Wednesday, May 9, 2018

EQUITY RESEARCH  THE NEWS CRUNCHER Research and Advisory

ALDAR PROPERTIES (ALDAR): Slew of Driving Forces Coming Into Play

Key Price and Enterprise Multiples However, S&P stated that the negative outlook is due to their Shares Outstanding (mn) 7,862.63 concerns that monetizing the deal and developing the new land Forward PE Ratio (x) 6.22 plot will prompt Aldar to increase its debt level, and they may Price to Book Ratio (x) 0.71 take more than two years to start generating income. Dividend Yield (%) 2017 5.80 In the words of the rating agency, unless Aldar managed to EV/EBITDA (x) 2018 7.21 grow its EBITDA to compensate for the higher level of debt, EV/Sales (x) 2018 2.73 S&P expects Aldar's credit ratios will weaken, such that debt to Market data courtesy: Bloomberg EBITDA may exceed 2x and funds from operations (FFO) to debt may dip below 45% over the next 12-18 months which is the Aldar has been recently under the lens of many expected timeframe to handover the new developments or to investors with a punch of news and updates that start generate income for the company. Currently, these ratios drive the prospects, performance and price of the were 1.1x and 84.3%, respectively, as 31 December 2017. share. In the following passages, we present the Aldar is cognizant of these concerns and has formulated corporate strategies to address these concerns. The Company most high-profile driving forces coming into play. has put forward a new corporate structure that would see the Development and Asset Management businesses operate Record Acquisition of Prime Assets Worth AED3.7bn independently. Consequently, this might encourage a more benign outlook on Aldar, going forward. Earlier this week, Aldar announced it has acquired a portfolio of assets from Tourism Development & Investment Company (TDIC) for AED3.7bn in what is considered to be one of the Potential Inflows as MSCI EM UAE Weight Adjusts largest real estate acquisitions in the history of the UAE. The Aldar has increased its foreign ownership limit from 40% to acquired assets consist of: 49%. The MSCI EM Semi-Annual Index Review, which will take  14 operating assets worth AED1.7bn of retail units, residential place on 14 May 2018, could likely see an upgrade to Aldar’s units, hotel rooms as well as adjacent assets such as district weight in the index, from its last published weight of ca. 5.5%. cooling facilities, a school and accommodation facilities. The increase in the ownership limit to 49% will increase the FIF Those acquired operating assets will drive the near-term NOI (Foreign Inclusion Factors) as well as the FO (Foreign Room). growth with their initial yield of ca. 7.5% (with potential With these adjustments, the Company’s Free Float Foreign upside) by generating AED120mn annualized NOI. Market Cap will adjust northwards, accordingly. The potential for an upside in index weighting could mean for  A portfolio of projects under development which includes 461 Aldar, some AED100mn to AED120mn passive inflows on the last beachfront apartments in Mamsha project and 83 villas in Jawaher project. Both are located on Al and day of May 2018. have a GDV of AED2.5bn. These are seen to drive growth in development revenues and profits. Aldar’s Other Catalysts

 1.1mn sqm infrastructure enabled GFA in Saadiyat Island  Aldar updated its dividend policy to include 20-40% which will be complimentary to the Company’s existing 6mn distribution from development businesses’ realized profits sqm approved GFA on the core destinations of: Yas Island, Al upon handover. Note that Aldar is now moving into Reem Island and Al Raha Beach. handover mode—with three handovers slated in 2018.

Aldar’s entry into Al Saadiyat Island shall enhance the  Aldar is undergoing legal and corporate formalization to government’s commitment to make Al Saadiyat Island one of pave the way for a potential spin-off. the most sought after destinations in the world. As well as  Aldar’s JV with Emaar will effectively extend its benefiting Aldar to reinforce its leadership in prime geographic reach outside the Capital. destinations.

This major buy will be financed through AED2.2bn cash and AED1.5bn out of the newly arranged AED5bn committed An Invitation to our Clients undrawn credit facilities obtained this month. We are very pleased to host Aldar’s Management, led by Group CEO, Thalal Al-Dhiyabi, CFO Greg Fewer and the Investor Relations team for a direct-to-client engagement. S&P Keeps Investment Grade Rating, Revises Outlook to Negative The Aldar Management Team shall be presenting the latest developments as well as the 1Q18 Performance on 16 May Right after the acquisition, S&P has revised its outlook for the 2018, from 11AM to 12NN, at the Al Ramz Capital Head company to negative from stable while affirming their “BBB/A- Quarters, Sky Tower, Reem Island, . 2” rating on Aldar Properties. S&P emphasized the high quality of the acquired assets, Kindly contact your Al Ramz broker to book for your slots. Aldar’s ability to benefit from a high share of recurring income Alternatively, you may get in touch with us—contact details are in total revenues, the prudent funding policy and being backed in the next page. by the government. 

Research and Advisory

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