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Fourth-quarter profit at Abu Dhabi’s Aldar gets boost from property portfolio

A jump in the value of Aldar’s investment properties boosted its fourth-quarter results on Monday, as the company continues to position itself as Abu Dhabi’s biggest landlord.

Fourth-quarter profit rose 5.6 per cent in 2015 compared with the year-earlier period, Aldar Properties stated on Monday.

The company reported that profit at­tri­butable to its shareholders increased to Dh735 million from Dh696m during the same period a year earlier, helped by a valuation gain of Dh568m on its vast rental portfolio, but also hampered by writedowns of Dh257m on some of its land and property costs.

Revenue for the three months to the end of December last year stood at Dh1.13 billion, down 8.8 per cent from Dh1.27bn during the same period a year ago as the company turned to its large rental portfolio, which includes Abu Dhabi’s largest shopping centre, Yas Mall, for income rather than riskier housing de­vel­opments.

Gross profit from these recurring revenue assets, which also include 4,800 rented apartments, hotels, schools and offices increased by 35 per cent to Dh447m.

In a filing to the Abu Dhabi bourse on Monday, Aldar said that net profit for the year rose 13.4 per cent to Dh2.53bn.

“Aldar’s fourth quarter bottom line beat our estimate, however, with earnings lifted by a non-cash gain,” said Harshjit Oza, an investment analyst at Naeem Brokerage in Cairo. “The balance sheet is firm with Aldar holding Dh313m net cash.”

Revenue for the year, on the other hand, was down by almost a third, tumbling to Dh4.5bn from Dh6.5bn a year earlier. Aldar said that the fall was a direct result of the change in the type of revenues it was receiving, with a far greater proportion coming from property handovers in 2014 and more income coming from leases in 2015.

“Our focus on stabilising recurring revenue assets has significantly improved the quality of our earnings and provided clarity on long term cash flow,” said the Aldar chief executive Mohamed Al Mubarak. “Our business remains underpinned by a healthy balance sheet, stable operating environment and strong fundamentals.”

Aldar, which is 29.7 per cent owned by Abu Dhabi government fund Mubadala, also announced a new dividend policy further linking shareholder remuneration with its leasing portfolio. Aldar’s board recommended a cash dividend to shareholders of 10 fils per share, up from 9 fils in 2014. The company said that from this year onwards it would recommend dividends of between 65 and 80 per cent of the cash it makes from its investment portfolio.

Analysts said that, despite a slowdown in the Abu Dhabi property market, as the capital’s only large quoted developer and major landlord, Aldar was in a good position to ride out any market softening.

“At first glance the results look very healthy, but when you start to strip away the various valuation gains and provisions the bottom-line numbers are not great,” said Sanyalak Manibhandu, head of research at NBAD Securities. “However, we don’t think this is a long-term problem for Aldar and it is mostly the result of moving to a model of a company which is more reliant on recurring revenue streams than property development.”

Aldar would raise capital expenditure to about Dh2.5bn this year from about Dh1.1bn in 2015, said its chief financial officer Greg Fewer, as the company spends on six projects launched since 2014.

Most of these projects had strong order books, including its affordable housing scheme on Reem Island, which was 90 per cent sold, said chief development officer Talal Al Dhiyebi.

“We’re watching how much we’re releasing into the market,” Mr Al Dhiyebi said on a conference call. “In the last two to three months, we’ve seen a slight slowdown on demand, but we are selling at a smaller rate.”

Aldar’s shares closed at Dh2.36 on Monday, a touch lower.

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