Moody's upgrades Emaar ratings

Ratings agency Moody's has upgraded Dubai-based property developer Emaar's ratings to investment grade in recognition of its strong credit metrics and business resilience.
The ratings agency said the upgrade of Emaar's rating to Baa3 reflects its view that the company "has built a solid business foundation and maintained a conservative financial profile that would allow it to defend its investment grade rating should market conditions remain challenging for an extended period of time."
Concurrently, Moody's has upgraded the rating of the company's senior unsecured $2 billion trust certificate programme established under Emaar Sukuk Limited to (P)Baa3 from (P)Ba1 and upgraded the ratings on Emaar Sukuk Limited's two $500 million senior unsecured sukuk issued under the programme to Baa3 from Ba1. The outlook on all ratings is stable.

"The upgrade of Emaar's ratings to investment grade is in recognition of its strong credit metrics and business resilience at a time when the macroeconomic environment remains weak," said Rehan Akbar, a Moody's Assistant Vice-President - Analyst. "We believe that Emaar's market leadership pos
ition and balance sheet strength - in combination with stable recurring revenues and a sizeable property sales backlog - will support the company's credit profile during the currently challenging market conditions and as it enters a phase of elevated capex ahead of the Dubai World Expo 2020."
Real estate prices in Dubai have fallen about 13 per cent since the peak in mid-2014 as a result of regional geopolitical events, low-oil prices and a strengthening dollar, Moody's said in a report.
Moody's said the budget cuts by the GCC governments introduced in 2016 would further weigh on the pace of real estate market stabilisation and assumes in its base case that investor sentiment would modestly recover by early next year should oil prices remain well above the low $30s/bbl seen in the first quarter of 2016.
"Nevertheless, Emaar has displayed resilience even in currently challenging conditions, with Dh4.2 billion in Dubai property sales in first quarter 2016 relative to a total of Dh10.2 billion recorded in 2015 and no significant customer cash collection delays," said the report.
Moody's also expects Emaar's malls and hotel assets on average to generate stable cash flows in the current environment, with organic growth in the former offsetting the pressure seen in the hospitality business. - issacjohn@khaleejtimes.com