From Russia With Love

dubai-police-museumOn Thursday, Dubai International started 80 days’ runway maintenance that will see services curtailed, cancelled or moved to Dubai World Central. (Emirates have announced that it will cut 5.4k flights over this period).  Consequently, it is unlikely that passenger traffic will reach the March numbers of 6.3 million – up 7.5% on the previous year. Q1 traffic – at 18.4 million – shows an 11.4% increase on the same quarter of 2013. Despite sluggish global trade, cargo traffic was up 6.7% in March, to 228k tonnes, and 5.0% in Q1 to 614k tonnes.

DP World announced a 9.2% increase in consolidated container traffic to 7.76 million TEUs (20 ft equivalent units). The world’s third biggest port operator handled a further 7.54 million TEUs in other locations in which they operate but not actually own.

As the emirate is steeped in maritime industry, it is perhaps not surprising to learn that this ever-expanding sector now contributes 4.6%, or almost US$ 4 billion, to Dubai’s GDP. As Dubai Maritime City matures, this influence will surely play an important role in Dubai’s economic progress.

Emirates NBD recorded a 25% surge in Q1 profits to US$ 284 million, despite having to provide US$ 346 million for bad loans. The impressive results from Dubai’s biggest lender, 55.6% owned by the Investment Corporation of Dubai, is yet another indicator that the local economy is progressing well. Loans and advances rose by 9%, to US$ 65.3 billion, whilst deposits were up 13% to US$ 68.5 billion.

Dubai’s third biggest bank, Mashreq, recorded a 35% rise in Q1 net profit to US$ 157 million. Significantly, its loans and advances rose by 5.8% to US$ 14.5 billion whilst its total assets stood at US$ 25.6 billion.

Deyaar is another developer benefiting from the local property boom as it announces a 268% hike in Q1 profits to US$ 14.2 million, on a 55% increase in revenue. The Dubai-based company had total assets of US$ 1.75 billion at 31 March 2014.

Dubai Aerospace Enterprises, whose shareholders include Investment Corporation of Dubai, Dubai International Capital and Emaar Properties, recorded a fourteen-fold increase in annual profit to US$ 112 million, as revenue rose 8.3% to US$ 2.11 billion. The company has two divisions, Capital – involved in aircraft leasing – and Engineering, dealing with repair and maintenance.

Etisalat has taken up a US$ 4.84 billion loan to pay for its purchase of the 53% shareholding in Maroc Telecom from Vivendi. This comes the same time as it announced an 11% hike in Q1 net profit to US$ 545 million on revenue of US$ 2.7 billion.

UK company, ISG, has won a US$ 35 million contract to refurbish the Kempinski Mall of The Emirates hotel. The fit-out company will be responsible for interior work, including all 393 rooms, as well the external façade of the hotel.

Plans are well advanced on the composition of the huge 438 hectare Expo site in Jebel Ali. Covering almost a third of this area, the focus will be the actual gated Expo site which will be surrounded by residential, logistics and hospitality areas – all will be linked by new roads and an extension to the Metro’s Red Line.

Despite empirical evidence indicating that there are more empty villas now than say six months ago, Standard and Poor’s is confident that the increasing supply of new units will be easily absorbed by new residents and a short-term over supply will not occur.  Because of their positive outlook, it has given local developer Damac a BB credit rating.

It is expected that Emaar Properties will offer up to 25% of its shopping malls unit on the Dubai Financial Market – and not on Nasdaq Dubai, as originally expected. The listing – expected to raise US$ 2.5 billion – will probably take place later in the year and will provide a huge boost for the local bourse.

Dubai-based retailer Lulu Group is planning to open a further fourteen stores in Dubai and Northern Emirates over the next two years. The company operates 110 stores in the region with 31.5k employees, and is now expanding into Malaysia.

The world’s third largest supermarket chain, Tesco, has signed a partnership agreement with Choithrams to sell their branded goods in 31 Dubai supermarkets. It is hoped that Tesco has better luck here than its recent overseas forays in China, Japan and the US. Despite recent profit falls, the UK supermarket chain still managed a pretax bottom line of US$ 5.1 billion and has a market cap of US$ 38.2 billion.

Meydan will soon have the largest man-made park of its kind in the world, covering 25k sq ft. No costs have been revealed but WL Hospitality Group has indicated  that the Wire World Adventure Park will include a bike park and an adventure rope and zip wire obstacle course.

Tecom is making the best of the booming economy and has announced that it will develop projects valued at US$ 273 million over the next two years. The Butterfly is a two tower office building, covering 255k sq ft, to be located between DMC and DIC whilst the new DuBiotech HQ will cater for both retail and commercial. The nine-storey Publishing Pavilion and the four tower-Makateb will prove useful additions for the rapidly expanding media sector.

Dubai Police expect to commission a state of the art, US$ 100 million forensic science and criminology laboratory by the end of the year. The four-storey building, encompassing 420 sq mt, will house six departments and nine laboratories along with training and conference facilities. In addition, it has plans to build its own museum; not only will it be shaped like a policeman’s hat but, being Dubai, it will become the biggest hat in the world.

Leisurecorp has sold Turnberry golf resort to Donald Trump. The Dubai government unit, which paid a reported US$ 93 million for the Scottish complex in 2008, disclosed no details of the sales price but is probably less than what was paid for in those halcyon days. Maybe members of the upcoming Trump Akoya golf club in Dubai will get reciprocal rights to play on the iconic Open golf course.

Two bond issues occurred this week. The Dubai government placed a 15-year sukuk on the DFM which brings the total value of sukuks listed locally to US$ 20.4 billion. Majid Al Futtaim has issued a ten-year US$ 500 million bond, which has been heavily oversubscribed, priced at around 195 basis points.

Because of a supposed accessibility risk to international investors, MSCI is reportedly planning to cut the weightings of four stocks on the DFM. This comes ahead of their formal transfer of the UAE bourses from frontier market to emerging markets status later in the month. Consequently an adjustment factor will be placed on Emaar, Arabtec, Dana Gas and Dubai Islamic Bank. Nevertheless it is estimated that up to US$ 2 billion could flood into the local market as overseas investment increases.

The DFM fell back 0.2% from its Sunday opening of 5088 points to close on Thursday at 5078. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.69 – down US$ 0.25 on the week – and up US$ 0.08 at US$ 2.47 respectively. During April, the bourse moved northwards 13.6% from 4451 points to close the month on 5059. So far this year, the best performing global stock market has skyrocketed over 50% from its January opening of 3370.

Outsourcing company Serco has hit bad times since being found out last year that it was defrauding the UK exchequer. The scandal cost the firm US$ 113 million, a loss of consumer confidence and a ban on further government contracts. Now to replenish its dwindling finances, it plans to raise US$ 280 million in a placement of 9.9% of its stock. It is a wonder then that its market valuation has only halved in the past twelve months.

The UK economy is now growing at its fastest rate in seven years as Q1 growth figures reached 0.8% with the good news spread among all sectors including manufacturing at 1.3%. In comparison, the likes of Germany, France, Italy and Spain are faring a lot worse so much so that ECB president, Mario Draghi, has indicated that he may have to start a radical quantitative easing program.

Meanwhile in Washington, the Fed will continue to cut back a further US$ 10 billion to US$ 45 billion on its QE policy, despite US Q1 growth figures coming in at a miserly 0.1%.

Also this week, the US Treasury found out that it had lost US$ 11.2 billion on its US$ 49.5 billion 2008 bailout of General Motors.  Maybe Treasury spokesman, Adam Hodge, could have done better than his quote that the goal of Treasury’s investment in GM was never to make a profit! Since the Treasury sold its last remaining shares, in December, the company’s market cap has fallen 16% over the past four months as it has had to recall 2.6 million cars, with potentially faulty ignition switches, which could be linked  to at least thirteen deaths.

With Russia still calling all the shots in the Crimea, the IMF has approved a US$ 17 billion bail-out fund for Ukraine, with 20% immediately available and the balance paid out over the next two years. In return, Kiev will have to implement stringent and unpopular reforms which will see both oil prices and taxes increased. A further US$ 15 billion will become available from other sources including the World Bank and the EU.

It seems that the West is giving Vladimir Putin carte blanche to do as he wishes in the region as pro-Russian forces continue to take over many government buildings in Eastern Ukraine, with tens of thousands of troops stationed menacingly on the border. The only riposte seems to be minor economic sanctions on several Russian officials and a pledge to recover the billions of dollars allegedly stolen by the country’s ex-president Yanukovych. From Russia with Love.

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