No Good For You!

20thcentfoxNakheel has announced its latest development for Deira Islands – a JV with Centara Hotels & Resorts for a 550-key resort, complete with a waterpark. This would bring the Dubai developer’s room portfolio on the man-made location to 1.8k whilst it will be the Thai company’s first venture in the country. Also this week, Nakheel opened its Golden Mile Galleria – a 400k sq ft development on Palm Jumeirah, with numerous retail and eating outlets and room for 1.2k vehicles.

Deloitte have released its latest tourism report for 2014 confirming that the number of Russian visitors had fallen by 15%, whilst the top three visitors were from Saudi Arabia (1.5 million), India (0.9 million) and UK (0.8 million). On the plus side, the number of Iranian and Chinese visitors grew by 41% and 24%.

It is estimated that Dubai has 369 hotels with an inventory of 75.6k rooms, with an expected 6.7% increase in supply as demand dips to 5.1%. Consequently, it is expected that both occupancy levels and average daily rates will fall slightly.

Al Ahli Holding Group is to build a Twentieth Century Fox-branded theme park over an area of 4 million sq ft. Work will start in 2018 and is slated for completion prior to Expo 2020. The designer and operator of the facility will be the US-based Rethink Leisure and Entertainment and, if successful, Al Ahli has secured the option to build three similar projects which could be in Latin America, India and East Asia.

It appears that the Al Habtoor Group is planning to hive off its shareholding in construction company, Habtoor Leighton Group. The decision to split with its Australian partner was made so that the local conglomerate can focus on its core businesses, including real estate, hotels, schools and car distributorships.

According to the latest Phidar Advisory Report, villa and apartment rentals in Dubai have fallen by 1.5% and 0.5% whilst sale prices dipped 3.4% and 3.6% respectively. Consequently, yields are now 4.8% (villas) and 7.5% (apartments). These figures differ from those that an earlier Cavendish Maxwell report espoused – 2.0% Q3 falls for both property types (the same as recorded in Q2), whilst Q3 rents had stabilised. Interestingly, over the next five years, Phidar estimates that Dubai annual demand will be at 5.8%, whilst supply could range from 2.8% – based on actual starts – and 6.7%, if all launch projects were to be included.

Of the 22.4k transactions, totalling US$ 50.7 billion, recorded by the Dubai Land Department for the first nine months of the year, 50% were mortgages (US$ 25.6 billion) and 42% cash. The Land Department also refuted rumours that it would be doubling the current 4% transfer fee.

Next week will see two major biennial events – the Dubai Air Show and Dubai International Motor Show. The latter comes on the back of UAE vehicle sales increasing by 13.0% last year and with strong H1 figures of 890k units. This year, the event, which is 30% bigger than in 2013, expects to have over 100k visitors. H1 figures show that automobiles account for 5.3% of all Dubai trade, equating to US$ 9.5 billion – a sure sign of the healthy state of this sector.

For the third year in a row, UAE has been ranked as the leading GCC country in the World Bank Group’s Annual Ease of Doing Business Report. However, its global 31st listing was slightly lower than in 2014.

The latest Prosperity Index from the Legatum Institute ranks Norway, Switzerland and Denmark as the top three with the UAE at 30th – ten places lower than the 2014 report. Its position fell mainly because of low oil prices and regional instability but it still remains the leading country in the MENA region.

Dubai Silicon Oasis Authority posted increases in both H1 revenue and profit – 16% to US$ 67 million and US$ 26 million respectively. Furthermore the number of operating companies increased by 11.6% to 1.2k over the same period.

DP World announced that it has acquired the remaining 49% stake in Southampton terminal and has extended its licence agreement there with Associated British Ports until 2047.

Zodiac Aerospace Services will launch its 4.5k sq mt facility, located in Dubai South. The French supplier of aircraft systems and equipment expects to generate 100 new jobs.

Largely because of the strong greenback, Emirates’ H1 revenue dipped 2.3% to US$ 12.6 billion but the airline still posted a stellar 65.0% growth in profit to a tad over US$ 1.0 billion. Over the period, manpower within the group, including Emirates and dnata, rose 4.0% to 87k. Not surprisingly, fuel prices were 45% lower than the corresponding 2014 period and although this was still the prime cost drag, at 28% of total operating expenditure, it was well down compared to the 38% figure last year.
Emirates’ subsidiary, Transguard reported a 20% increase in business over the past year. Established in 2001, to provide facilities management services, including security, recruitment and cargo handling, the company now employs 30k staff. It also manages the cash for more than 80% of Dubai’s ATMs.

H1 figures from Dubai Customs indicate that the emirate is performing well despite the slide in oil prices. Its H1 non-oil foreign trade reached US$ 177.7 billion, with imports, exports and reexports recording US$ 109.6 billion, US$ 17.7 billion and US$ 50.4 billion respectively. Surprisingly, phones accounted for 14.6% of all commodities traded, totalling US$ 25.9 billion. China (US$ 24.5 billion), India (US$ 13.6 billion) and US (US$ 10.7 billion) were the three main trading partners carving up 27.5% of the total.

The latest Emirates NBD UAE Purchasing Managers’ Index indicates a slowdown in business conditions as it drops 2 points to 54.0 in October. Although still in positive territory (signified by any reading over 50), output and new orders expansion dipped.

With the continued softening of the local market, banks are reporting an increasing amount of debt defaults by individuals and SMEs. It is estimated that over the past quarter, defaults have increased by up to US$ 1 billion, resulting in many banks having to increase their impairment losses. It seems that the smaller financial institutions are taking the hit but it is only a matter of time before the contagion impacts on the bigger banks.

The Dutch bank ABN Ambro received a slap on the wrist from Dubai authorities when it it received a US$ 640k fine for breaching anti-money laundering rules. The Dubai Financial Services Authority noted that the bank’s failings were widespread and subsequently nine employees have been reportedly terminated and 80 client accounts closed.

It is reported that venture capital firm Beco Capital has acquired a 14.8% shareholding in JadoPado for US$ 4.0 million, effectively valuing the Dubai-based online market place at US$ 28 million; the additional funding will be used for ambitious expansion plans. Beco has already invested in two other similar local entities – Careem and Propertyfinder.

As its international revenue fell and expenses rose, Etisalat recorded an 8.5% fall in Q3 net profit to US$ 531 million, as total revenue also dipped 1.0% to US$ 3.5 billion. Operating expenses were 5.4% higher at US$ 2.3 billion.

Telecom operator Du saw a 12.3% dip in Q3 profits to US$ 133 million, with revenue flat at US$ 831 million. One of the main reasons for this was a 16.6% jump in government royalty payments to US$ 131 million. The telecom operator, established in 2007, is taxed on two fronts – 12.5% on regulated revenue and 30% on regulated profit – both of which have risen this year from 10% and 25% in 2014.

Aramex reported a 7.3% increase in Q3 profit to US$ 20 million on the back of a 2.0% rise in revenue to US$ 255 million. The Dubai-based courier expects at least two acquisitions over the next six months and has already secured a US$ 150 million bank credit line to cover these purchases.

Emirates Investment Bank posted a 27.9% fall in nine months profit to US$ 80 million as at 30 September. There were marginal increases in both client deposits (1.0% to US$ 823 million) and total assets (0.8% to US$ 2.12 billion).

Q3 profits for Dubai Investments rose 30.2% to US$ 67 million, as its total assets and net worth balances rose to US$ 4.1 billion and US$ 2.8 billion. However, the company’s nine-month profit fell 24.4% to US$ 205 million because of a one-off gain of US$ 129 million from the sale of Globalpharma in the corresponding period in 2014.

Despite announcing a 123% rise in nine-month profits to US$ 4.3 million, on a 11.0% increase in revenue to US$ 28.5 million, shares in troubled Gulf Navigation fell 4.0% on Sunday to US$ 0.136.

Although Emaar Properties reported a 30.7% hike in Q3 profits to US$ 230 million, on a 56.0% jump in revenue to US$ 899 million, the figures were below market expectations. The profit figure for the first nine months of the year headed north – by 16.4% to US$ 831 million – with assets totalling US$ 42.5 billion and a land bank covering 195 million sq mt.

The DFM opened Sunday at 3503 and fell a further 1.5% to 3451 by the end of the week (05 November). Of the bellwether stocks, Emaar Properties was flat at US$ 1.75, whilst Arabtec fell US$ 0.04 to US$ 0.40. Yet again, trading volumes on Thursday were wafer thin, at only 106 million shares, valued at US$ 42 million changing hands, (cf 174 million shares for US$ 73 million, the previous Thursday).

Oil and gold had mixed weeks so that by Thursday (05 November), Brent crude had closed 1.9% down on the week at US$ 47.88, whilst gold continued heading south, falling US$ 60 to US$ 1,087.

Two international banks returned Q3 profits. HSBC posted an unexpectedly high 32.6% hike in pre-tax profit to US$ 6.1 billion. Although market conditions were tough and revenue was 4% off at US$ 14 billion, major cost reduction measures – including job cuts and selling loss-making businesses – ensured a healthy bottom line for Q3.

Due to a US$ 1.7 billion gain RBS, 73% owned by the UK government, was able to post a 6.3% increase in Q3 profit to US$ 1.5 billion. However the bank did see a 15.6% slide in revenue to US$ 4.7 billion, whilst restructuring costs rose to US$ 1.3 billion.

Toyota reported an 11.8% hike in H1 profits to US$ 10.2 billion, buoyed by a weakening yen – with a double whammy of making its export prices more attractive and inflating the value of incoming overseas profits. The world’s largest carmaker saw a marginal fall in unit sales to 4.97 million and although it is going through a major cost cutting exercise, it still has plans to build a US$ 1 billion plant in Mexico.

General Electric has finally acquired the energy assets of the conglomerate, Alstom for US$ 10.6 billion which includes three JVs – electricity grids, nuclear power and renewable power. As part of the deal, the French company bought a rail signalling division for US$ 800 million from GE.

Mainly because of the low fuel prices, eurozone inflation returned to zero in October. In the 28-member EU bloc, unemployment fell to its lowest level in almost four years by 0.1% to 9.3%, with a wide range from Germany’s 4.5% to an estimated Greek figure of 21.6%. There are still discussions in the corridors of power that the ECB may extend its QE programme to boost the sagging economy.

Just as indicators point to a US interest rate hike next month, the Bank of England has signalled that the UK rate will probably remain static at least for the next 12 months. The current rate will thus remain flat at 0.5% – the longest unchanged period in more than 65 years. At the same time, it is unlikely that it will be out in the market selling the US$ 577 billion bonds it bought via its recent QE programme until rates rise to above the 2% mark. The Bank also marginally lowered its 2015 growth rate and also forecast that the immediate inflation rate will hover around the zero level – in the long term this is No Good For You.

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