Flying High Again

emirates-planeEmirates’ annual revenue grew by 13.0% to US$ 22.5 billion, as the airline saw its profits jump 42.5% to US$ 887 million, forming a large part of the Group’s overall profit of US$ 1.1 billion. With a 13.0% increase in passenger numbers to 44.5 million, its major cost continued to be fuel, which accounted for US$ 8.4 billion. According to IATA data, the Dubai-based carrier will make over 40% of the total profits of  US$ 2.2 billion emanating from the ME aviation industry. Parent company, Investment Corporation of Dubai, received a dividend of US$ 272 million.

The annual Arabian Travel Mart is expected to have had a record 2,500 exhibitors, and over 22k visitors, when it closes on Thursday; of this total, 17k are expected from overseas which should prove another profitable period for Dubai’s hospitality sector.  As usual, a raft of announcements has come out from ATM.

Marriott International already has links with Emirates providing crew accommodation on a global scale as well as managing the tallest hotel in the world, JW Marriott Marquis, plus the Marriott Harbour Suites in JBR. RDK Tourism will manage its  312-room  Renaissance Dubai Downtown, due to open next year, which will be followed by two more – Dubai Marriott Hotel Citywalk and Marriott Executive Apartments Dubai City Walk.

Emaar Hospitality currently has twelve hotels under its banner encompassing three brands – The Address, Vida and Dubai Inn (in a JV with Meraas Holding). The first of five Dubai Inns – which will add a further 1.75k rooms – will be built in Zabeel and is scheduled for opening next year. It has announced that Manzil will become its fourth flagship brand and will be at the luxury end of the market, having a noticeable Arabic influence. The first hotel is to be known as Manzil Downtown Dubai (formerly Al Manzil).

As the Hilton Garden Inn brand gains Dubai traction, MAF Properties has signed a management agreement for the hotelier to manage its new 370-room hotel in Mall of the Emirates. Hilton expects two other establishments – in Al Mina and Al Muraqabat – to open by the end of next year.

Damac has launched its latest project, Constella serviced hotel apartments, claimed to be the first Sharia compliant of its kind in Dubai; this will entail separate swimming pools and gym facilities for men and women with dedicated floors and dining facilities for females. The luxury tower will be built in Jumeirah Village and will be financed by an Islamic bank.

With 90% + occupancy rates in Q1, the four Dubai properties managed by Hospitality Management Holdings recorded a 10.0% rise in Revenue per available room (RevPAR) and a 7.2% increase in average room rates (ARR). HMH was the first local chain to be alcohol free.

The Taj Group reported that the 296-room Taj Dubai, located in Downtown, will open by year end.

So as to encourage the construction of more three and four-star hotels, Dubai Holdings has announced attractive incentives to potential investors. The government-owned entity, currently hosting 14 properties, has listed forty potential plots, located in areas managed by Tecom and Dubai Properties Group. It is hoped that, if fully taken up, this will add a further 8.5k hotel rooms in time for Expo 2020. (A recent report has indicated that the UAE will have an additional 120 new hotels, with a portfolio of 32k rooms, over the next five years).

Even with two years to prepare, it is disappointing to note that only one of the country’s forty six banks has found the time to finalise their clients’ two-year credit history to assist with the setting up of Al Etihad Credit Bureau. When established, it will prove a boon for the UAE economy, as valid credit ratings and other financial information will reduce the potential for bad consumer loan debts and could well bring down the cost of borrowing. Currently, banks cannot access data from other financial institutions so are unable to obtain complete credit data on individuals or companies who have accounts with other banks.

This week Emirates NBD issued a five-year AUD 400 million fixed 5.75% rate note, with a Fitch rating of A+. 2006 was the only other time, Dubai’s largest bank has been involved with an Australian dollar bond.

They say the Brits are the biggest whingers and, if that is the case, the Lufthansa senior management must be running them a close second. Now that the airline’s former CEO, Christoph Franz, has left, his replacement, Carsten Spohr, has continued claiming that Emirates, along with other Gulf airlines, operates at an unfair advantage. The German carrier wants to limit the expansion plans claiming that imbalanced subsidies are being made to Gulf carriers, in finance deals, which reduce their overall costs. Maybe they should spend more time on improving their efficiency and quality levels to Emirates’ standards.

It seems highly likely that the fifty-year old Dubai Refreshments Company will merge with its Abu Dhabi counterpart. Both companies distribute Pepsi Cola drinks and would appear that a merger would reduce costs and improve operational efficiencies.

Assuming that Etisalat’s recent purchase of Vivendi’s 53% in Maroc Telecom goes through, the UAE telecom provider will sell its operations, in several W African countries, to the Moroccan company for a reported US$ 650 million.

Dubai Investments recorded a 25.6% jump in Q1 profit to US$ 72 million and, at the same time, indicated that it would soon be divesting itself of some of its assets which would boost future profits.

As widely expected, Arabtec reported Q1 results with a 39.0% hike in revenue to US$ 586 million which generated a 115.9% growth in net profit to US$ 37.6 million. With all the hype surrounding the company, this does not seem to be such a high return.

Union Properties seems to have recovered from its dark days, following the GFC, with Q1 profits up from US$ 6.0 million to US$ 49.0 million, year on year; this follows on the trend from its 2013 results, where the annual profits showed similar upward movement from US$ 47.9 million to US$ 430.5 million.

It is reported that the proposed UAE rail network, Etihad Rail, is planning four stations in Dubai – Jebel Ali Port, Dubai World Central, Meydan and Dubailand. Phase 1 of the US$ 11 billion project covers freight and will be open within the year whilst the second 620km stage will link Mussafah and Jebel Ali and could be operational by 2017.

The IMF has once again issued a warning about Dubai’s real estate sector, indicating that more needs to be done to curb increased speculation that could lead to the formation of an asset bubble. In some locations, property prices have jumped more than 40% over the past twelve months.

The latest IIF forecast sees the Dubai economy growing at an impressive 5.6% this year with the three ‘Ts’ – trade, travel and tourism – being the main drivers. At the same time, it forecasts a jump in inflation rates from its current 2.0% level to 3.6% by this December.

The gold industry is another sector that is set to grow in Dubai with news that Kaloti Precious Metals is planning to build a US$ 60 million refinery in the emirate. Although a major player in gold trading, Dubai lags behind the West when it comes to refining. For example, the UAE refines about 800 tonnes of the precious metal every year, compared to say Switzerland’s 3k tonnes. The new refinery will have a capacity of 1.4k tonnes and will help Dubai move up the refinery ladder.

The DFM recovered from its 0.2% fall the previous week and surged 4.41% from its Sunday opening of 5078 points to close on Thursday at 5302. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.76 and 1.84 respectively. So far this year, the best performing global stock market has skyrocketed 57.32% from its January opening of 3370.

Despite the likes of Tesco and Ikea persevering in the regulated Indian market, it seems likely that the world’s second largest retailer, Carrefour, is planning to move out. It seems that the next government will not permit foreign direct investment in the multi brand retail sector. Undoubtedly, the traditional family-owned shops still hold sway in the world’s third largest economy.

Pakistan will receive a further five-year 2% US$ 14 billion loan from the World Bank which is expected to be spent on the four ‘Es’ – economy, education, energy and extremism. Struggling to collect taxation receipts, the government has had to borrow more money than expected to pay the costs of the public sector. (In its latest report, Transparency International, ranked Pakistan 127 out of 171 countries in its listing of corrupt countries – how much of this money will be used for the benefit of the populace remains to be seen).

Sony Corp has warned that operating profits will be slashed as it revised its forecast down from US$ 783 million to US$ 255 million. Its electronics revenue is haemorrhaging badly and its DVD and CD-ROM will take a US$ 245 million impairment hit because of disastrous sales in Europe. Now looking at a US$ 1.3 billion overall loss, there is little good news on the horizon for the former electronics conglomerate whose once iconic TVs have now managed to lose over US$ 7.8 billion in the last decade. It is very odd to note that the Sony stock was up 90% in 2013 and has lost only 1% this year!

This loss pales into insignificance compared to Tokyo Electric Power Co’s US$ 15 billion – the single biggest loss recorded by a non-financial company in Japan. The power company is still recovering from the fallout from the Fukishima nuclear plant disaster.

The EC issued its latest forecast indicating that the 18-bloc eurozone will see a 1.2% growth this year, whilst the 28-country EU will perform slightly better at 1.6%. However the likes of Italy, France and Spain continue to lag behind with expected growth rates of 0.6%, 1.0% and 1.1% respectively. However, a low inflation rate (0.8%), high unemployment levels (11.8%) and continuing public deficits (Spain 5.6%, France 3.4% and Italy 2.6%) are potential risk factors that could continue to hold back economic progress.

Dubai’s economic indicators are all heading northwards; for example, over the past year, the local bourse is up 151%, property prices have risen up to 40%, Dubai tops the HSBC global trade confidence index at 141, corporate earnings are showing massive increases and inbound tourism is at an all-time high. Then with the latest results from Emirates, there is no doubt that Dubai is Flying High Again!

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