Emaar Properties, the largest developer in the region, has reported earnings that are worse than expected after booking Dh417 million (US$113.5m) in provisions for the fourth quarter of last year.
Fourth-quarter profits fell by 62 per cent to Dh274m compared with the same period in 2009 after two partly owned companies wrote down the value of their assets and costs rose.
The company more than doubled provisions compared with the same period in 2009, after Amlak Finance and Dubai Bank, both affiliated companies, wrote down the value of their assets, an Emaar spokesman said.
"The provisions primarily relate to provisions made by both these entities in respect of their assets," the spokesman said.
Amlak, which was once the largest lender to homebuyers in the UAE but stopped issuing loans two years ago, had until now refused to revalue almost Dh4 billion of property investments and advance payments on unfinished developments. Emaar owns a 66 per cent stake in the company.
Emaar was also dealing with the rising cost of doing business, an income statement published yesterday shows. While its revenues increased by 28 per cent to Dh3.8bn in the final three months of last year from Dh2.98bn in the same period in 2009, its cost of sales rose by 69 per cent to Dh2.6bn.
Chet Riley, an analyst at Nomura Securities, said Emaar was probably facing a combination of holding costs for undelivered units in its projects and increased operating costs. Even more writedowns were likely to come in the first part of this year.
"We look at this as impair in 2010 and repair in 2011," Mr Riley said. "Especially if you consider that most of their revenue came out of Dubai, this is a fairly good result."
Emaar has emerged as one of the healthiest property developers in the UAE because of its strong recurring revenues from retail, hotels and malls. About a quarter of its revenues last year were from these three categories, the company said.
"In a year that was marked by cautious optimism, timely delivery of property and consolidation of core businesses, Emaar Properties took bold initiatives that have a far-reaching potential in driving sustained returns for our stakeholders," said Mohamed Alabbar, the chairman of Emaar.
It reported net profits of Dh2.4bn for last year, compared with Dh327m in 2009 when it wrote off huge investments in a US property company, John Laing Homes.
Emaar has also been raising new finance in recent months, with the issuance of a convertible bond worth $500m in September and a $500m sukuk last month.
"Both offerings were the first by a corporate entity out of the region post the global financial crisis and received overwhelming response from the investors," it said.
The new funds have been used in large part to convert short-term debt to debt with a longer maturity.
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The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
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UAE squad
Men's draw: Victor Scvortov and Khalifa Al Hosani, (both 73 kilograms), Sergiu Toma and Mihail Marchitan (90kg), Ivan Remarenco (100kg), Ahmed Al Naqbi (60kg), Musabah Al Shamsi and Ahmed Al Hosani (66kg)
Women’s draw: Maitha Al Neyadi (57kg)
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Where can I submit a sample?
Volunteers can now submit DNA samples at a number of centres across Abu Dhabi. The programme is open to all ages.
Collection centres in Abu Dhabi include:
- Abu Dhabi National Exhibition Centre (ADNEC)
- Biogenix Labs in Masdar City
- Al Towayya in Al Ain
- NMC Royal Hospital in Khalifa City
- Bareen International Hospital
- NMC Specialty Hospital, Al Ain
- NMC Royal Medical Centre - Abu Dhabi
- NMC Royal Women’s Hospital.
The Way It Was: My Life with Frank Sinatra by Eliot Weisman and Jennifer Valoppi
Hachette Books
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