Emaar Q1 profit surges on mall and hotel business

Visitors check out the underwater aquarium at The Dubai Mall.

Emaar Properties on Tuesday said it posted a net profit of Dh1.5 billion for the first quarter of 2018, an increase of 8.5 per cent over the same period last year, on the back of strong performance by its mall and hospitality units.

Its revenue for the first 3 months of 2018 totalled Dh5.59 billion, 37 per cent higher than the Q1 2017 revenue of Dh4 billion, thanks to significant progress achieved on projects under construction and growth in the malls and hospitality businesses.

Emaar Development, the property development business, recorded strong property sales of Dh3.9 billion during Q1 2018. It now has a project backlog of Dh41 billion.

The master developer's shopping malls, hospitality and leisure and entertainment businesses generated recurring revenue of Dh1.83 billion during Q1 2018, 15 per cent higher than the Q1 2017 revenue of Dh1.59 billion.

"Our strategy to build long-term value for our shareholders is to focus on creating future cities that are relevant to our new generation, and to continue to drive the success of our hospitality, malls, leisure and entertainment businesses. We are a customer-first company, and we focus on rapid construction and project delivery," said Mohamed Alabbar, chairman, Emaar Properties.

Vijay Valecha, chief market analyst, Century Financial Brokers, said on the face of it, Emaar Properties' 37 per cent revenue growth to Dh5.59 billion looks good but profit growth of 20 per cent, prior to considering the IPO of Emaar Development, suggests that net margins are lagging revenue growth.

"This could be due to discounting or promotional schemes offered to lure customers and might be the reason for today's dip. However, from a valuation perspective, shares are cheap and they are trading below market multiples. With revenue momentum strong and overall economic environment of the Middle East improving due to high oil prices, average unit realisations could improve in the coming quarters," Valecha added.

Emaar shares plunged 1.7 per cent to Dh5.69 on Tuesday, dragging the Dubai Financial Market index lower.

Emaar Properties distributed cash dividend of Dh4 billion from the proceeds of the successful IPO of Emaar Development in 2 tranches to the company's shareholders.

Emaar Malls recorded revenue of Dh1.04 billion in Q1 2018, a growth of 24 per cent over Q1 2017 revenue of Dh836 million.

The developer's hospitality, commercial leasing and entertainment businesses reported revenues of Dh795 million during Q1 2018, 5 per cent higher than the Q1 2017 revenue of Dh756 million. Its hospitality brands - Address Hotels + Resorts, Vida Hotels and Resorts and Rove Hotels (joint venture with Meraas) - recorded an average occupancy of 90 per cent, higher than Dubai's industry average in Q1 2018.

Emaar Hospitality Group also reached 50 hotel projects in its portfolio currently, including 35 upcoming projects in the UAE and international markets, as well as 15 hotels and serviced residences that are operational in Dubai.

- waheedabbas@khaleejtimes.com