Emaar land-for-equity swap could be rejected

DUBAI — Emaar, the largest publicly listed real estate developer in the Arab world, has said that the land-for-equity swap with Dubai Holding "would be rejected if it was not value accretive to Emaar shareholders," according to a research note released yesterday by EFG-Hermes, Egypt's largest investment bank.

By Lucia Dore (Assistant Editor, Business)

Published: Thu 19 Jul 2007, 8:52 AM

Last updated: Sat 4 Apr 2015, 10:21 PM

Emaar's chief financial officer, Amit Jain, made the comments during a conference call with analysts following the release of the company's second-quarter earnings on July 16.

On March 18, Emaar agreed to swap 2.364 billion of new shares for land with Dubai Holding but no details were released about the value of the land or its location. These latest comments "could help allay some of the fears investors have held since the announcement on March 18", the research note states. "However, we do not expect the overhang to be removed entirely until full details are released and a final negotiation reached," it states. Khaleej Times has also learnt that the deal may not be closed until later in the year.

Emaar's year-on-year growth in net income to Dh1.6 billion, failed to meet analysts expectations of between Dh1.8 billion and Dh2 billion. "The weakness is caused mainly by a lower level of land sales, which command gross margins in excess of 85 per cent," according to the note, which adds: "This is part of a new strategy employed by management to alter the sales mix away from land sales and towards development properties. While in the short-term, this translates into lower margins, development properties provide progressively higher profitability over the medium-term."

Emaar has also said that John Laing, the largest privately held home builder in the US, "so far remains unaffected by the weakness in the US sub-prime market and the market is expected to return to growth in 1H2008," according to EFG-Hermes. And in India, the investment bank states that "no dates have been finalised for the IPO of Emaar-MGF but management indicated that a listing as late as 1Q2008 was possible."

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