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HSBC Cuts Target Price of Emaar Properties, Keeps Overweight Rating

DUBAI - HSBC Holdings Plc cut the target price of Emaar Properties to Dh7.20 from Dh8.50, but maintained its “overweight” rating on the Middle East’s biggest property developer.

HSBC said the sheer scale of development at Emaar will stretch management and operational capacity, raising the risk of delays and even project cancellation.

“While the outlook is much brighter than it was six months ago when Dubai financing was at the centre of investors’ minds and real estate prices were falling sharply, the outlook continues to face some uncertainty.” It said there is still a risk ofoversupply in Dubai which could have dire implications on future sales and force developers like Emaar to abandon projects.

The bank said it was comfortable with Emaar’s approach to consolidate its projects, and its recent adoption of the completed contract revenue recognition method for its accounts.

“We feel the agenda is now down to ensuring that liquidity is in place to capitalise on opportunities which may be presented in the next few years.” HSBC said it expects Emaar’s cash flow in 2009 to be sustained by existing operations, boosted by rental income with the delieveries of the Marina Hotel, Dubai Mall, Burj Dubai Armani Hotel, and an officer tower at Dubai Marina, as well as increasing capacity of Dubai Mall and Marina Mall.

“Our channel checks suggest that occupancy at properties such as Emaar’s appear to remain surprisingly resilient at 80 per cent for retail, 75 per cent for four-star hotels, and 65 per cent for five-star hotels.”

Emaar shares, ended
 2 per cent higher at Dh3.51
 on Monday.


rocel@khaleejtimes.com