 (12,050)
913 24% (650) 2,219 1,569
2,473 28% (876) 44 (832)
1,559 46% (750) 68 (683)
1,722 52% (494) 66 (428)
1,821 52% (525) 70 (455)
EBIT (incl revaluation gain) Margin Is something supposed to be here? Net financing cost Other fin. income (charges) Associate income Profit before taxes
3,290 66% 0% (371) 480 47 3,447
901 46% (262) 456 (88) 1,007
(11,833) -896% (545) 159 2 (12,218)
2,481 66% (84) 2,398
1,641 19% (141) 1,501
876 26% (70) 806
1,294 39% (22) 1,272
1,366 39% (115) 1,251
Income taxes
-
-
-
-
-
-
-
-
Minority shareholders' interest
-
-
-
-
-
-
-
-
3,447 69% 2.0 1.2
1,007 51% 0.4 0.3
(12,218) -925% (4.7) (4.2)
2,398 64% 0.8 0.8
1,501 17% 0.5 0.5
806 24% 0.3 0.3
1,272 39% 0.4 0.4
1,251 36% 0.4 0.4
0%
0.0 4%
(1.5) 33%
0%
0%
0%
0%
0%
1,758
(1,060)
(562)
2,824
1,873
1,105
1,518
1,586
Cost of land Cost of properties Direct rental expenses Hotel direct costs Other expenses Total cost % of sales
Net profit (loss) Margin Basic EPS Fully diluted EPS DPS Payout ratio EBITDA excl reval gains Source: Company data, AlembicHC
19
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Assets Cash and cash equivalents Receivables on Yas Island assets sale Trade and other receivables Development properties Current assets
12,066 6,651 7,130 25,848
10,313 9,138 7,888 10,808 38,146
5,728 4,553 16,076 26,357
5,106 1,717 15,628 22,452
5,518 1,503 10,669 17,689
3,870 1,288 7,234 12,392
1,200 1,073 5,627 7,900
2,835 1,073 4,019 7,927
Investments in associates Other financial assets Refundable costs Receivables on Yas Island assets sale Long-term assets – noncurrent
875 97 972
627 199 826
578 169 2,435 3,182
578 169 2,261 3,008
578 169 1,913 2,660
578 169 1,565 2,313
578 169 1,218 1,965
578 169 870 1,617
Intangible asset Hotels Property, plant, and equipment Investment properties Permanent
163 1,831 20,953 22,947
40 12,400 14,812 27,252
34 54 13,303 5,918 19,309
34 161 4,416 8,344 12,954
34 208 4,344 9,680 14,266
34 198 4,276 10,325 14,832
34 188 4,211 10,325 14,758
34 179 4,149 10,325 14,687
Total assets
49,767
66,224
48,847
38,414
34,616
29,537
24,622
24,231
Liabilities Trade and other payables Borrowings – short term Current liabilities
7,464 2,683 10,147
6,556 4,696 11,252
5,746 8,763 14,509
5,108 0.0 5,108
4,469 0.0 4,469
3,831 0.0 3,831
638 0.0 639
0.0 0.0
Borrowing and long-term debt Obligation under finance lease/retentions Other financial liabilities Advances from customers Provision for employee services Long-term liabilities – noncurrent
15,669 938 586 2,136 22 19,352
29,711 1,438 404 2,444 34 34,031
24,003 1,442 288 4,250 43 30,026
18,391 1,442 288 3,632 43 23,796
16,187 1,442 288 1,175 43 19,136
12,070 1,442 288 46 43 13,889
9,122 1,442 288 43 10,895
8,119 1,442 288 43 9,892
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Paid up capital Statutory and other reserves Retained earnings Convertible bonds Shareholders’ equity
2,578 3,825 5,885 7,980 20,268
2,578 3,887 6,441 8,034 20,941
2,578 3,870 (5,880) 3,744 4,312
2,882 3,870 (3,483) 6,240.4 9,510
2,882 3,870 (1,982) 6,240.4 11,011
2,882 3,870 (1,175) 6,240.4 11,817
2,882 3,870 96 6,240.4 13,089
2,882 3,870 1,347 6,240.4 14,340
Total liabilities and equity
49,767
66,224
48,848
38,414
34,616
29,537
24,622
24,231
Minority interest in subsidiaries
Source: Company data, AlembicHC
20
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Net profit before minorities Depreciation and amortization Change in working capital Share of associates Interest income (expense) Interest received Interest paid Fair value gain on investment property Provision for employee end of service benefits Others (net) Net cash generated from operating activities
3,447 25 (47) (272) 164 (1,533) 13 (447) 1,351
1,007 94 (693) 88 (194) (1,961) 12 623 (1,025)
(11,388) 341 1,492 234 158 (391) 10,945 1,391
2,398 342 2,201 84 411 (495) 4,941
1,501 232 2,426 141 183 (324) 4,159
806 228 2,230 70 175 (245) 3,265
1,272 225 (1,069) 22 190 (212) 428
1,251 221 1,317 115 48 (162) 2,789
Investments activities CAPEX (excl hotel properties) Additions to hotels properties Additions to investment properties Associates Acquisition (sale) of financial assets Movement in >3 months bank deposits Others Net cash generated from investment activities
(1,485) (11,762) (393) (3) (4,647) 520 (17,771)
(837) (14,537) (0) (9) 1,210 687 (13,485)
(2,826) (55) 2,058 (823)
6,124 (112) 6,012
(1,486) (57) (1,544)
(795) (795)
(150) (150)
(150) (150)
(232)
(751)
(329)
-
-
-
-
14,331 (4,282) 6,408 16,224
17,504 (2,758) (28) 13,967
3,267 (3,522) (15) (599)
2,800 (14,375) (11,575)
(2,204) (2,204)
(4,117) (4,117)
(2,948) (2,948)
(1,003) (1,003)
(196) 5,059 4,863
(543) 4,863 10,313
(4,585) 10,313 5,728
(622) 5,728 5,106
411 5,106 5,518
(1,647) 5,518 3,870
(2,671) 3,870 1,200
1,636 1,200 2,835
Financing activities Dividends paid Shares issued Bank borrowings raised Borrowings repaid Others Net cash generated from financing activities Net addition (deduction) in cash Cash at beginning of fiscal year Cash at end of fiscal year Source: Company data, AlembicHC
21
GCC real estate Real estate | GCC 19 January 2011
DCF (AEDm) EBIT Tax rate EBIT∗(1−T) Depreciation and amortization Capital expenditure Revaluation of investment properties Changes in working capital FCF: Explicit period % change y-o-y Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
3290 0% 3,290 0 (13,248) (1,533) 0 -11,937 229.4%
901 0% 901 0 (15,374) (1,961) -693 -16,504 38.3%
(11,833) 0% (11,833) 341 (2,881) 10,930 1,492 -1,950 -88.2%
2,481 0% 2,481 342 6,012 0 2,201 11,037 -665.9%
1,641 0% 1,641 232 (1,544) 0 2,426 2,756 -75.0%
876 0% 876 228 (795) 0 2,230 2,540 -7.8%
(11,937)
(16,504)
(1,950)
11,037
2,756
2,540
...
2027 TY 2,473 0% 2,473 191 (150) 0 0 2,513 3.0% 38,421 40,934
Source: AlembicHC
Valuation and WACC Terminal growth rate NPV: FCF (AEDm) Net debt (AEDm) Equity (AEDm) Outstanding shares (m) DCF value (AED/share)
3.0% 25,355 13,285 12,070 4,099 2.9
WACC Beta Risk free rate Country risk premium Cost of equity Cost of debt After tax cost of debt Weights (AEDm) Equity market capitalization Debt Total Tax rate WACC
1.5 4.0% 5.5% 12.0% 7.5% 8.0% 9,305 18,391 27,696 0% 10%
Source: Company data, AlembicHC
22
GCC real estate Real estate | GCC 19 January 2011
Emaar: Neutral, TP AED3.8/share Revenue breakdown (AEDm)
EPS (AED/share) 80%
15,000
0.6
40%
-16% -12%
0.5
31%
60% 10,000
-46%
30% 20%
-9%
10%
0.4
0% 40%
0.3
-36%
20%
0.2
-30% -40%
0.1 -
-50%
0% 2010e 2011e 2012e Sale of Land Sale of Commercial Units Hotel Revenue
2013e
2014 2015e Sale of Villas and Condominiums Rental Income GPM RHS
-60%
0.0 10e Old
10e Cons New EPS (AED)
11e 11e Cons 12e 12e Cons Old New Old New % Change New/Old and New/Consensus
Source: AlembicHC
Source: AlembicHC, Reuters
Valuation breakdown (AED/share)
NAV breakdown (AED/share)
4.0 45%
International
3.0 2.5
0.4
0.1 Unit sale
0.5
Hotel business
Other 0.2 Egypt 0.4 Morocco 0.1 Saudi Arabia
2.0 1.5
-50%
16
4.5
3.5
-10% -20%
5,000
14
-55%
12 -60%
10
-65%
8 6
55%
UAE 2.2
1.0
-70%
4 Rental business
0.5
-75%
2
-80%
-
0.0 Valuation breakdown
Source: AlembicHC
UAE
International
2010e Equity Emaar MGF
2011e 2012e Net mkt value of land TP discount to NAV
2013e Net mkt value of IP
Source: AlembicHC
23
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) 6,000 5,000 4,000 3,000 2,000 1,000 (1,000) (2,000) (3,000) 2010e Operating Activities
2011e
2012e Investing Activities
2013e Financing Activities
2014e
2015e Net Cash Flow
Source: AlembicHC
24
GCC real estate Real estate | GCC 19 January 2011
Income statement (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Sale of land Sale of villas and condominiums Sale of commercial units Rental income Hotel revenue Revenue
613 8,564 465 499 577 10,717
135 6,041 60 1,510 667 8,413
26 7,832 368 1,834 931 10,991
6,220 1,951 1,040 9,211
3,253 2,083 1,090 6,426
2,166 1,143 3,309
3,096 1,198 4,294
3,383 1,256 4,639
Cost of land Cost of villas and condominiums Cost of commercial units Direct rental expenses Hotel direct costs Total costs % of sales
(25) (4,774) (144) (178) (367) (5,487) 51%
(9) (3,556) (33) (268) (448) (4,314) 51%
(9) (5,266) (142) (317) (595) (6,329) 58%
(4,198) (293) (676) (5,167) 56%
(2,176) (312) (709) (3,197) 50%
(217) (743) (960) 29%
(310) (779) (1,088) 25%
(338) (816) (1,155) 25%
5,230 49%
4,099 49%
4,662 42%
4,044 44%
3,229 50%
2,350 71%
3,205 75%
3,485 75%
(1,905) 531 (1,120) 240 (363) (2,616)
(1,912) 520 (1,842) 83 (288) (3,438)
(2,052) 514 361 (286) (1,464)
(1,995) 501 92 (368) (1,771)
(1,995) 386 64 (257) (1,802)
(1,324) 199 33 (132) (1,224)
(1,288) 258 43 (172) (1,159)
(1,160) 278 46 (186) (1,021)
EBIT (incl revaluation gain) Margin
2,614 24%
661 8%
3,198 29%
2,273 25%
1,427 22%
1,125 34%
2,046 48%
2,464 53%
Net financing cost Other fin. income (charges) Associate income Impairments Profit before taxes
346 109 (2,948) 121
139 (534) 266
(85) (208) (53) 2,853
(169) 408 2,513
(88) 300 1,639
20 197 1,342
85 93 2,224
66 104 2,634
3
24
(10)
(25)
(16)
(13)
(22)
(26)
Minority shareholders' interest
(42)
(38)
28
121
68
4
219
269
Net profit (loss) Margin
166 2%
327 4%
2,815 26%
2,367 26%
1,555 24%
1,324 40%
1,983 46%
2,339 50%
0.0 3,734 35%
0% 0.1 2,503 30%
0% 0.5 3,488 32%
0.1 20% 0.4 2,873 31%
0.1 20% 0.3 2,049 32%
0.0 20% 0.2 1,769 53%
0.1 20% 0.3 2,703 63%
0.1 20% 0.4 3,124 67%
Gross profit Margin Operating expenses SG&A expenses Other operating income W/off development properties Other income Other operating expenses Operating expenses
Income taxes
DPS Payout ratio Basic EPS EBITDA excl reval gains Margin Source: Company data, AlembicHC
25
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Assets Cash and cash equivalents Trade and other receivables Development properties Short-term investments Receivables, deposits, and prepayments Current assets
5,393 1,058 26,799 867 3,511 37,629
2,267 981 26,555 937 3,211 33,951
1,671 939 24,263 711 3,211 30,794
4,076 730 17,950 498 2,456 25,710
7,161 522 11,213 355 1,474 20,725
9,799 313 6,229 213 671 17,225
8,816 104 6,229 71 221 15,442
10,507 6,229 50 16,786
8,314 1,636 9,950
7,861 2,005 4,521 14,387
7,831 2,627 4,521 14,978
8,239 2,627 4,521 15,386
8,539 2,627 4,521 15,686
8,735 2,627 4,521 15,883
8,828 2,627 4,521 15,976
8,933 2,627 4,521 16,080
Intangible asset Hotels Property, plant, and equipment Investment properties Permanent assets
439 5,414 13,248 19,102
439 6,822 8,546 15,807
46 40 7,186 8,574 15,847
46 38 7,360 9,151 16,596
46 36 7,526 9,701 17,310
46 35 7,683 10,277 18,041
46 33 7,833 10,166 18,078
46 31 7,975 9,914 17,966
Total assets
66,680
64,145
61,619
57,692
53,720
51,149
49,496
50,832
Liabilities Trade and other payables Borrowings – short term Advances from customers Current liabilities
9,680 4,564 18,109 32,354
9,545 4,500 15,888 29,933
8,172 4,776 10,855 23,803
5,034 4,776 8,141 17,951
2,627 4,776 5,427 12,830
1,751 4,776 2,714 9,241
876 4,776 0 5,651
0 4,776 4,776
4,610 1,079 37 5,726
4,125 1,160 47 5,333
5,157 1,209 54 6,419
5,157 1,209 54 6,419
5,157 1,209 54 6,419
5,157 1,209 54 6,419
5,157 1,209 54 6,419
5,157 1,209 54 6,419
494
202
227
348
416
420
639
908
Paid up capital Statutory and other reserves Retained earnings Employee performance share program Shareholders’ equity
6,091 14,431 7,586 (2) 28,601
6,091 14,710 7,878 (2) 28,879
6,091 14,388 10,693 (3) 31,397
6,091 14,388 12,496 (3) 33,322
6,091 14,388 13,578 (3) 34,470
6,091 14,388 14,591 (3) 35,488
6,091 14,388 16,309 (3) 37,425
6,091 14,388 18,252 (3) 39,637
Total liabilities and equity
66,680
64,145
61,619
57,692
53,720
51,149
49,496
50,832
Investments in associates Loans to associates Raw land Noncurrent assets
Borrowing and long-term debt Retentions Provision for employee services Long-term liabilities – noncurrent Minority interest in subsidiaries
Source: Company data, AlembicHC
26
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Net profit before minorities Depreciation and amortization Change in working capital Share of associates Interest income (expense) Interest received Interest paid Fair value gain on investment property Impairment of goodwill Provision for employee end of service benefits Others (net) CF generated from operating activities
3,068 111 (1,152) (265) 341 (341) 1,120 2,948 19 (26) 5,823
2,028 636 (5,015) 534 10 174 (1,633)
2,840 641 (3,596) 140 57 (36) 6 7 (184) (124)
2,488 599 1,638 169 129 (298) 4,725
1,622 622 2,949 88 210 (298) 5,193
1,329 644 2,548 (20) 318 (298) 4,521
2,202 657 (2,789) (85) 383 (298) 70
2,608 660 (529) (66) 364 (298) 2,739
Investments activities CAPEX (excl hotel properties) Additions to hotels properties Additions to investment properties Associates
(5,845) (149) (1,530)
(1,727) (132) (635)
(1,104) (41) (864)
(1,348) (408)
(1,336) (300)
(1,375) (197)
(694) (93)
(548) (104)
Acquisition (sale) of financial assets Movement in >3 months bank deposits Others CF generated from investment activities
2,342 2,377 (1) (2,807)
(13) (283) (2,790)
(4) (169) (2,182)
(1,756)
(1,636)
(1,572)
(788)
(652)
Financing activities Dividends paid
(1,199)
(4)
-
(563)
(473)
(311)
(265)
(397)
Bank borrowings raised Net share issuance fee Borrowings repaid Others CF generated from financing activities
3,448 (1,978) 58 329
2,005 (809) 17 1,210
1,467 (307) 5 1,164
(563)
(473)
(311)
(265)
(397)
3,346 2,132 (30) 5,393
(3,214) 5,393 11 2,267
(1,142) 2,267 1,125
2,406 1,125 3,531
3,084 3,531 6,615
2,638 6,615 9,253
(983) 9,253 8,271
1,690 8,271 9,961
Net addition (deduction) in cash Cash at beginning of fiscal year Net forex difference/others Cash at end of fiscal year Source: Company data, AlembicHC
27
GCC real estate Real estate | GCC 19 January 2011
DCF (AEDm) EBIT∗(1−T) Depreciation and amortization Capital expenditure Revaluation of investment properties Cash flow for minorities Cash flow from associates Changes in working capital Net change in debt (other than Sukuk) Free cash flow: Explicit period Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
2,322 0 (5,994) 1,120 42 (293) (1,152) -26 -3,980
588 0 (1,860) 1,842 38 (234) (5,015) 174 -4,468
2,842 290 (1,145) 0 (28) (65) (3,596) -184 -1,884
2,020 599 (1,348) 0 (121) 0 1,638 0 2,788
1,268 622 (1,336) 0 (68) 0 2,949 0 3,436
1,000 644 (1,375) 0 (4) 0 2,548 0 2,812
(3,980)
(4,468)
(1,884)
2,788
3,436
2,812
...
2027 TY 3,905 659 (548) 0 (439) 0 0 0 3,577 3.0% 45,797 49,375
Source: AlembicHC
Valuation and WACC Terminal growth rate NPV: FCF (AEDm) Net debt (AEDm) Equity (AEDm) Outstanding shares (m) DCF value (AED/share)
3.0% 28,719 5,856 22,862 6,091 3.8
WACC Beta Risk free rate Country risk premium Cost of equity Cost of debt After tax cost of debt Weights (AEDm) Equity market capitalization Debt Total Tax rate WACC
1.2 4.0% 5.5% 12.1% 6.0% 5.7% 21,015 4,125 25,140 5% 11.0%
Source: Company data, AlembicHC
28
GCC real estate Real estate | GCC 19 January 2011
Al Akaria: Neutral, TP SAR27.8/share Revenue breakdown (SARm)
EPS (SAR/share)
4,000
80%
1.6
3,500
70%
1.4
3,000
60%
1.2
2,500
50%
2,000
40%
1,500
30%
1,000
20%
500
10% 0%
2010e
2011e
2012e
2013e
2014e
2015e
100%
79%
80% 48%
-16%
1.0
-37%
Sale of Properties
Rental Income
GPM RHS
20%
0.6
0%
0.4
-20%
0.2
-40% -60% 10e 10e Cons Old New EPS (SAR)
11e 11e Cons 12e 12e Cons Old New Old New % Change New/Old and New/Consensus
Source: AlembicHC, Reuters
Valuation breakdown (SAR/share)
NAV breakdown (SAR/share)
Investments & landbank excluded
35
HC Valuation
6.5
30
0.6
4.1
0%
70
-10%
60
-20%
50 -30% 40
20
-40% 30
15 10
80
3.6
25
40%
0.8
Source: AlembicHC
40
-8%
0.0
Sale of Land
45
60%
4%
23.6
-50%
20
5
-48%
-51%
10
0
-59%
Lease projects
Source: AlembicHC
Sale projects
Plot sales
Investments
-60%
-55%
-70%
Raw land
2010e Equity
Land
2011e 2012e Investment properties
2013e DCF discount to NAV
Source: AlembicHC
29
GCC real estate Real estate | GCC 19 January 2011
Cash flow (SARm) 3,000 2,500 2,000 1,500 1,000 500 (500) 2010e Operating Activities
2011e
2012e Investing Activities
2013e Financing Activities
2014e
2015e Net cashflow
Source: AlembicHC
30
GCC real estate Real estate | GCC 19 January 2011
Income statement (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Sale of land Sale of properties Rental income Other income Revenue
57 162 6 225
171 171
229 213 442
250 250
294 294
585 337 922
1,575 347 1,922
2,999 357 3,356
Cost of land infrastructure Cost of properties Direct rental expenses Total cost % of sales Gross profit Margin
(34) (46) (80) 36% 145 64%
(43) (43) 25% 128 75%
(98) (64) (162) 37% 281 63%
(75) (75) 30% 175 70%
(88) (88) 30% 206 70%
(352) (101) (453) 49% 469 51%
(960) (104) (1,064) 55% 858 45%
(1,860) (107) (1,968) 59% 1,389 41%
Operating expenses Depreciation SG&A expenses (excl depreciation) Operating expenses
(18) (17) (34)
(20) (17) (36)
(29) (44) (73)
(33) (25) (58)
(37) (29) (66)
(37) (92) (129)
(36) (192) (228)
(37) (336) (372)
EBIT (incl revaluation gain) Margin
110 49%
92 54%
208 47%
117 47%
139 47%
340 37%
629 33%
1,017 30%
Net financing cost Other income (expense) Fair value gain (loss) on investments Profit before taxes Income tax
27 137 (20)
6 17 115 (20)
14 (23) 198 (18)
10 10 136 (18)
(20) 12 131 (18)
(38) 13 316 (21)
(46) 14 597 (28)
(37) 14 994 (40)
-
-
-
-
-
-
-
-
Net profit (loss) Margin Basic EPS
117 52% 1.0
95 56% 0.8
180 41% 1.5
118 47% 1.0
113 38% 0.9
295 32% 2.5
569 30% 4.7
954 28% 8.0
DPS Payout ratio
0.7 71%
0.7 87%
1.4 92%
0.2 25%
0.2 25%
0.6 25%
1.2 25%
2.0 25%
EBITDA Margin
124 55%
101 59%
223 50%
150 60%
176 60%
377 41%
666 35%
1,053 31%
Minority shareholders’ interest
Source: Company data, AlembicHC
31
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
749 13 5 91 125 2 986
644 13 6 98 125 2 887
769 12 8 127 2 919
533 12 8 399 2 955
231 12 8 1,394 2 1,648
150 12 8 2,155 2 2,328
941 12 8 1,860 2 2,824
3,600 12 8 2 3,622
Long-term investments Land Property, plant, and equipment Investment properties Investment properties WIP Noncurrent assets
477 750 6 663 309 2,205
491 785 5 641 354 2,275
476 827 10 1,043 2,356
476 827 14 1,146 2,463
476 827 18 1,212 2,533
476 827 31 1,176 2,510
476 827 58 1,141 2,502
476 827 106 1,107 2,516
Total assets
3,191
3,163
3,275
3,418
4,181
4,837
5,326
6,138
33 43 29 105
36 40 17 93
27 40 3 70
20 17 3 40
13 3 3 20
7 0 3 10
3 3
3 3
Borrowing and long-term debt Provision for employee services Noncurrent liabilities
11 11
12 12
12 12
100 12 112
800 12 812
1,200 12 1,212
1,200 12 1,212
1,200 12 1,212
Minority interest in subsidiaries
-
-
-
-
-
-
-
-
Paid up capital Statutory and other reserves Retained earnings Unrealized losses on investments Shareholders’ equity
1,200 1,790 137 (53) 3,074
1,200 1,799 98 (39) 3,058
1,200 1,799 200 (5) 3,194
1,200 1,799 273 (5) 3,266
1,200 1,799 356 (5) 3,350
1,200 1,799 623 (5) 3,616
1,200 1,799 1,118 (5) 4,112
1,200 1,799 1,930 (5) 4,924
Total liabilities and equity
3,191
3,163
3,275
3,418
4,181
4,838
5,326
6,138
Assets Cash and cash equivalents Trade and other receivables Other current assets Land held for sale Development property WIP Inventory Current assets
Liabilities Trade and other payables Advances from customers Provision for tax Current liabilities
Source: Company data, AlembicHC
32
GCC real estate Real estate | GCC 19 January 2011
Cash flow (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
137 20 (43) 5 119
60 9 (4) 1 6 (6) 66
180 29 84 292
118 33 (303) 10 (10) (151)
113 37 (1,015) (20) 20 (866)
295 37 (770) (38) 38 (439)
569 36 287 (46) 46 893
954 37 1,860 (37) 37 2,851
Investment activities CAPEX (PPE) CAPEX (investment properties) Others Net cash generated from investment activities
(3) (184) (367) (554)
(15) 659 3 647
(5) (68) (73)
(4) (136) (140)
(4) (102) (107)
(14) (14)
(29) (29)
(50) (50)
Financing activities Dividends paid Bank borrowings raised Net cash generated from financing activities
(122) (122)
(122) (122)
(90) (90)
(45) 100 55
(29) 700 671
(28) 400 372
(74) (74)
(142) (142)
Net addition (deduction) in cash Cash at beginning Cash at end of fiscal year
(558) 619 61
591 61 652
129 644 773
(236) 773 536
(302) 536 235
(81) 235 154
791 154 944
2,659 944 3,603
Net profit before minorities Depreciation and amortization Change in working capital Change in provisions Net financing cost Interest income (expense) Net cash generated from operating activities
Source: Company data, AlembicHC
33
GCC real estate Real estate | GCC 19 January 2011
DCF (SARm) EBIT Tax rate EBIT∗(1−T) Depreciation and amortization Capital expenditure Cash flow from associates Changes in working capital Free cash flow: Explicit period Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
...
2027 TY
110
14 (554)
92 (20) 72 9 647
208 (18) 190 15 (73)
117 (18) 98 33 (140)
139 (18) 121 37 (107)
340 (21) 319 37 (14)
278 (60) 218 29 (10)
(43)
(4)
84
(303)
(1,015)
(770)
-
(583)
724
215
(311)
(964)
(428)
(583)
724
215
(311)
(964)
(428)
236 3.0% 3,309 3,545
Source: AlembicHC
Valuation and WACC Terminal growth rate
3.0%
WACC
NPV: FCF (SARm) Net debt (SARm) Equity (SARm) Outstanding shares (m) DCF value (SAR/share)
2,897 (433) 3,330 120 27.8
Beta Risk free rate Country risk premium Cost of equity After tax cost of debt Weights (SARm) Equity market capitalization Debt Total Tax rate WACC
0.9 4.5% 6.5% 10.4% 5.0% 4.3% 3,180 0.0 3,180 15.0% 10.4%
Source: Company data, AlembicHC
34
GCC real estate Real estate | GCC 19 January 2011
Sorouh: Neutral, TP AED1.6/share Revenue breakdown (AEDm)
EPS (AED/share) 90%
7,000
80%
6,000
0.7
250%
4%
205% 0.6
200%
60%
0.5
150%
4,000
50%
0.4
3,000
40%
70% 5,000
30%
2,000 1,000 -
112% 29%
0.3
20%
0.2
10%
0.1
-49%
2011e
2012e
2013e
Land Sale Sale of Properties Hotel Revenue
0% -50%
2014e
2015e
0.0
-100% 10e 10e Old New EPS (AED)
Contract Revenue Rental Income GPM RHS
Cons
11e 11e Cons 12e 12e Cons Old New Old New % Change New/Old and New/Consensus RHS
Source: AlembicHC
Source: AlembicHC, Reuters
Valuation breakdown (AED/share)
NAV breakdown (AED/share)
1.8 1.6 0.2 1.4
9
-66%
8
-68%
7
-70%
0.2 6
0.1
5
1.0
-72%
-71%
-74% 4
0.8 0.6
50%
2%
0% 2010e
1.2
100%
-75%
3
1.2
-76% -78%
2
0.4
-78%
1
0.2
-
0.0 Inv. Portfolio
Source: AlembicHC
Sale properties
Plot sales
-80% -79% -82%
2010e 2011e BV Market value of IP
2012e Land
2013e DCF discount to NAV RHS
Source: AlembicHC
35
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) 2,500
2,500
2,000
2,000
1,500
1,500
1,000
1,000
500
500
-
-
(500)
(500)
(1,000)
(1,000) 2010e Operating activities
2011e
2012e Investing activities
2013e
2014e Financing activities
2015e Net cash flow
Source: AlembicHC
36
GCC real estate Real estate | GCC 19 January 2011
Income statement (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Land sale Contract revenue Sale of properties Rental income Hotel revenue Revenue
3,532 127 64 3,723
1,586 202 1,177 139 3,102
368 300 230 202 7 1,106
300 2,531 389 3,220
300 4,741 605 92 5,738
300 2,094 663 98 3,156
300 671 103 1,075
300 671 109 1,080
(1,290) (118) (19) (1,427) 38%
(978) (989) (30) (1,997) 64%
(106) (166) (34) (1) (307) 28%
(1,926) (97) (2,024) 63%
(3,643) (151) (60) (3,854) 67%
(1,629) (166) (64) (1,859) 59%
(168) (67) (235) 22%
(168) (71) (238) 22%
2,297 62%
1,105 36%
799 72%
1,196 37%
1,884 33%
1,297 41%
840 78%
842 78%
(312) (340)
(50) (259)
(52) (302)
(74) (291)
(90) (226)
(63) (237)
(54) (249)
(54) (261)
Land development cost Construction cost Direct rental expenses Hotel direct costs Total costs % of sales Gross profit Margin Operating expenses Selling and marketing expenses General and administrative expenses Fair value gain on financial investments Other income Operating expenses
-
91
(18)
-
-
-
-
-
(652)
(217)
123 (248)
115 (250)
116 (200)
109 (191)
(303)
(315)
EBIT (incl revaluation gain) Margin
1,645 44%
888 29%
550 50%
947 29%
1,684 29%
1,106 35%
537 50%
526 49%
Net financing cost Income from associates Other fin. income (charges) Gain (loss) on financial assets Profit before taxes Income taxes
40 51 79 (31) 1,784 -
(42) (51) 143 11 949 -
(53) (7) 3 493 -
(34) 913 -
(35) 52 1,700 -
(38) 1,067 -
28 566 -
33 559 -
Minority shareholders' interest Net profit (loss) Margin Basic EPS
(74) 1,858 50% 0.7
12 937 30% 0.4
(9) 502 45% 0.2
913 28% 0.3
1,700 30% 0.6
1,067 34% 0.4
566 53% 0.2
559 52% 0.2
0.1 24%
0.1 15%
0%
0%
0.1 17%
0.1 8%
0.1 18%
0.0 12%
1,645 44%
797 26%
568 51%
947 29%
1,684 29%
1,106 35%
537 50%
526 49%
DPS Payout ratio EBITDA excl reval gains Margin Source: Company data, AlembicHC
37
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Assets Cash and cash equivalents Land held for sale Trade and other receivables Development properties Inventory Short-term investment Current assets
6,842 257 4,331 2,475 30 29 13,964
2,763 639 3,983 3,778 16 20 11,200
2,007 625 3,592 4,502 38 2 10,766
2,640 625 2,670 4,064 38 2 10,039
2,150 625 2,115 1,629 38 2 6,559
4,094 625 1,854 (0) 38 2 6,613
4,149 625 1,854 (0) 38 2 6,668
4,323 625 1,854 (0) 38 2 6,842
608
301
198 805
Investments in associates and long-term investments Other noncurrent assets Noncurrent assets Intangible asset Hotels Property, plant, and equipment Investment properties Investment properties under development Permanent assets
293
293
293
293
293
174 475
293 162 455
162 455
162 455
162 455
162 455
162 455
652 88 857
613 172 983
610 57 182 983
610 172 212 3,325
610 172 242 3,993
610 172 272 4,044
610 172 302 4,044
610 172 332 4,044
574
257
2,170
(873)
(1,514)
(1,559)
(1,559)
(1,559)
2,026
975 2,809
3,446
3,504
3,539
3,569
3,599
16,939
13,701
14,029
13,940
10,518
10,607
10,692
10,896
Liabilities Trade and other payables Borrowings – short term Notes payable – short term Nonconvertible Sukuk Current liabilities
6,783 105 275 1,736 8,899
5,298 19 140 971 6,427
5,946 22 40 6,008
5,234 22 40 5,296
552 22 40 614
22 40 62
22 40 62
22 40 62
Borrowing and long-term debt Nonconvertible Sukuk Notes payable – long term Provision for employee services Noncurrent liabilities
175 1,490 20 1,685
113 970 37 26 1,146
1,642 36 28 1,706
1,642 36 28 1,706
1,642 36 28 1,706
1,642 36 28 1,706
1,642 36 28 1,706
1,642 36 28 1,706
9
98
89
89
89
89
89
89
2,500 364 3,086 5,958
2,500 424 3,103 6,125
2,625 428 3,173 6,315
2,625 428 3,796 6,938
2,625 428 5,056 8,198
2,625 428 5,697 8,839
2,625 428 5,782 8,924
2,625 428 5,986 9,128
16,543
13,698
14,029
13,940
10,518
10,607
10,692
10,896
Total assets
Minority interest in subsidiaries Paid up capital Statutory and other reserves Retained earnings Shareholders’ equity Total liabilities and equity Source: Company data, AlembicHC
38
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Net profit before minorities Depreciation and amortization Change in working capital Interest income (expense) Interest received Interest paid Fair value gain on investment property Impairment of goodwill Provision for employee end of service benefits Others (net) Net cash generated from operating activities
1,784 (40) 121 (80) 1,784
495 35 (3,215) (81) 123 (83) 30 6 1,104 (1,586)
44 552 34 33 (67) 494
623 647 34 99 (133) 1,271
1,415 (1,692) 35 98 (133) (277)
782 1,339 38 95 (133) 2,121
281 (28) 161 (133) 281
274 (33) 166 (133) 274
Investments activities CAPEX (excl hotel properties) Additions to hotel properties Additions to investment properties Associates Subsidiaries Additions to development WIP Acquisition (sale) of financial assets Movement in >3 months bank deposits Others Net cash generated from investment activities
(6) (122) 0 (16) (571) (716)
(200) (198) (3) (66) 118 164 167 (17)
(28) (57) (719) 22 1,015 250
(30) (114) (493) (637)
(30) (28) (58)
(30) (6) (36)
(30) (30)
(30) (30)
Financing activities Dividends paid Share issue Net bank borrowings raised Net share issuance fee Borrowings repaid Others Net cash generated from financing activities
(308) 63 (245)
(330) 1 (1,814) (166) (2,309)
(429) (50) (485)
-
(156) (156)
(142) (142)
(196) (196)
(70) (70)
Net addition (deduction) in cash Cash at beginning of fiscal year Net forex difference/others Cash at end of fiscal year
823 1,402 2,226
(3,912) 5,517 2,763
259 2,763 3,022
633 3,022 3,656
(490) 3,656 3,165
1,944 3,165 5,109
55 5,109 5,164
174 5,164 5,338
Source: Company data, AlembicHC
39
GCC real estate Real estate | GCC 19 January 2011
DCF (AEDm) EBIT Tax rate EBIT∗(1−T) Capital expenditure Revaluation of investment properties Cash flow for minorities Changes in working capital Net change in debt (other than Sukuk) Free cash flow: Explicit period Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
1,645 1,645 (128) 74 1,590
888 888 (397) (91) (12) (3,215) 1,104 (1,723)
550 550 (804) 18 9 552 324
947 947 (637) 647 957
1,684 1,684 (58) (1,692) (66)
1,106 1,106 (36) 1,339 2,409
1,590
(1,723)
324
957
(66)
2,409
...
2027 TY 59 59 (30) 29 3.0% 408 437
Source: AlembicHC
Valuation and WACC Terminal growth rate
3.0%
WACC
NPV: FCF (AEDm) Net debt (AEDm) Equity (AEDm) Outstanding shares (m) DCF value (AED/share)
3,337 (976) 4,313 2,625 1.6
Beta Risk free rate Country risk premium Cost of equity Cost of debt After tax cost of debt Weights (AEDm) Equity market capitalization Debt Total Tax rate WACC
1.5 4.0% 5.5% 12.0% 6.5% 6.5% 3,990 1,664 5,654 0% 10.4%
Source: Company data, AlembicHC
40
GCC real estate Real estate | GCC 19 January 2011
Rating scale Recommendation Overweight Neutral Underweight
Potential return Greater than 20% 0% to 20% Less than 0%
Disclaimer This document was issued by HC Brokerage, which is an affiliate of HC Securities and Investment (henceforth referred to as “HC”) – a fully fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services – and Alembic Global Advisors, which is registered with US-based broker dealer Pulse Trading Inc. (collectively the “Firms”). The information used to produce this document is based on sources that the Firms believe to be reliable and accurate. This information has not been independently verified and may be condensed or incomplete. The Firms do not make any guarantee, representation, or warranty and accept no responsibility or liability for the accuracy and completeness of such information. Expression of opinion contained herein is based on certain assumptions and with the use of specific financial techniques that reflect the personal opinion of the authors of the commentary and is subject to change without notice. The information in these materials reflects the Firms equity rating on a particular stock. The Firms, their affiliates, and/or their employees may publish or otherwise express other viewpoints or trading strategies that may conflict with the views included in this report. Please be aware that the Firms and/or their affiliates and the investment funds and managed accounts they manage may take positions contrary to the included equity rating. This material is for informational purposes only and is not an offer to sell or the solicitation of an offer to buy. Ratings and general guidance are not personal recommendations for any particular investor or client and do not take into account the financial, investment, or other objectives or needs of, and may not be suitable for any particular investor or client. Investors and clients should consider this only a single factor in making their investment decision while taking into account the current market environment. Foreign currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of, or income derived from, the investment. Investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk. Neither HC nor any officer or employee of HC accepts liability for any direct, indirect, or consequential damages or losses arising from any use of this report or its contents. Disclosures We, Majed Azzam, Ankur Khetawat, Nermeen Abdel Gawad, Sapna Sharma, certify that the views expressed in this document accurately reflect our personal views about the subject securities and companies. We also certify that we do not hold a beneficial interest in the securities traded. The Firms are not a market maker in the securities of the subject company. The Firms, their affiliates, and/or directors and employees may own or have positions in and effect transactions of companies mentioned in this document. The firms and their affiliates may also seek to perform or have performed investment-banking services for companies mentioned in this memorandum. Copyright No part or excerpt of its content may be redistributed, reproduced, or conveyed in any form, written or oral, to any third party without prior written consent of the Firms. The information within this research report must not be disclosed to any other person if and until the Firms have made their information publicly available. Issuer of report: HC Brokerage Building F15-B224, Smart Village KM28 Cairo-Alexandria Desert Road 6 October 12577, Egypt Telephone: +202 3535 7666 Fax: +202 3535 7665 Website: www.hc-si.com
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GCC real estate Real estate | GCC 19 January 2011
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45
GCC real estate Real estate | GCC
MENA research
Revising forecasts; DAAR remains our top pick
Despite improving liquidity and rental yields in the UAE, we maintain our neutral view on the sector as excess supply remains a concern Aldar, trading at 0.9x floor BV, looks appealing as both liquidity and asset quality have been clearly addressed… …however, over the medium-term, we prefer DAAR and Mabanee on supportive sector fundamentals, defensive profiles, and more attractive valuations
Dar Al Arkan: Raise TP to SAR17.6/share from SAR16.9/share and maintain Overweight rating. Despite its recent run (+20% since November), DAAR remains our top pick in MENA on valuation grounds as we feel that liquidity concerns are overstated in light of supportive fundamentals for plot sales with volumes picking up. DAAR’s developed land portfolio (no CAPEX required) stands at SAR3.5bn, which alone could cover most of the company’s debt of cSAR8bn, assuming historic margins of 45%. Also, we feel that it is the only builder in Saudi Arabia that provides direct exposure to the low-mid income segment through land sales (SAR500/sqm). We revise our EPS estimates downward by 10% in 2010e on the sale of less prime land, while maintaining margins. We push back the delivery of phase 1 of Shams Al Riyadh into 2012e and cut our EPS estimates for 2011e by 28%. Mabanee: Maintain TP at KWd1,100/share and Overweight rating. Mabanee is a REIT that provides direct exposure to the underserved Kuwaiti retail market. Also, unlike other Kuwaiti corporates, with a limited investment portfolio, Mabanee offers a pure play on core operations, rather than indirect exposure to the KSE. The stock trades at 0.75x 2012e NAV when phase III is delivered and 0.65x 2013e NAV when occupancy levels normalize. Following an upward revision in management guidance on rental rates (+20% to an average of KWD450/sqm) and gross leasable area for phase III (to 95,000 from 85,000), we recently raised our rental income forecast (please refer to our note Mabanee: Back in fashion, published on 7 January 2011). Aldar: Maintain TP at AED2.9/share and Overweight rating. Following the funding framework, Aldar emerges as a leaner company with an improved capital structure, allowing the market to focus on fundamentals, in our view. The transaction, we estimate, yields an uniflated BV of AED2.3/share on a fully diluted basis, which we feel provides a realistic floor valuation. In our most recent note, Aldar: Turning a new leaf, published on 14 January 2011, we reintroduce DCF in lieu of book NAV, which we used previously. While the impairments significantly impact the company’s book, from a DCF
Dar Al Arkan Target price (SAR) Potential return Mabanee
Overweight 17.6 75% Overweight
Target price (KWd) Potential return Aldar
1,100 39% Overweight
Target price (AED) Potential return Emaar
2.9 38% Neutral
Target price (AED) Potential return Al Akaria
3.8 11% Neutral
Target price (SAR) Potential return Sorouh
27.8 9% Neutral
Target price (AED) Potential return
1.6 3%
Note: Returns based on prices as of 18 January 2011
19 January 2011 Majed Azzam Analyst +971 4 2935 385 [email protected] Ankur Khetawat Analyst +971 4 2935 387 [email protected] Nermeen Abdel Gawad Analyst +20 2 3535 7362 [email protected] Sapna Sharma Analyst +971 4 2935 382 [email protected] Disclaimer: See page 41
GCC real estate Real estate | GCC 19 January 2011
perspective the impact is less pronounced, considering that fair value gains/losses are noncash items and the street is not assuming any land sales, in our view. In contrast, the sale of Yas low yielding assets at a c15% profit we believe offsets the impact of the impairment and provides a cash injection, significantly reducing debt burden and interest costs. We cut our revenue estimates for 2010e by 56% to take into account delivery delays at Al Bandar and Al Gurm. We also adjusted our EPS forecasts downward to include AED10.5bn in asset impairments to be recognized in 4Q10. We raise our 2011e EPS estimates by 35% largely as a result of a one-off cAED2bn gain on disposal of assets. Emaar: We exclude KAEC from our valuation on widening losses and cut our TP to AED3.8/share from AED4.1/share but maintain Neutral rating. On our estimates, current price levels reflect the company’s rental assets and property sales backlog, with the upside largely driven by investments (e.g. KAEC and MGF). Given the funding uncertainties in the case of MGF and potential impairments of investments/loans to associates similar to what we saw with Aldar, we feel that the market is unlikely to price them in. MGF is likely to continue to be a drag on Emaar’s cash flows as the IPO is unlikely to go through in the near term. Plans to raise USD2bn through a Sukuk issuance highlight the company’s growing funding needs. Also, funding costs are on the rise (7.5% on CB and likely to be higher on planed USD2bn sukuk). KAEC losses are continuing to widen, raising concerns about the project’s viability in the current environment. Accordingly, we exclude KAEC from our valuation and cut our TP to AED3.8/share but maintain Neutral rating. We revise our EPS estimates downward by 12% in 2010e as we now factor in (1) slower deliveries at Burj Khalifa, (2) margin compression on higher international contribution, and (3) push back the delivery of commercial units in Emaar Square. As such, we raise our EPS forecast for 2011e by 30%. Al Akaria: Raise TP to SAR27.8/share from SAR26.2/share but maintain Neutral rating. We believe the rental portfolio is fully priced in to Al Akaria’s current share price and that without a coherent plan the market will not give any value to the company’s land bank where the current upside lies. We raise our EPS estimates by 115% in 2010e on higher occupancy at Al Akaria Plaza (70% versus 60% previously) and the sale of the Al Basateen developed land plot in Riyadh for SAR230m. We treat this land sale as a one-off given the company’s history and considering that this sale has exhausted land held for sale, on our estimate. Therefore, we no longer assume any plot sales in 2011e and cut our EPS forecast by 8%. We raise our 2012e EPS estimates by 30% as the company recently revised the number of units at Diplomatic Quarters 2 upward to 420 from 292 previously with phase 1 expected to be delivered in 2012e. Sorouh: Cut TP to AED1.6/share from AED1.9/share but maintain Neutral rating. Given that Sorouh’s business model has historically been highly skewed towards sales with a limited buildup of recurring income properties, we feel that its growth prospects are limited. Sorouh trades at 0.7x 2010e BV, which implies that the market is pricing in AED2.2bn of asset impairments. While Sorouh follows cost accounting and its historic land sale prices averaged AED2,500/sqm versus AED4,500/sqm for Aldar, the magnitude of Aldar’s impairments (70% of equity) raises concerns. 3Q10 numbers showed deterioration in overdue receivables. Accordingly, to be conservative, we now assume 50% of land receivables are unrecoverable up from 20% previously. We cut our EPS estimates for 2010e by 49% as the delivery of Sun and Sky Towers has now been pushed back to early 2011e. As a result, we double our EPS forecasts for 2011e. 2
GCC real estate Real estate | GCC 19 January 2011
Revising estimates Estimates revision 2010e
2011e
2012e
New Dar Al Arkan (SARm) Revenue 4,349 Gross profit 1,917 GPM 44% Net profit 1,548
Old
%Δ
Cons.
New
Old
%Δ
Cons.
New
Old
%Δ
Cons.
4,796 2,102 44% 1,729
-9% -9%
4,758
5,695
2,040
6,753 2,983 44% 2,598
7,935
-28%
6,328 2,821 45% 2,411
-6% -5%
1,709
6,225 2,690 43% 2,247
-29% -25%
-10%
4,449 2,021 45% 1,610
-7%
2,738
Mabanee (KWd ‘000) Revenue 35,253 Gross profit 28,334 GPM 80% Net profit 19,453
34,452 27,690 80% 19,372
2% 2%
32,925
35,200
19,650
60,990 52,945 87% 39,498
54,825
5%
70,359 60,476 86% 44,599
15% 14%
18,700
34,298 27,566 80% 18,037
5% 5%
0%
35,901 28,855 80% 18,872
13%
33,675
Aldar (AEDm) Revenue 1,321 Gross profit 217 GPM 16% Net profit (12,218)
2,987 735 25% (254)
-56% -71%
2,543
4,070
(396)
8,517 2,613 31% 3,507
5,130
35%
8,757 2,473 28% 1,501
3% -5%
(951)
2,466 902 37% 1,772
53% 1%
-
3,761 913 24% 2,398
-57%
375
Sorouh (AEDm) Revenue 1,106 Gross profit 799 GPM 72% Net profit 502
3,421 1,311 38% 980
-68% -39%
2,550
2,876
775
5,738 1,889 33% 1,630
3,065
205%
5,738 1,884 33% 1,700
0% 0%
487
783 662 85% 300
311% 81%
-49%
3,220 1,196 37% 913
4%
799
Emaar (AEDm) Revenue 10,991 Gross profit 4,662 GPM 42% Net profit 2,815
11,250 5,038 45% 3,202
-2% -7%
10,980
9,200
2,692
7,498 4,128 55% 2,437
9,452
31%
6,426 3,229 50% 1,555
-14% -22%
3,356
6,672 3,495 52% 1,801
38% 16%
-12%
9,211 4,044 44% 2,367
-36%
2,969
116% 96%
287
231
114
482 283 59% 178
300
-16%
294 206 70% 113
-39% -27%
122
304 192 63% 141
-18% -9%
79%
250 175 70% 118
-37%
123
Al Akaria (SARm) Revenue Gross profit GPM Net profit
442 281 63% 180
205 143 70% 101
Source: AlembicHC, Bloomberg and Reuters consensus
Recommendations overview Recommendation DAAR Mabanee Aldar Emaar Al Akaria Sorouh
Overweight Overweight Overweight Neutral Neutral Neutral
Action
New TP/share
Old TP/share
SAR17.6 KWd1,100 AED2.9 AED3.8 SAR27.8 AED1.6
SAR16.9 KWd1,100 AED2.9 AED4.1 SAR26.2 AED1.9
TP change
Source: AlembicHC
3
GCC real estate Real estate | GCC 19 January 2011
MENA real estate and construction valuation multiples Company
BB code
Cur
CMP(1)
MCap (USDm)
Rec
TP
Upside
Real estate KSA Dar Al Arkan Al Akaria Average UAE Aldar Emaar Sorouh Average Egypt TMGH SODIC Nasr City PHD ODH (2) Heliopolis Egypt Resorts Average Kuwait Mabanee
P/BV
P/E
ROE
09a
10e
11e
09a
10e
11e
09a
10e
11e
09a
10e
11e
AL ARKAN AB SRECO AB
SAR SAR
10.1 25.6
2,894 819
OW N
17.6 27.8
75% 9%
0.8x 1.0x 0.9x
0.8x 1.0x 0.9x
0.7x 0.9x 0.8x
0.4x 0.5x 0.5x
0.4x 0.5x 0.4x
0.4x 0.4x 0.4x
5.1x 32.3x 18.7x
7.0x 17.0x 12.0x
6.7x 26.1x 16.4x
15% 3% 9%
11% 6% 8%
10% 4% 7%
ALDAR UH EMAAR UH SOROUH UH
AED AED AED
2.1 3.4 1.6
2,344 5,671 1,115
OW N N
2.9 3.8 1.6
38% 11% 3%
0.4x 0.7x 0.7x 0.6x
2.0x 0.7x 0.7x 1.1x
0.9x 0.6x 0.6x 0.7x
0.2x 0.3x 0.3x 0.2x
0.2x 0.2x 0.3x 0.2x
0.2x 0.2x 0.2x 0.2x
5.4x 63.6x 4.2x 24.4x
0.0x 7.4x 8.2x 7.8x
2.5x 8.8x 4.5x 5.2x
8% 1% 16% 8%
-451% 9% 8% -144%
36% 7% 13% 19%
TMGH EY OCDI EY MNHD EY PHDC EY ODHN EY HELI EY EGTS EY
EGP EGP EGP EGP CHF EGP EGP
8.0 100.5 30.5 5.9 55.2 24.2 2.0
2,757 614 523 1,064 1,623 462 352
OW OW OW OW N N N
10 130 39 7.5 69 27.4 2.2
25% 29% 28% 27% 25% 13% 13%
0.7x 1.7x 12.5x 2.0x 1.5x 13.9x 1.9x 4.9x
0.7x 1.5x 10.1x 1.4x 1.3x 7.7x 1.9x 3.5x
0.6x 1.2x 6.5x 1.1x 1.2x 6.5x 1.9x 2.7x
0.6x 0.7x 0.4x 0.4x 0.4x 0.3x 0.2x 0.4x
0.5x 0.9x 0.4x 0.7x 0.5x 0.3x 0.2x 0.5x
0.5x 0.7x 0.4x 0.6x 0.5x 0.3x 0.2x 0.5x
16.0x 0.0x 28.2x 8.3x 12.1x 13.5x 0.0x 15.6x
16.0x 16.2x 38.4x 14.8x 9.5x 20.4x 0.0x 19.2x
6.1x 4.6x 17.9x 5.4x 7.5x 11.8x 0.0x 8.9x
4% -7% 44% 23% 12% 68% 0% 21%
4% 9% 26% 10% 14% 65% -1% 18%
10% 25% 36% 21% 15% 44% -1% 22%
MABANEE KK
Kwd
790
1,422
OW
1100
39%
3.6x 3.6x 2.5x
3.2x 3.2x 2.2x
2.8x 2.8x 1.8x
1.2x 1.2x 0.6x
1.1x 1.1x 0.6x
1.1x 1.1x 0.5x
26.1x 26.1x 21.2x
20.5x 20.5x 14.9x
21.1x 21.1x 12.9x
14% 14% 13%
15% 15% -26%
13% 13% 15%
Sector average Construction DSI DSI (ex goodwill) Arabtec Sector average
P/NAV
P/BV DSI UH DSI UH ARTC UH
AED AED AED
1.1 1.1 1.9
640 640 602
OW OW N
1.2 1.2 2.4
11% 11% 30%
09a 0.9x 1.4x 0.9x 1.1x
10e 0.9x 1.5x 0.8x 1.1x
EV/EBITDA 11e 0.9x 1.3x 0.7x 0.9x
09a 8.2x 8.2x 4.1x 6.8x
10e 10.1x 10.1x 3.9x 8.1x
P/E 11e 9.4x 9.4x 3.8x 7.5x
09a 7.1x 7.1x 4.5x 6.2x
10e 12.9x 12.9x 4.4x 10.0x
ROE 11e 11.5x 11.5x 5.0x 9.3x
09a 13% 20% 21% 18%
10e 7% 11% 18% 12%
11e 8% 11% 14% 11%
Source: Bloomberg, AlembicHC Note: (1) Prices as of 18 January 2011 (2) Adjusted for bonus shares
4
GCC real estate Real estate | GCC 19 January 2011
Dar Al Arkan: Overweight, TP SAR17.6/share Revenue breakdown (SARm)
EPS (SAR/share)
10,000
48%
9,000
47%
8,000
0%
3.0 2.5
-7%
46%
7,000 6,000
45%
5,000
44%
4,000
43%
3,000
42%
2,000 1,000
41%
-
40% 2010e
2011e
2012e
2013e
2014
2015e
Sale of Properties
Rental Income
GPM
2.0
-19%
-8% -10%
-15%
1.0
-20%
0.5
-25% -30% 10e 10e Old New EPS (SAR)
Cons
11e 11e Cons 12e 12e Cons Old New Old New % Change new/old and new/consensus( RHS)
Source: AlembicHC, Reuters
Valuation breakdown (SAR/share)
NAV breakdown (SAR/share)
25
investments
-5%
30
valuation
3.2 1.1
3.0
-10% 25
-15% -20%
20
2.0
15
0%
35
Future projects &
20
-10%
1.5
Source: AlembicHC
AlembicHC
-25%
1.9 15
-30%
10 10
13.7 5
-35% -34% -45%
5
0
-38%
Plot sales Sale projects
Source: AlembicHC
-5%
-28%
0.0
Sale of Land
30
-9%
Lease projects
Investments
Qasr Khozam
Shams Al Arous
2010e Equity Land
-40% -45%
-43%
2011e 2012e Investment properties
-50% 2013e DCF discount to NAV
Source: AlembicHC
5
GCC real estate Real estate | GCC 19 January 2011
Cash flow (SARm) 12,000 10,000 8,000 6,000 4,000 2,000 (2,000) (4,000) (6,000) 2010e Operating Activities
2011e
2012e Investing Activities
2013e Financing Activities
2014e
2015e Net cashflow
Source: AlembicHC
6
GCC real estate Real estate | GCC 19 January 2011
Income statement (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Sale of land Sale of properties Rental income Revenue
4,620 990 5,611
4,945 519 5,464
3,855 467 26 4,349
4,066 251 131 4,449
4,526 1,532 269 6,328
4,781 3,462 322 8,565
4,990 3,566 341 8,898
4,990 352 5,341
(2,199) (567) (2,766) 49%
(2,559) (398) (2,957) 54%
(2,027) (397) (8) (2,432) 56%
(2,189) (199) (39) (2,428) 55%
(2,448) (978) (81) (3,507) 55%
(2,600) (2,215) (96) (4,911) 57%
(2,722) (2,215) (102) (5,040) 57%
(2,722) (105) (2,828) 53%
Gross profit Margin
2,845 51%
2,507 46%
1,917 44%
2,021 45%
2,821 45%
3,654 43%
3,858 43%
2,514 47%
Operating expenses SG&A expenses Other Depreciation and amortization Operating expenses
(150) (1) (50) (201)
(146) (41) (186)
(123) (46) (169)
(133) (58) (191)
(190) (63) (253)
(257) (62) (319)
(267) (62) (329)
(160) (61) (221)
EBIT (incl revaluation gain) Margin
2,644 47%
2,321 42%
1,748 40%
1,829 41%
2,569 41%
3,335 39%
3,529 40%
2,292 43%
(245)
(146)
(190)
(187)
(109)
(36)
72
239
17 2,417 (60)
(2) 2,173 (54)
30 1,588 (40)
9 1,651 (41)
13 2,473 (62)
17 3,316 (83)
18 3,619 (90)
11 2,542 (64)
-
-
-
-
-
-
-
-
2,356 42% 3.3
2,118 39% 2.0
1,548 36% 1.4
1,610 36% 1.5
2,411 38% 2.2
3,233 38% 3.0
3,528 40% 3.3
2,478 46% 2.3
2.3 0%
0.0 0%
1.0 0%
0.0 0%
0.0 0%
0.0 0%
0.0 0%
0.0 0%
2,696 48%
2,321 42%
1,772 41%
1,887 42%
2,631 42%
3,397 40%
3,591 40%
2,353 44%
Cost of land Cost of properties Direct rental expenses Total cost % of sales
Net financing cost (Islamic Murabha/Sukuk charges) Other income Profit before taxes Income tax Minority shareholders’ interest Net profit (loss) Margin Basic EPS DPS Payout ratio EBITDA Margin Source: Company data, AlembicHC
7
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Cash and cash equivalents Due from related parties Prepaid expenses and others Trade and other receivables Developed land, short term and long term Investment in land Land WIP Development properties WIP Current assets
716 57 1,737 949 3,099 3,727 3,726 4,195 18,206
2,223 3 233 846 4,458 3,683 5,245 4,023 20,715
1,375 9 420 414 2,986 4,775 6,285 3,642 19,906
1,851 9 268 263 796 5,541 6,881 4,840 20,449
1,261 9 115 113 6,731 5,230 5,193 18,651
10,168 9 6,058 3,303 2,215 21,753
17,906 9 4,712 1,927 (0) 24,553
21,439 9 3,366 551 (0) 25,365
1,120 127 120 591 1,958
1,162 98 103 1,518 2,882
1,162 2 115 2,021 3,301
1,162 2 152 2,351 3,668
1,162 2 188 2,293 3,645
1,162 2 222 2,236 3,623
1,162 2 256 2,180 3,601
1,162 2 290 2,126 3,580
20,164
23,597
23,206
24,117
22,296
25,376
28,154
28,945
Liabilities Trade and other payables Borrowings and short-term debt Other Current liabilities
171 1,635 613 2,420
471 2,700 635 3,806
196 550 1,164 1,943
125 550 1,164 1,844
53 550 1,164 1,768
550 1,164 1,714
550 1,164 1,714
550 1,164 1,714
Borrowing and long-term debt Provision for end of service indemnities Noncurrent liabilities
6,000 8 6,008
5,655 12 5,667
6,655 13 6,668
6,055 13 6,068
1,900 13 1,913
1,800 13 1,813
1,050 13 1,063
(638) 13 (625)
-
265
265
265
265
265
265
265
Paid up capital Statutory and other reserves Retained earnings Shareholders’ equity
7,200 3,600 936 11,736
10,800 462 2,597 14,124
10,800 462 3,068 14,595
10,800 462 4,677 16,204
10,800 462 7,088 18,615
10,800 462 10,321 21,848
10,800 462 13,850 25,377
10,800 462 16,328 27,855
Total liabilities and equity
20,164
23,597
23,206
24,117
22,296
25,376
28,154
28,945
Investments in associates Deferred charges net Property, plant, and equipment Investment properties (incl WIP) Noncurrent assets Total assets
Minority interest in subsidiaries
Source: Company data, AlembicHC
8
GCC real estate Real estate | GCC 19 January 2011
Cash flow (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Net profit before minorities Depreciation and amortization Change in working capital Change in provisions Net financing cost Interest income (expense) Net cash generated from operating activities
2,417 50 296 4 2,766
2,173 41 2,236 5 4,455
1,548 46 455 2 (91) 190 2,150
1,610 58 (167) (187) 187 1,501
2,411 63 1,132 (109) 109 3,605
3,233 62 5,752 (36) 36 9,048
3,528 62 4,937 72 (72) 8,527
2,478 61 2,722 239 (239) 5,262
Investments activities CAPEX (land) CAPEX (investments) CAPEX (excl IP and hotels)/PPE CAPEX (IP WIP) Net cash generated from investment activities
(744) (3,798) (3) (425) (4,971)
(1,193) (930) (1) (1,818) (3,942)
(214) (21) (526) (761)
(40) (385) (425)
(40) (40)
(40) (40)
(40) (40)
(40) (40)
Financing activities Dividends paid Bank borrowings raised Others Net cash generated from financing activities
(1,620) 1,235 (41) (426)
720 270 990
(1,080) (1,067) (2,147)
(600) (600)
(4,155) (4,155)
(100) (100)
(750) (750)
(1,688) (1,688)
Net addition (deduction) in cash Cash at beginning Cash at end of fiscal year
(2,630) 3,347 717
1,507 717 2,224
(758) 2,224 1,466
476 1,466 1,941
(590) 1,941 1,351
8,908 1,351 10,259
7,737 10,259 17,996
3,534 17,996 21,530
Source: Company data, AlembicHC
9
GCC real estate Real estate | GCC 19 January 2011
DCF (SARm) EBIT Tax rate EBIT∗(1−T) Depreciation and amortization Capital expenditure Changes in working capital Free cash flow: Explicit period Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
2644 3% 2,578 50 (4,971) 296 -2,046
2321 3% 2,263 0 (3,942) 2,236 557
1748 3% 1,704 25 (761) 455 1,422
1829 3% 1,783 58 (425) -167 1,249
2569 3% 2,504 63 (40) 1,132 3,659
3335 3% 3,251 62 (40) 5,752 9,026
(2,046)
557
1,422
1,249
3,659
9,026
...
2027 TY 280 3% 273 56 (40) 0 289 3.0% 3,303 3,592
Source: AlembicHC
Valuation and WACC Terminal growth rate NPV: FCF (SARm) Net debt (SARm) Equity (SARm) Outstanding shares DCF value (SAR/share)
3.0% 24,793 5,830 18,963 1,080 17.6
WACC Beta Risk free rate Country risk premium Cost of equity After tax cost of debt Weights (SARm) Equity market capitalization Debt Total Tax rate WACC
1.5 4.5% 6.5% 14.3% 7.0% 6.8% 10,800 8,355 19,155 2.5% 12.0%
Source: Company data, AlembicHC
10
GCC real estate Real estate | GCC 19 January 2011
Mabanee: Overweight, TP KWd1,100/share Revenue breakdown (KWDm)
EPS (KWd/share)
80
88%
70
86%
60 84%
50
100
30%
90
30%
80
25% 17%
70
20%
60
40
82%
30
80%
15%
50 3%
40
6%
4%
10% 5%
30
20 78%
10 -
76% 2010e
2011e
2012e
2013e
2014e
The Avenues phase 1 & 2 The Avenues phase 3 Advertising fees
0%
20 10
-10% -15% 10e Old
Mabanee office building Placement fees GPM RHS
10e New
Cons
EPS (AED)
11e 11e Old New
Cons
Source: AlembicHC, Reuters
Valuation breakdown (KWd/share)
NAV breakdown (KWd/share)
1,400 1,200
1,200
60% 50%
1,000
1,000 343
40%
800
800 12 600
Cons
49%
290 33
12e 12e Old New
% change new/old and new/consensus
Source: AlembicHC
HC valuation
-5%
-11%
-
2015e
35%
30%
69
600 20%
400
400
641 200
5%
200
10% -5%
0%
The Mabanee Avenues Office phase 1 & 2
Source: AlembicHC
Salmiyah Plot
Avenues Investment The phase 3 in associate Avenues phase 4
2010e 2011e Book value Investment properties
-10% 2012e Land
2013e DCF prem/disc to NAV
Source: AlembicHC
11
GCC real estate Real estate | GCC 19 January 2011
Cash flow (KWDm) KWD 90m in project finance
80
50
60
40
40
30
20
20
10
(20) Redemption of KWD18.6m of held for sale investments
(40) (60)
(10)
(80)
(20) 2010e Operating activities
2011e
2012e Investing activities
2013e Financing activities
2014e Net cashflows (RHS)
Source: AlembicHC
12
GCC real estate Real estate | GCC 19 January 2011
Mabanee income statement (KWD ‘000) Year to 31 December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Rental income Placement fees Advertising services Revenue
23,556 11,007 1,750 36,312
30,731 1,545 2,213 34,489
32,947 2,306 35,253
33,552 2,349 35,901
57,065 10,000 3,295 70,359
60,240 4,217 64,457
63,210 4,425 67,634
63,210 4,425 67,634
Direct rental expenses Gross profit % of sales
(5,588) 30,724 85%
(6,941) 27,547 80%
(6,919) 28,334 80%
(7,046) 28,855 80%
(9,884) 60,476 86%
(12,650) 51,806 80%
(13,274) 54,360 80%
(13,274) 54,360 80%
(2,528) (2,401) (13,485) 12,310 34%
(3,051) (2,530) (487) 21,480 62%
(3,182) (3,034) 22,119 63%
(3,890) (3,052) 21,914 61%
(4,339) (7,036) 49,100 70%
(4,277) (6,446) 41,084 64%
(4,214) (6,763) 43,382 64%
(4,153) (6,763) 43,444 64%
(6,068) (274) 500 6,467
(4,938) (315) (1,033) 854 25 16,074
(1,738) 43 20,424
(2,150) 50 19,814
(2,347) 71 46,824
(1,775) 90 39,399
(1,085) 95 42,392
(354) 95 43,185
(59) (130) (52) 6,225
(160) (427) (176) 15,310
(204) (543) (224) 19,453
(198) (527) (217) 18,872
(467) (1,245) (513) 44,599
(393) (1,048) (432) 37,527
(423) (1,127) (464) 40,378
(431) (1,148) (473) 41,133
-
-
-
-
-
-
-
-
6,225
15,310
19,453
18,872
44,599
37,527
40,378
41,133
25,794
23,556
-
-
-
-
-
-
14.9
33.3
38.5
37.4
88.3
74.3
80.0
81.4
0.0 0%
0.0 0%
0.0 0%
10.0 26%
10.0 27%
10.0 11%
10.0 13%
0.0 0%
Depreciation SG&A expenses (excl depreciation) Fair value gains (losses) EBIT % of sales Net financing cost Associate income Allowance for doubtful debt Foreign exchange gains (losses) Other income (expense) Profit before taxes Contribution to KFAS Contribution to NLST Income taxes/Zakat Net income before minority interest Minority interest Net income attributable to shareholders EBITDA (excl revaluation) EPS DPS (KWD) Payout ratio Source: Company data, AlembicHC
13
GCC real estate Real estate | GCC 19 January 2011
Mabanee balance sheet (KWD ‘000) Year to 31 December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Assets Cash and cash equivalents Accounts receivable Held for trading investments Current assets
24,017 6,489 763 31,268
10,172 4,258 14,430
9,909 4,854 14,763
3,431 3,640 7,071
44,555 2,427 46,982
78,716 1,213 79,930
115,661 115,661
160,846 160,846
Available for sales investments Investment in associates Property, plant, and equipment Investment properties Long-term assets
25,504 16,366 558 157,122 199,550
18,663 17,049 673 169,797 206,183
10,589 16,914 1,003 225,826 254,333
16,914 1,167 289,058 307,138
16,914 1,415 284,738 303,067
16,914 1,490 280,483 298,887
16,914 1,568 276,292 294,774
16,914 1,646 272,163 290,722
Total assets
230,819
220,613
269,096
314,209
350,049
378,816
410,435
451,568
16,852 66,184 83,036 40,779
17,449 61,730 79,179 20,179
14,836 51,874 66,710 66,633
11,127 51,874 63,001 101,633
7,418 51,874 59,292 101,633
3,709 51,874 55,583 101,633
51,874 51,874 101,633
51,874 51,874 101,633
9,113
9,414
9,009
9,009
9,009
9,009
9,009
9,009
284 50,175
447 30,039
319 75,961
319 110,961
319 110,961
319 110,961
319 110,961
319 110,961
-
-
-
-
-
-
-
-
41,745 17,027 36,621 (2,300) 4,634 (119) 97,608
45,920 20,255 44,528 (2,645) 4,418 (1,082) 111,394
50,511 20,255 55,504 (2,732) 4,313 (1,426) 126,425
50,511 20,255 69,326 (2,732) 4,313 (1,426) 140,247
50,511 20,255 108,875 (2,732) 4,313 (1,426) 179,796
50,511 20,255 141,351 (2,732) 4,313 (1,426) 212,273
50,511 20,255 176,679 (2,732) 4,313 (1,426) 247,600
50,511 20,255 217,812 (2,732) 4,313 (1,426) 288,733
230,819
220,613
269,096
314,209
350,049
378,816
410,435
451,568
Liabilities Trade and other payables Short-term borrowings Current liabilities Borrowing and long-term debt Other noncurrent liabilities (security deposits) Provision for employee services Long-term liabilities Minority interest in subsidiaries Paid up capital Statutory and other reserves Retained earnings Treasury shares Gain on sale of treasury shares Treasury shares reserve Fair value reserve Shareholders’ equity Total liabilities and equity Source: Company data, AlembicHC
14
GCC real estate Real estate | GCC 19 January 2011
Mabanee cash flow statement (KWD ‘000) Year to 31 December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
6,519 2,601 (7,889) 192 6,068 8,086
16,144 3,170 1,544 1,199 (617) 517
19,453 3,182 892 101 (1,125) 1,738
18,872 3,890 8,094 (2,150) 2,150
44,599 4,339 (2,496) (2,347) 2,347
37,527 4,277 (2,496) (1,775) 1,775
40,378 4,214 (2,496) (1,085) 1,085
41,133 4,153 (354) 354
15,577
21,957
24,242
30,856
46,443
39,308
42,097
45,286
(30,823) 1,444
(234) (15,109) 5,156
(338) (59,203) 4,152
(180) (67,105) -
(268) -
(97) -
(101) -
(101) -
(29,379)
(10,186)
(55,389)
(67,284)
(268)
(97)
(101)
(101)
Financing activities Dividends paid Share issue Bank borrowings raised Others Net cash generated from financing activities
39,271 (2,301)
(26,628) (561)
(4,564) 36,168 (193)
(5,050) 35,000 -
(5,050) -
(5,050) -
(5,050) -
-
36,970
(27,189)
31,411
29,950
(5,050)
(5,050)
(5,050)
-
Net addition (deduction) in cash Cash at beginning Cash at the end of fiscal year
23,169 (2,623) 20,547
(15,418) 20,547 10,172
264 10,172 10,436
(6,478) 10,436 3,958
41,124 3,958 45,082
34,161 45,082 79,243
36,945 79,243 116,188
45,184 116,188 161,373
Net profit before minorities Depreciation and amortization Change in working capital Change in provisions Net financing cost Interest income (expenditure) Others Net cash generated from operating activities Investments activities CAPEX (PPE) CAPEX (investment properties) Others Net cash generated from investment activities
Source: AlembicHC
15
GCC real estate Real estate | GCC 19 January 2011
Mabanee (KWD ‘000 ) EBIT Tax rate EBIT∗(1−T) Depreciation and amortization Capital expenditure Revaluation of investment properties Changes in working capital Free cash flow: Explicit period % change y-o-y Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
12,310 (242)
21,480 (764) 20,716 -3,051 (10,186) (487) 1,544
22,119 (970) 21,148 1,589 (55,389) 0 892
21,914 (941) 20,972 3,890 (67,284) 0 8,094
49,100 (2,225) 46,875 4,339 (268) 0 (2,496)
41,084 (1,872) 39,212 4,277 (97) 0 (2,496)
54,370 (3,194) 51,176 3,535 (115) 0 0
(50,753)
8,537 -116.8%
(31,760) -472.0%
(34,329) 8.1%
48,451 -241.1%
40,896 -15.6%
(50,753)
8,537
(31,760)
(34,329)
48,451
40,896
54,596 -0.1% 3.0% 969,586 1,024,183
0 (29,379) (13,485) (7,889)
...
2027 TY
Source: AlembicHC
Mabanee Valuation and WACC Terminal growth rate NPV: FCF (KWD ‘000) Net debt/cash (KWD ‘000) Equity (KWD ‘000) Outstanding shares (m) DCF value (KWd/share) Value of land (KWD ‘000) Investment in associates (KWD ‘000) Value of land and investments (KWD ‘000) Value of land and investments(per share) Total value (KWd/share)
3.0% 653,018 150,076 502,942 505 996 35,000 16,914 51,914 103 1,099
WACC Beta Risk free rate Country risk premium Cost of equity Cost of debt After tax cost of debt Weights (KWD '000) Equity market capitalization Debt Total Tax rate WACC
1.1 4.0% 5.5% 10.1% 5.0% 4.8% 383,887 118,506 502,393 5.0% 8.8%
Source: Company data, AlembicHC
16
GCC real estate Real estate | GCC 19 January 2011
Aldar: Overweight, TP AED2.9/share Revenue breakdown (AEDm)
Fully diluted EPS (AED/share)
10,000
60%
2
50%
1
9,000 8,000 7,000
40%
6,000 30%
5,000 4,000
80% 72%
60%
-
40%
(1)
20%
(2)
0%
(3)
-20%
20%
3,000 2,000
10% (4)
1,000 -
0% 2010e
2011e
2012e
2013e
Sale of Properties Hotel Revenue
2014e
2015e
-40% -45%
(5) 10e Old
Rental Income GPM RHS
10e Cons New EPS (AED)
11e Old
Source: AlembicHC
Source: AlembicHC, Reuters
Valuation breakdown (AED/share)
NAV breakdown (AED/share)
3.5 3.0 0.2 2.5
-60%
11e Cons 12e 12e Cons New Old New % change new/old and new/consensus
16
-68%
14
-70%
12
-72%
0.5 10
2.0
-74% 8
1.5 1.0
-76% 6
2.2
-78%
4
0.5 0.0 Rental properties
Source: AlembicHC
Hotels
Sale properties
2
-80%
0
-82% 2010e Adjusted BV* Land
2011e 2012e Market value of IP DCF discount to NAV
2013e Market value of hotels
Source: AlembicHC
17
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) 15,000 10,000 5,000 (5,000) (10,000) (15,000) 2010e Operating Activities
2011e
2012e Investing Activities
2013e Financing Activities
2014e
2015e Net cash flow
Source: AlembicHC
18
GCC real estate Real estate | GCC 19 January 2011
Income statement (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Sale of land Sale of properties Rental income Hotel revenue Other income Revenue
3,737 1,115 87 39 4,978
103 1,470 394 12 1,979
690 353 277 1,321
2,491 700 570 3,761
6,825 1,001 931 8,757
764 1,413 1,205 3,382
1,834 1,459 3,293
1,926 1,574 3,500
(1,142) (1,104) (35) (14) (2,295) 46%
(1,270) (266) (1,537) 78%
(501) (128) (150) (325) (1,104) 84%
(1,986) (350) (513) (2,849) 76%
(5,231) (400) (652) (6,284) 72%
(556) (424) (844) (1,823) 54%
(550) (1,021) (1,571) 48%
(578) (1,102) (1,680) 48%
Gross profit Margin Is something supposed to be here? SG&A expenses Fair value gains (losses/provisions) Other income Operating expenses
2,683 54% 0% (926) 1,533 607
443 22% (1,617) 1,961 114 459
217 16% (1,133) (10,930) 14 (12,050)
913 24% (650) 2,219 1,569
2,473 28% (876) 44 (832)
1,559 46% (750) 68 (683)
1,722 52% (494) 66 (428)
1,821 52% (525) 70 (455)
EBIT (incl revaluation gain) Margin Is something supposed to be here? Net financing cost Other fin. income (charges) Associate income Profit before taxes
3,290 66% 0% (371) 480 47 3,447
901 46% (262) 456 (88) 1,007
(11,833) -896% (545) 159 2 (12,218)
2,481 66% (84) 2,398
1,641 19% (141) 1,501
876 26% (70) 806
1,294 39% (22) 1,272
1,366 39% (115) 1,251
Income taxes
-
-
-
-
-
-
-
-
Minority shareholders' interest
-
-
-
-
-
-
-
-
3,447 69% 2.0 1.2
1,007 51% 0.4 0.3
(12,218) -925% (4.7) (4.2)
2,398 64% 0.8 0.8
1,501 17% 0.5 0.5
806 24% 0.3 0.3
1,272 39% 0.4 0.4
1,251 36% 0.4 0.4
0%
0.0 4%
(1.5) 33%
0%
0%
0%
0%
0%
1,758
(1,060)
(562)
2,824
1,873
1,105
1,518
1,586
Cost of land Cost of properties Direct rental expenses Hotel direct costs Other expenses Total cost % of sales
Net profit (loss) Margin Basic EPS Fully diluted EPS DPS Payout ratio EBITDA excl reval gains Source: Company data, AlembicHC
19
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Assets Cash and cash equivalents Receivables on Yas Island assets sale Trade and other receivables Development properties Current assets
12,066 6,651 7,130 25,848
10,313 9,138 7,888 10,808 38,146
5,728 4,553 16,076 26,357
5,106 1,717 15,628 22,452
5,518 1,503 10,669 17,689
3,870 1,288 7,234 12,392
1,200 1,073 5,627 7,900
2,835 1,073 4,019 7,927
Investments in associates Other financial assets Refundable costs Receivables on Yas Island assets sale Long-term assets – noncurrent
875 97 972
627 199 826
578 169 2,435 3,182
578 169 2,261 3,008
578 169 1,913 2,660
578 169 1,565 2,313
578 169 1,218 1,965
578 169 870 1,617
Intangible asset Hotels Property, plant, and equipment Investment properties Permanent
163 1,831 20,953 22,947
40 12,400 14,812 27,252
34 54 13,303 5,918 19,309
34 161 4,416 8,344 12,954
34 208 4,344 9,680 14,266
34 198 4,276 10,325 14,832
34 188 4,211 10,325 14,758
34 179 4,149 10,325 14,687
Total assets
49,767
66,224
48,847
38,414
34,616
29,537
24,622
24,231
Liabilities Trade and other payables Borrowings – short term Current liabilities
7,464 2,683 10,147
6,556 4,696 11,252
5,746 8,763 14,509
5,108 0.0 5,108
4,469 0.0 4,469
3,831 0.0 3,831
638 0.0 639
0.0 0.0
Borrowing and long-term debt Obligation under finance lease/retentions Other financial liabilities Advances from customers Provision for employee services Long-term liabilities – noncurrent
15,669 938 586 2,136 22 19,352
29,711 1,438 404 2,444 34 34,031
24,003 1,442 288 4,250 43 30,026
18,391 1,442 288 3,632 43 23,796
16,187 1,442 288 1,175 43 19,136
12,070 1,442 288 46 43 13,889
9,122 1,442 288 43 10,895
8,119 1,442 288 43 9,892
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Paid up capital Statutory and other reserves Retained earnings Convertible bonds Shareholders’ equity
2,578 3,825 5,885 7,980 20,268
2,578 3,887 6,441 8,034 20,941
2,578 3,870 (5,880) 3,744 4,312
2,882 3,870 (3,483) 6,240.4 9,510
2,882 3,870 (1,982) 6,240.4 11,011
2,882 3,870 (1,175) 6,240.4 11,817
2,882 3,870 96 6,240.4 13,089
2,882 3,870 1,347 6,240.4 14,340
Total liabilities and equity
49,767
66,224
48,848
38,414
34,616
29,537
24,622
24,231
Minority interest in subsidiaries
Source: Company data, AlembicHC
20
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Net profit before minorities Depreciation and amortization Change in working capital Share of associates Interest income (expense) Interest received Interest paid Fair value gain on investment property Provision for employee end of service benefits Others (net) Net cash generated from operating activities
3,447 25 (47) (272) 164 (1,533) 13 (447) 1,351
1,007 94 (693) 88 (194) (1,961) 12 623 (1,025)
(11,388) 341 1,492 234 158 (391) 10,945 1,391
2,398 342 2,201 84 411 (495) 4,941
1,501 232 2,426 141 183 (324) 4,159
806 228 2,230 70 175 (245) 3,265
1,272 225 (1,069) 22 190 (212) 428
1,251 221 1,317 115 48 (162) 2,789
Investments activities CAPEX (excl hotel properties) Additions to hotels properties Additions to investment properties Associates Acquisition (sale) of financial assets Movement in >3 months bank deposits Others Net cash generated from investment activities
(1,485) (11,762) (393) (3) (4,647) 520 (17,771)
(837) (14,537) (0) (9) 1,210 687 (13,485)
(2,826) (55) 2,058 (823)
6,124 (112) 6,012
(1,486) (57) (1,544)
(795) (795)
(150) (150)
(150) (150)
(232)
(751)
(329)
-
-
-
-
14,331 (4,282) 6,408 16,224
17,504 (2,758) (28) 13,967
3,267 (3,522) (15) (599)
2,800 (14,375) (11,575)
(2,204) (2,204)
(4,117) (4,117)
(2,948) (2,948)
(1,003) (1,003)
(196) 5,059 4,863
(543) 4,863 10,313
(4,585) 10,313 5,728
(622) 5,728 5,106
411 5,106 5,518
(1,647) 5,518 3,870
(2,671) 3,870 1,200
1,636 1,200 2,835
Financing activities Dividends paid Shares issued Bank borrowings raised Borrowings repaid Others Net cash generated from financing activities Net addition (deduction) in cash Cash at beginning of fiscal year Cash at end of fiscal year Source: Company data, AlembicHC
21
GCC real estate Real estate | GCC 19 January 2011
DCF (AEDm) EBIT Tax rate EBIT∗(1−T) Depreciation and amortization Capital expenditure Revaluation of investment properties Changes in working capital FCF: Explicit period % change y-o-y Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
3290 0% 3,290 0 (13,248) (1,533) 0 -11,937 229.4%
901 0% 901 0 (15,374) (1,961) -693 -16,504 38.3%
(11,833) 0% (11,833) 341 (2,881) 10,930 1,492 -1,950 -88.2%
2,481 0% 2,481 342 6,012 0 2,201 11,037 -665.9%
1,641 0% 1,641 232 (1,544) 0 2,426 2,756 -75.0%
876 0% 876 228 (795) 0 2,230 2,540 -7.8%
(11,937)
(16,504)
(1,950)
11,037
2,756
2,540
...
2027 TY 2,473 0% 2,473 191 (150) 0 0 2,513 3.0% 38,421 40,934
Source: AlembicHC
Valuation and WACC Terminal growth rate NPV: FCF (AEDm) Net debt (AEDm) Equity (AEDm) Outstanding shares (m) DCF value (AED/share)
3.0% 25,355 13,285 12,070 4,099 2.9
WACC Beta Risk free rate Country risk premium Cost of equity Cost of debt After tax cost of debt Weights (AEDm) Equity market capitalization Debt Total Tax rate WACC
1.5 4.0% 5.5% 12.0% 7.5% 8.0% 9,305 18,391 27,696 0% 10%
Source: Company data, AlembicHC
22
GCC real estate Real estate | GCC 19 January 2011
Emaar: Neutral, TP AED3.8/share Revenue breakdown (AEDm)
EPS (AED/share) 80%
15,000
0.6
40%
-16% -12%
0.5
31%
60% 10,000
-46%
30% 20%
-9%
10%
0.4
0% 40%
0.3
-36%
20%
0.2
-30% -40%
0.1 -
-50%
0% 2010e 2011e 2012e Sale of Land Sale of Commercial Units Hotel Revenue
2013e
2014 2015e Sale of Villas and Condominiums Rental Income GPM RHS
-60%
0.0 10e Old
10e Cons New EPS (AED)
11e 11e Cons 12e 12e Cons Old New Old New % Change New/Old and New/Consensus
Source: AlembicHC
Source: AlembicHC, Reuters
Valuation breakdown (AED/share)
NAV breakdown (AED/share)
4.0 45%
International
3.0 2.5
0.4
0.1 Unit sale
0.5
Hotel business
Other 0.2 Egypt 0.4 Morocco 0.1 Saudi Arabia
2.0 1.5
-50%
16
4.5
3.5
-10% -20%
5,000
14
-55%
12 -60%
10
-65%
8 6
55%
UAE 2.2
1.0
-70%
4 Rental business
0.5
-75%
2
-80%
-
0.0 Valuation breakdown
Source: AlembicHC
UAE
International
2010e Equity Emaar MGF
2011e 2012e Net mkt value of land TP discount to NAV
2013e Net mkt value of IP
Source: AlembicHC
23
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) 6,000 5,000 4,000 3,000 2,000 1,000 (1,000) (2,000) (3,000) 2010e Operating Activities
2011e
2012e Investing Activities
2013e Financing Activities
2014e
2015e Net Cash Flow
Source: AlembicHC
24
GCC real estate Real estate | GCC 19 January 2011
Income statement (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Sale of land Sale of villas and condominiums Sale of commercial units Rental income Hotel revenue Revenue
613 8,564 465 499 577 10,717
135 6,041 60 1,510 667 8,413
26 7,832 368 1,834 931 10,991
6,220 1,951 1,040 9,211
3,253 2,083 1,090 6,426
2,166 1,143 3,309
3,096 1,198 4,294
3,383 1,256 4,639
Cost of land Cost of villas and condominiums Cost of commercial units Direct rental expenses Hotel direct costs Total costs % of sales
(25) (4,774) (144) (178) (367) (5,487) 51%
(9) (3,556) (33) (268) (448) (4,314) 51%
(9) (5,266) (142) (317) (595) (6,329) 58%
(4,198) (293) (676) (5,167) 56%
(2,176) (312) (709) (3,197) 50%
(217) (743) (960) 29%
(310) (779) (1,088) 25%
(338) (816) (1,155) 25%
5,230 49%
4,099 49%
4,662 42%
4,044 44%
3,229 50%
2,350 71%
3,205 75%
3,485 75%
(1,905) 531 (1,120) 240 (363) (2,616)
(1,912) 520 (1,842) 83 (288) (3,438)
(2,052) 514 361 (286) (1,464)
(1,995) 501 92 (368) (1,771)
(1,995) 386 64 (257) (1,802)
(1,324) 199 33 (132) (1,224)
(1,288) 258 43 (172) (1,159)
(1,160) 278 46 (186) (1,021)
EBIT (incl revaluation gain) Margin
2,614 24%
661 8%
3,198 29%
2,273 25%
1,427 22%
1,125 34%
2,046 48%
2,464 53%
Net financing cost Other fin. income (charges) Associate income Impairments Profit before taxes
346 109 (2,948) 121
139 (534) 266
(85) (208) (53) 2,853
(169) 408 2,513
(88) 300 1,639
20 197 1,342
85 93 2,224
66 104 2,634
3
24
(10)
(25)
(16)
(13)
(22)
(26)
Minority shareholders' interest
(42)
(38)
28
121
68
4
219
269
Net profit (loss) Margin
166 2%
327 4%
2,815 26%
2,367 26%
1,555 24%
1,324 40%
1,983 46%
2,339 50%
0.0 3,734 35%
0% 0.1 2,503 30%
0% 0.5 3,488 32%
0.1 20% 0.4 2,873 31%
0.1 20% 0.3 2,049 32%
0.0 20% 0.2 1,769 53%
0.1 20% 0.3 2,703 63%
0.1 20% 0.4 3,124 67%
Gross profit Margin Operating expenses SG&A expenses Other operating income W/off development properties Other income Other operating expenses Operating expenses
Income taxes
DPS Payout ratio Basic EPS EBITDA excl reval gains Margin Source: Company data, AlembicHC
25
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Assets Cash and cash equivalents Trade and other receivables Development properties Short-term investments Receivables, deposits, and prepayments Current assets
5,393 1,058 26,799 867 3,511 37,629
2,267 981 26,555 937 3,211 33,951
1,671 939 24,263 711 3,211 30,794
4,076 730 17,950 498 2,456 25,710
7,161 522 11,213 355 1,474 20,725
9,799 313 6,229 213 671 17,225
8,816 104 6,229 71 221 15,442
10,507 6,229 50 16,786
8,314 1,636 9,950
7,861 2,005 4,521 14,387
7,831 2,627 4,521 14,978
8,239 2,627 4,521 15,386
8,539 2,627 4,521 15,686
8,735 2,627 4,521 15,883
8,828 2,627 4,521 15,976
8,933 2,627 4,521 16,080
Intangible asset Hotels Property, plant, and equipment Investment properties Permanent assets
439 5,414 13,248 19,102
439 6,822 8,546 15,807
46 40 7,186 8,574 15,847
46 38 7,360 9,151 16,596
46 36 7,526 9,701 17,310
46 35 7,683 10,277 18,041
46 33 7,833 10,166 18,078
46 31 7,975 9,914 17,966
Total assets
66,680
64,145
61,619
57,692
53,720
51,149
49,496
50,832
Liabilities Trade and other payables Borrowings – short term Advances from customers Current liabilities
9,680 4,564 18,109 32,354
9,545 4,500 15,888 29,933
8,172 4,776 10,855 23,803
5,034 4,776 8,141 17,951
2,627 4,776 5,427 12,830
1,751 4,776 2,714 9,241
876 4,776 0 5,651
0 4,776 4,776
4,610 1,079 37 5,726
4,125 1,160 47 5,333
5,157 1,209 54 6,419
5,157 1,209 54 6,419
5,157 1,209 54 6,419
5,157 1,209 54 6,419
5,157 1,209 54 6,419
5,157 1,209 54 6,419
494
202
227
348
416
420
639
908
Paid up capital Statutory and other reserves Retained earnings Employee performance share program Shareholders’ equity
6,091 14,431 7,586 (2) 28,601
6,091 14,710 7,878 (2) 28,879
6,091 14,388 10,693 (3) 31,397
6,091 14,388 12,496 (3) 33,322
6,091 14,388 13,578 (3) 34,470
6,091 14,388 14,591 (3) 35,488
6,091 14,388 16,309 (3) 37,425
6,091 14,388 18,252 (3) 39,637
Total liabilities and equity
66,680
64,145
61,619
57,692
53,720
51,149
49,496
50,832
Investments in associates Loans to associates Raw land Noncurrent assets
Borrowing and long-term debt Retentions Provision for employee services Long-term liabilities – noncurrent Minority interest in subsidiaries
Source: Company data, AlembicHC
26
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Net profit before minorities Depreciation and amortization Change in working capital Share of associates Interest income (expense) Interest received Interest paid Fair value gain on investment property Impairment of goodwill Provision for employee end of service benefits Others (net) CF generated from operating activities
3,068 111 (1,152) (265) 341 (341) 1,120 2,948 19 (26) 5,823
2,028 636 (5,015) 534 10 174 (1,633)
2,840 641 (3,596) 140 57 (36) 6 7 (184) (124)
2,488 599 1,638 169 129 (298) 4,725
1,622 622 2,949 88 210 (298) 5,193
1,329 644 2,548 (20) 318 (298) 4,521
2,202 657 (2,789) (85) 383 (298) 70
2,608 660 (529) (66) 364 (298) 2,739
Investments activities CAPEX (excl hotel properties) Additions to hotels properties Additions to investment properties Associates
(5,845) (149) (1,530)
(1,727) (132) (635)
(1,104) (41) (864)
(1,348) (408)
(1,336) (300)
(1,375) (197)
(694) (93)
(548) (104)
Acquisition (sale) of financial assets Movement in >3 months bank deposits Others CF generated from investment activities
2,342 2,377 (1) (2,807)
(13) (283) (2,790)
(4) (169) (2,182)
(1,756)
(1,636)
(1,572)
(788)
(652)
Financing activities Dividends paid
(1,199)
(4)
-
(563)
(473)
(311)
(265)
(397)
Bank borrowings raised Net share issuance fee Borrowings repaid Others CF generated from financing activities
3,448 (1,978) 58 329
2,005 (809) 17 1,210
1,467 (307) 5 1,164
(563)
(473)
(311)
(265)
(397)
3,346 2,132 (30) 5,393
(3,214) 5,393 11 2,267
(1,142) 2,267 1,125
2,406 1,125 3,531
3,084 3,531 6,615
2,638 6,615 9,253
(983) 9,253 8,271
1,690 8,271 9,961
Net addition (deduction) in cash Cash at beginning of fiscal year Net forex difference/others Cash at end of fiscal year Source: Company data, AlembicHC
27
GCC real estate Real estate | GCC 19 January 2011
DCF (AEDm) EBIT∗(1−T) Depreciation and amortization Capital expenditure Revaluation of investment properties Cash flow for minorities Cash flow from associates Changes in working capital Net change in debt (other than Sukuk) Free cash flow: Explicit period Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
2,322 0 (5,994) 1,120 42 (293) (1,152) -26 -3,980
588 0 (1,860) 1,842 38 (234) (5,015) 174 -4,468
2,842 290 (1,145) 0 (28) (65) (3,596) -184 -1,884
2,020 599 (1,348) 0 (121) 0 1,638 0 2,788
1,268 622 (1,336) 0 (68) 0 2,949 0 3,436
1,000 644 (1,375) 0 (4) 0 2,548 0 2,812
(3,980)
(4,468)
(1,884)
2,788
3,436
2,812
...
2027 TY 3,905 659 (548) 0 (439) 0 0 0 3,577 3.0% 45,797 49,375
Source: AlembicHC
Valuation and WACC Terminal growth rate NPV: FCF (AEDm) Net debt (AEDm) Equity (AEDm) Outstanding shares (m) DCF value (AED/share)
3.0% 28,719 5,856 22,862 6,091 3.8
WACC Beta Risk free rate Country risk premium Cost of equity Cost of debt After tax cost of debt Weights (AEDm) Equity market capitalization Debt Total Tax rate WACC
1.2 4.0% 5.5% 12.1% 6.0% 5.7% 21,015 4,125 25,140 5% 11.0%
Source: Company data, AlembicHC
28
GCC real estate Real estate | GCC 19 January 2011
Al Akaria: Neutral, TP SAR27.8/share Revenue breakdown (SARm)
EPS (SAR/share)
4,000
80%
1.6
3,500
70%
1.4
3,000
60%
1.2
2,500
50%
2,000
40%
1,500
30%
1,000
20%
500
10% 0%
2010e
2011e
2012e
2013e
2014e
2015e
100%
79%
80% 48%
-16%
1.0
-37%
Sale of Properties
Rental Income
GPM RHS
20%
0.6
0%
0.4
-20%
0.2
-40% -60% 10e 10e Cons Old New EPS (SAR)
11e 11e Cons 12e 12e Cons Old New Old New % Change New/Old and New/Consensus
Source: AlembicHC, Reuters
Valuation breakdown (SAR/share)
NAV breakdown (SAR/share)
Investments & landbank excluded
35
HC Valuation
6.5
30
0.6
4.1
0%
70
-10%
60
-20%
50 -30% 40
20
-40% 30
15 10
80
3.6
25
40%
0.8
Source: AlembicHC
40
-8%
0.0
Sale of Land
45
60%
4%
23.6
-50%
20
5
-48%
-51%
10
0
-59%
Lease projects
Source: AlembicHC
Sale projects
Plot sales
Investments
-60%
-55%
-70%
Raw land
2010e Equity
Land
2011e 2012e Investment properties
2013e DCF discount to NAV
Source: AlembicHC
29
GCC real estate Real estate | GCC 19 January 2011
Cash flow (SARm) 3,000 2,500 2,000 1,500 1,000 500 (500) 2010e Operating Activities
2011e
2012e Investing Activities
2013e Financing Activities
2014e
2015e Net cashflow
Source: AlembicHC
30
GCC real estate Real estate | GCC 19 January 2011
Income statement (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Sale of land Sale of properties Rental income Other income Revenue
57 162 6 225
171 171
229 213 442
250 250
294 294
585 337 922
1,575 347 1,922
2,999 357 3,356
Cost of land infrastructure Cost of properties Direct rental expenses Total cost % of sales Gross profit Margin
(34) (46) (80) 36% 145 64%
(43) (43) 25% 128 75%
(98) (64) (162) 37% 281 63%
(75) (75) 30% 175 70%
(88) (88) 30% 206 70%
(352) (101) (453) 49% 469 51%
(960) (104) (1,064) 55% 858 45%
(1,860) (107) (1,968) 59% 1,389 41%
Operating expenses Depreciation SG&A expenses (excl depreciation) Operating expenses
(18) (17) (34)
(20) (17) (36)
(29) (44) (73)
(33) (25) (58)
(37) (29) (66)
(37) (92) (129)
(36) (192) (228)
(37) (336) (372)
EBIT (incl revaluation gain) Margin
110 49%
92 54%
208 47%
117 47%
139 47%
340 37%
629 33%
1,017 30%
Net financing cost Other income (expense) Fair value gain (loss) on investments Profit before taxes Income tax
27 137 (20)
6 17 115 (20)
14 (23) 198 (18)
10 10 136 (18)
(20) 12 131 (18)
(38) 13 316 (21)
(46) 14 597 (28)
(37) 14 994 (40)
-
-
-
-
-
-
-
-
Net profit (loss) Margin Basic EPS
117 52% 1.0
95 56% 0.8
180 41% 1.5
118 47% 1.0
113 38% 0.9
295 32% 2.5
569 30% 4.7
954 28% 8.0
DPS Payout ratio
0.7 71%
0.7 87%
1.4 92%
0.2 25%
0.2 25%
0.6 25%
1.2 25%
2.0 25%
EBITDA Margin
124 55%
101 59%
223 50%
150 60%
176 60%
377 41%
666 35%
1,053 31%
Minority shareholders’ interest
Source: Company data, AlembicHC
31
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
749 13 5 91 125 2 986
644 13 6 98 125 2 887
769 12 8 127 2 919
533 12 8 399 2 955
231 12 8 1,394 2 1,648
150 12 8 2,155 2 2,328
941 12 8 1,860 2 2,824
3,600 12 8 2 3,622
Long-term investments Land Property, plant, and equipment Investment properties Investment properties WIP Noncurrent assets
477 750 6 663 309 2,205
491 785 5 641 354 2,275
476 827 10 1,043 2,356
476 827 14 1,146 2,463
476 827 18 1,212 2,533
476 827 31 1,176 2,510
476 827 58 1,141 2,502
476 827 106 1,107 2,516
Total assets
3,191
3,163
3,275
3,418
4,181
4,837
5,326
6,138
33 43 29 105
36 40 17 93
27 40 3 70
20 17 3 40
13 3 3 20
7 0 3 10
3 3
3 3
Borrowing and long-term debt Provision for employee services Noncurrent liabilities
11 11
12 12
12 12
100 12 112
800 12 812
1,200 12 1,212
1,200 12 1,212
1,200 12 1,212
Minority interest in subsidiaries
-
-
-
-
-
-
-
-
Paid up capital Statutory and other reserves Retained earnings Unrealized losses on investments Shareholders’ equity
1,200 1,790 137 (53) 3,074
1,200 1,799 98 (39) 3,058
1,200 1,799 200 (5) 3,194
1,200 1,799 273 (5) 3,266
1,200 1,799 356 (5) 3,350
1,200 1,799 623 (5) 3,616
1,200 1,799 1,118 (5) 4,112
1,200 1,799 1,930 (5) 4,924
Total liabilities and equity
3,191
3,163
3,275
3,418
4,181
4,838
5,326
6,138
Assets Cash and cash equivalents Trade and other receivables Other current assets Land held for sale Development property WIP Inventory Current assets
Liabilities Trade and other payables Advances from customers Provision for tax Current liabilities
Source: Company data, AlembicHC
32
GCC real estate Real estate | GCC 19 January 2011
Cash flow (SARm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
137 20 (43) 5 119
60 9 (4) 1 6 (6) 66
180 29 84 292
118 33 (303) 10 (10) (151)
113 37 (1,015) (20) 20 (866)
295 37 (770) (38) 38 (439)
569 36 287 (46) 46 893
954 37 1,860 (37) 37 2,851
Investment activities CAPEX (PPE) CAPEX (investment properties) Others Net cash generated from investment activities
(3) (184) (367) (554)
(15) 659 3 647
(5) (68) (73)
(4) (136) (140)
(4) (102) (107)
(14) (14)
(29) (29)
(50) (50)
Financing activities Dividends paid Bank borrowings raised Net cash generated from financing activities
(122) (122)
(122) (122)
(90) (90)
(45) 100 55
(29) 700 671
(28) 400 372
(74) (74)
(142) (142)
Net addition (deduction) in cash Cash at beginning Cash at end of fiscal year
(558) 619 61
591 61 652
129 644 773
(236) 773 536
(302) 536 235
(81) 235 154
791 154 944
2,659 944 3,603
Net profit before minorities Depreciation and amortization Change in working capital Change in provisions Net financing cost Interest income (expense) Net cash generated from operating activities
Source: Company data, AlembicHC
33
GCC real estate Real estate | GCC 19 January 2011
DCF (SARm) EBIT Tax rate EBIT∗(1−T) Depreciation and amortization Capital expenditure Cash flow from associates Changes in working capital Free cash flow: Explicit period Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
...
2027 TY
110
14 (554)
92 (20) 72 9 647
208 (18) 190 15 (73)
117 (18) 98 33 (140)
139 (18) 121 37 (107)
340 (21) 319 37 (14)
278 (60) 218 29 (10)
(43)
(4)
84
(303)
(1,015)
(770)
-
(583)
724
215
(311)
(964)
(428)
(583)
724
215
(311)
(964)
(428)
236 3.0% 3,309 3,545
Source: AlembicHC
Valuation and WACC Terminal growth rate
3.0%
WACC
NPV: FCF (SARm) Net debt (SARm) Equity (SARm) Outstanding shares (m) DCF value (SAR/share)
2,897 (433) 3,330 120 27.8
Beta Risk free rate Country risk premium Cost of equity After tax cost of debt Weights (SARm) Equity market capitalization Debt Total Tax rate WACC
0.9 4.5% 6.5% 10.4% 5.0% 4.3% 3,180 0.0 3,180 15.0% 10.4%
Source: Company data, AlembicHC
34
GCC real estate Real estate | GCC 19 January 2011
Sorouh: Neutral, TP AED1.6/share Revenue breakdown (AEDm)
EPS (AED/share) 90%
7,000
80%
6,000
0.7
250%
4%
205% 0.6
200%
60%
0.5
150%
4,000
50%
0.4
3,000
40%
70% 5,000
30%
2,000 1,000 -
112% 29%
0.3
20%
0.2
10%
0.1
-49%
2011e
2012e
2013e
Land Sale Sale of Properties Hotel Revenue
0% -50%
2014e
2015e
0.0
-100% 10e 10e Old New EPS (AED)
Contract Revenue Rental Income GPM RHS
Cons
11e 11e Cons 12e 12e Cons Old New Old New % Change New/Old and New/Consensus RHS
Source: AlembicHC
Source: AlembicHC, Reuters
Valuation breakdown (AED/share)
NAV breakdown (AED/share)
1.8 1.6 0.2 1.4
9
-66%
8
-68%
7
-70%
0.2 6
0.1
5
1.0
-72%
-71%
-74% 4
0.8 0.6
50%
2%
0% 2010e
1.2
100%
-75%
3
1.2
-76% -78%
2
0.4
-78%
1
0.2
-
0.0 Inv. Portfolio
Source: AlembicHC
Sale properties
Plot sales
-80% -79% -82%
2010e 2011e BV Market value of IP
2012e Land
2013e DCF discount to NAV RHS
Source: AlembicHC
35
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) 2,500
2,500
2,000
2,000
1,500
1,500
1,000
1,000
500
500
-
-
(500)
(500)
(1,000)
(1,000) 2010e Operating activities
2011e
2012e Investing activities
2013e
2014e Financing activities
2015e Net cash flow
Source: AlembicHC
36
GCC real estate Real estate | GCC 19 January 2011
Income statement (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Land sale Contract revenue Sale of properties Rental income Hotel revenue Revenue
3,532 127 64 3,723
1,586 202 1,177 139 3,102
368 300 230 202 7 1,106
300 2,531 389 3,220
300 4,741 605 92 5,738
300 2,094 663 98 3,156
300 671 103 1,075
300 671 109 1,080
(1,290) (118) (19) (1,427) 38%
(978) (989) (30) (1,997) 64%
(106) (166) (34) (1) (307) 28%
(1,926) (97) (2,024) 63%
(3,643) (151) (60) (3,854) 67%
(1,629) (166) (64) (1,859) 59%
(168) (67) (235) 22%
(168) (71) (238) 22%
2,297 62%
1,105 36%
799 72%
1,196 37%
1,884 33%
1,297 41%
840 78%
842 78%
(312) (340)
(50) (259)
(52) (302)
(74) (291)
(90) (226)
(63) (237)
(54) (249)
(54) (261)
Land development cost Construction cost Direct rental expenses Hotel direct costs Total costs % of sales Gross profit Margin Operating expenses Selling and marketing expenses General and administrative expenses Fair value gain on financial investments Other income Operating expenses
-
91
(18)
-
-
-
-
-
(652)
(217)
123 (248)
115 (250)
116 (200)
109 (191)
(303)
(315)
EBIT (incl revaluation gain) Margin
1,645 44%
888 29%
550 50%
947 29%
1,684 29%
1,106 35%
537 50%
526 49%
Net financing cost Income from associates Other fin. income (charges) Gain (loss) on financial assets Profit before taxes Income taxes
40 51 79 (31) 1,784 -
(42) (51) 143 11 949 -
(53) (7) 3 493 -
(34) 913 -
(35) 52 1,700 -
(38) 1,067 -
28 566 -
33 559 -
Minority shareholders' interest Net profit (loss) Margin Basic EPS
(74) 1,858 50% 0.7
12 937 30% 0.4
(9) 502 45% 0.2
913 28% 0.3
1,700 30% 0.6
1,067 34% 0.4
566 53% 0.2
559 52% 0.2
0.1 24%
0.1 15%
0%
0%
0.1 17%
0.1 8%
0.1 18%
0.0 12%
1,645 44%
797 26%
568 51%
947 29%
1,684 29%
1,106 35%
537 50%
526 49%
DPS Payout ratio EBITDA excl reval gains Margin Source: Company data, AlembicHC
37
GCC real estate Real estate | GCC 19 January 2011
Balance sheet (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Assets Cash and cash equivalents Land held for sale Trade and other receivables Development properties Inventory Short-term investment Current assets
6,842 257 4,331 2,475 30 29 13,964
2,763 639 3,983 3,778 16 20 11,200
2,007 625 3,592 4,502 38 2 10,766
2,640 625 2,670 4,064 38 2 10,039
2,150 625 2,115 1,629 38 2 6,559
4,094 625 1,854 (0) 38 2 6,613
4,149 625 1,854 (0) 38 2 6,668
4,323 625 1,854 (0) 38 2 6,842
608
301
198 805
Investments in associates and long-term investments Other noncurrent assets Noncurrent assets Intangible asset Hotels Property, plant, and equipment Investment properties Investment properties under development Permanent assets
293
293
293
293
293
174 475
293 162 455
162 455
162 455
162 455
162 455
162 455
652 88 857
613 172 983
610 57 182 983
610 172 212 3,325
610 172 242 3,993
610 172 272 4,044
610 172 302 4,044
610 172 332 4,044
574
257
2,170
(873)
(1,514)
(1,559)
(1,559)
(1,559)
2,026
975 2,809
3,446
3,504
3,539
3,569
3,599
16,939
13,701
14,029
13,940
10,518
10,607
10,692
10,896
Liabilities Trade and other payables Borrowings – short term Notes payable – short term Nonconvertible Sukuk Current liabilities
6,783 105 275 1,736 8,899
5,298 19 140 971 6,427
5,946 22 40 6,008
5,234 22 40 5,296
552 22 40 614
22 40 62
22 40 62
22 40 62
Borrowing and long-term debt Nonconvertible Sukuk Notes payable – long term Provision for employee services Noncurrent liabilities
175 1,490 20 1,685
113 970 37 26 1,146
1,642 36 28 1,706
1,642 36 28 1,706
1,642 36 28 1,706
1,642 36 28 1,706
1,642 36 28 1,706
1,642 36 28 1,706
9
98
89
89
89
89
89
89
2,500 364 3,086 5,958
2,500 424 3,103 6,125
2,625 428 3,173 6,315
2,625 428 3,796 6,938
2,625 428 5,056 8,198
2,625 428 5,697 8,839
2,625 428 5,782 8,924
2,625 428 5,986 9,128
16,543
13,698
14,029
13,940
10,518
10,607
10,692
10,896
Total assets
Minority interest in subsidiaries Paid up capital Statutory and other reserves Retained earnings Shareholders’ equity Total liabilities and equity Source: Company data, AlembicHC
38
GCC real estate Real estate | GCC 19 January 2011
Cash flow (AEDm) Year to December
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Net profit before minorities Depreciation and amortization Change in working capital Interest income (expense) Interest received Interest paid Fair value gain on investment property Impairment of goodwill Provision for employee end of service benefits Others (net) Net cash generated from operating activities
1,784 (40) 121 (80) 1,784
495 35 (3,215) (81) 123 (83) 30 6 1,104 (1,586)
44 552 34 33 (67) 494
623 647 34 99 (133) 1,271
1,415 (1,692) 35 98 (133) (277)
782 1,339 38 95 (133) 2,121
281 (28) 161 (133) 281
274 (33) 166 (133) 274
Investments activities CAPEX (excl hotel properties) Additions to hotel properties Additions to investment properties Associates Subsidiaries Additions to development WIP Acquisition (sale) of financial assets Movement in >3 months bank deposits Others Net cash generated from investment activities
(6) (122) 0 (16) (571) (716)
(200) (198) (3) (66) 118 164 167 (17)
(28) (57) (719) 22 1,015 250
(30) (114) (493) (637)
(30) (28) (58)
(30) (6) (36)
(30) (30)
(30) (30)
Financing activities Dividends paid Share issue Net bank borrowings raised Net share issuance fee Borrowings repaid Others Net cash generated from financing activities
(308) 63 (245)
(330) 1 (1,814) (166) (2,309)
(429) (50) (485)
-
(156) (156)
(142) (142)
(196) (196)
(70) (70)
Net addition (deduction) in cash Cash at beginning of fiscal year Net forex difference/others Cash at end of fiscal year
823 1,402 2,226
(3,912) 5,517 2,763
259 2,763 3,022
633 3,022 3,656
(490) 3,656 3,165
1,944 3,165 5,109
55 5,109 5,164
174 5,164 5,338
Source: Company data, AlembicHC
39
GCC real estate Real estate | GCC 19 January 2011
DCF (AEDm) EBIT Tax rate EBIT∗(1−T) Capital expenditure Revaluation of investment properties Cash flow for minorities Changes in working capital Net change in debt (other than Sukuk) Free cash flow: Explicit period Terminal growth rate FCF: Terminal FCF: Total
2008a
2009a
2010e
2011e
2012e
2013e
1,645 1,645 (128) 74 1,590
888 888 (397) (91) (12) (3,215) 1,104 (1,723)
550 550 (804) 18 9 552 324
947 947 (637) 647 957
1,684 1,684 (58) (1,692) (66)
1,106 1,106 (36) 1,339 2,409
1,590
(1,723)
324
957
(66)
2,409
...
2027 TY 59 59 (30) 29 3.0% 408 437
Source: AlembicHC
Valuation and WACC Terminal growth rate
3.0%
WACC
NPV: FCF (AEDm) Net debt (AEDm) Equity (AEDm) Outstanding shares (m) DCF value (AED/share)
3,337 (976) 4,313 2,625 1.6
Beta Risk free rate Country risk premium Cost of equity Cost of debt After tax cost of debt Weights (AEDm) Equity market capitalization Debt Total Tax rate WACC
1.5 4.0% 5.5% 12.0% 6.5% 6.5% 3,990 1,664 5,654 0% 10.4%
Source: Company data, AlembicHC
40
GCC real estate Real estate | GCC 19 January 2011
Rating scale Recommendation Overweight Neutral Underweight
Potential return Greater than 20% 0% to 20% Less than 0%
Disclaimer This document was issued by HC Brokerage, which is an affiliate of HC Securities and Investment (henceforth referred to as “HC”) – a fully fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services – and Alembic Global Advisors, which is registered with US-based broker dealer Pulse Trading Inc. (collectively the “Firms”). The information used to produce this document is based on sources that the Firms believe to be reliable and accurate. This information has not been independently verified and may be condensed or incomplete. The Firms do not make any guarantee, representation, or warranty and accept no responsibility or liability for the accuracy and completeness of such information. Expression of opinion contained herein is based on certain assumptions and with the use of specific financial techniques that reflect the personal opinion of the authors of the commentary and is subject to change without notice. The information in these materials reflects the Firms equity rating on a particular stock. The Firms, their affiliates, and/or their employees may publish or otherwise express other viewpoints or trading strategies that may conflict with the views included in this report. Please be aware that the Firms and/or their affiliates and the investment funds and managed accounts they manage may take positions contrary to the included equity rating. This material is for informational purposes only and is not an offer to sell or the solicitation of an offer to buy. Ratings and general guidance are not personal recommendations for any particular investor or client and do not take into account the financial, investment, or other objectives or needs of, and may not be suitable for any particular investor or client. Investors and clients should consider this only a single factor in making their investment decision while taking into account the current market environment. Foreign currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of, or income derived from, the investment. Investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk. Neither HC nor any officer or employee of HC accepts liability for any direct, indirect, or consequential damages or losses arising from any use of this report or its contents. Disclosures We, Majed Azzam, Ankur Khetawat, Nermeen Abdel Gawad, Sapna Sharma, certify that the views expressed in this document accurately reflect our personal views about the subject securities and companies. We also certify that we do not hold a beneficial interest in the securities traded. The Firms are not a market maker in the securities of the subject company. The Firms, their affiliates, and/or directors and employees may own or have positions in and effect transactions of companies mentioned in this document. The firms and their affiliates may also seek to perform or have performed investment-banking services for companies mentioned in this memorandum. Copyright No part or excerpt of its content may be redistributed, reproduced, or conveyed in any form, written or oral, to any third party without prior written consent of the Firms. The information within this research report must not be disclosed to any other person if and until the Firms have made their information publicly available. Issuer of report: HC Brokerage Building F15-B224, Smart Village KM28 Cairo-Alexandria Desert Road 6 October 12577, Egypt Telephone: +202 3535 7666 Fax: +202 3535 7665 Website: www.hc-si.com
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41
GCC real estate Real estate | GCC 19 January 2011
Research
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Karim Khadr Sarah Shabayek
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Head of Research (US)/Chemicals
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+1 212 359 8291
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Chemicals
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Financials Financials Financials
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Majed Azzam Ankur Khetawat Nermeen Abdel Gawad Sapna Sharma
Real Estate & Construction Real Estate & Construction Real Estate & Construction Real Estate & Construction
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Diversified Diversified Diversified
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Sales and Trading – Cairo, Egypt Shawkat El-Maraghy Mohamed Helmy Aboubakr Shaaban Hossam Wahid Hassan Kenawi Nihal Hany Ahmed Nabil
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Sales
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45
