Q1 2015 Real Estate

Financial Analysis
By Sheharyar Khan, CFA,
ACCA

IS Items
3,500,000

3,000,000

2,500,000

2,000,000
Revenue
1,500,000

Gross Profit
Net Profit

1,000,000

500,000

(500,000)

 In terms of Revenue, Emaar has highest revenue of 3 million.

They have adopted revenue recognition policy as per IFRS 15 due
to which they are able to recognize revenue on satisfaction of
performance obligation other than on completion of project. As
per the old policy their revenue would have been 2.7 m. Emaar
has a diversified revenue base and 49.45% revenue comes from
real estate, 34.12% from leasing and 16.43% from hospitality.
Leasing activities generate 63.21% GP margin.
Damac has revenue of 1.78 m and 61.66% revenue comes from
sale of land and 38.34% comes from constructed units.
Aldar comes on 3rd in terms of revenue and has diversified
revenue base. 42% comes from property development, 32.73%
from investment properties, 7.39% from construction, 11.33%
from hotels, and remaining comes from schools, leisure,
operation village and construction.

BS ITEMS
80,000,000

70,000,000

60,000,000

50,000,000

40,000,000

Development properties
Total Assets
Share Capital

30,000,000

20,000,000

10,000,000

Total Equity
Total Liabilities

 Emaar has highest total assets,

followed by Aldar, Emaar malls and
Damac.
In terms of development assets.
Emaar has highest number of
projects to be delivered in upcoming
time and damac has projects worth
of 8.5 bn to be delivered.
UPP is the only one who has
announced Bonus dividends for the

Margin Ratios
100.00%

80.00%

60.00%

Gross Profit Margin

40.00%

Net Profit Margin

Return on Equity

20.00%

0.00%

-20.00%

 In terms of GM Emaar Malls has highest margin as

it is a leasing business. In terms of build to sale
model, Damac has highest GM of 63.72%.
Aldar has highest gross margin but it is mainly
coming from gain from gain on sale of investment
properties and hence is not sustainable income.
In terms of sustainable margins, Emaar malls has
highest NI margin. Damac and Aldar are
generating Net Margins of 44%.
In terms of ROE, Damac is offering the highest
ROE.

Efficiency Ratio
600000.00%

500000.00%

400000.00%

300000.00%

Asset Turnover
recievable days
development days
payable days

200000.00%

100000.00%

0.00%

-100000.00%

cash conversion cycle

 Damac is most efficient in terms of utilizing

its assets, followed by Emaar malls and Aldar.
Aldar is most efficient in terms of converting
its development properties to cash followed
by UPP.
In terms of managing working capital, emaar
malls is most efficient followed by Damac and
Aldar.
Emaar has very high cash converison cycle
due to the size of its development assets.

Debt Ratios
3000.00%

2500.00%

2000.00%

1500.00%
Debt to asset
1000.00%

Debt to Equity
Interest Coverage

500.00%

0.00%

-500.00%

-1000.00%

 In terms of gearing, Dubai Parks is

having the minimum debt level
compared to equity, and Aldar &
Damac are hughly geared company.
However Damac has high operating
income sufficient to cover its short
term interest payments.

Investor Ratios
40.00

35.00

30.00

25.00

20.00

Share Price
EPS
Expected EPS

15.00

PE
BVPS

10.00

5.00

PB

 In terms of PE ratio, Damac has been

underpriced and if their EPS remains
same for the upcoming quarters,
Damac shows significant margin for
price appreciation.
Emaar malls, UPP and RAK properties
are overpriced as of expected PE
ratios. In terms of PB Emaar
properties can show price
appreciation.

Investor Ratios
2
1.8
1.6
1.4
1.2
1

Bonus Dividend

0.8

Cash Dividend

0.6

Dividend Payout

0.4
0.2
0

Dividend Yield

 In terms of Dividend yield RAK properties has been

consistently paying 0.05 Dividend, however their
EPS is low which is resulting in paying dividend out
of retained earnings rather than EPS.
UPP has also paid dividend last year, however their
Dividend payout is very high and dividend payment
doesnt seem to be sustainable.
If Damac offers the same dividend payout as of
Emaar which can be expected this year, they will be
paying 0.17 as dividend which can generate yield of
5.55% and makes it a very good stock to buy at
price of 3-3.10.