S&P Raises Dubai’s Largest Developer Emaar's Outlook

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Ratings agency S&P Global has upped the outlook for Emaar Properties and its malls subsidiary from negative to stable, thanks to stronger demand lifting property prices in some areas of Dubai for the first time since 2015. It is expected that the developer’s sales will surpass 2019 figures this year. “We expect a rebound in the company's earnings and credit metrics in 2021, with EBITDA likely to exceed Dh8 billion. We, therefore, revised our outlook on Emaar Properties to stable from negative and affirmed our 'BB+' long-term issuer credit rating on the company,” S&P analysts said. Emaar Properties, Dubai’s largest developer, has the lion's share of the growth thanks to its leading market position. Earlier this month, Emaar recorded massive property sales in the emirate surging by 250 per cent to Dh10.5 billion in the first five months of 2021. This is compared to the same period last year compared to Dh6.3 billion reported for all of 2020. Full-year sales will likely outpace the Dh14.8 billion recorded in 2019. The Dubai Financial Market-listed developer’s shares rose 1.18 per cent to Dh4.28 per share after the announcement. “The Dubai real estate market is gaining momentum as the emirate emerges from a Covid-19-induced slowdown. After a tough 2020, data for first-quarter 2021 suggests that the residential real estate market in Dubai has bottomed out and now offers attractive opportunities for developers, especially for premium properties,” S&P said. "While sale prices continued to decline at a low-single-digit rate for the residential sector overall in first-quarter 2021, many higher-end properties increased in price." “Given that Emaar Properties accounts for more than half of primary sales in Dubai and focuses specifically on premium properties, we think that it will materially benefit from the observed uptick in demand and higher prices," it was added. "We expect that the company will deliver about 6,000 units in 2021 after delivering 4,800 units in 2020. We also think that handovers will increase to close to 10,000 in 2022, based on the project completion pipeline,” said the ratings agency. S&P forecast more than 30 per cent revenue growth in 2021 on supportive market trends for real estate and a gradual recovery in other business segments. “Revenue from the retail segment will gradually recover because we understand that Emaar Properties is no longer providing rent relief measures to tenants, and footfall and spending are recovering,” said S&P. "We foresee a minimal contribution from the new Dubai Hills Mall, set to open in fourth-quarter 2021, with a gradual ramp-up in 2022 and assumed 70-75 per cent occupancy. Under our revised base-case scenario, we think that revenue in 2021 will exceed Dh26 billion." It also revised its outlook on Emaar Malls, a core Emaar Properties subsidiary, from negative to stable and affirmed 'BB+' issuer credit rating.