With A Little Help From My Friends

dubai-parksHH Sheikh Mohammed bin Rashid Al Maktoum has set up the Dubai Economic Security Centre whose main aims are to combat bribery, corruption, financing of terrorism, money laundering and fraud. As well as protecting the emirate’s position as a global financial hub, the Centre will have wide-ranging power that gives it authority over all companies operating in Dubai and local government bodies.

It’s business as usual this week – two property reports with two different findings. Standard & Poor’s estimate a 10% drop in 2016 prices, with no immediate improvement in sight. Cluttons forecast further declines – 5% for villas and up to 4% for apartments – in residential prices for the rest of the year, following a 2.2% Q1 fall and 7% over the past 12 months. Interestingly, they estimate that in the 45-month period to December 2019, 43.2k units will be handed over. Given that Dubai’s 2015 population was 2.5 million which is expected to grow at 6% per annum, there will be a 650k increase in numbers by 2019. Where will they live?

As part of its strategy to triple in size by 2024, Dubai International Financial Centre will self-finance its own US$ 129 million Gate Avenue mixed use project. Encompassing 660k sq ft, the development, linking the residential and commercial areas, will house 150 retail and dining outlets and will be completed by the end of next year.

Work on all ten villas on Sweden – one of six island’s making up The Heart of Europe on Dubai’s The World – will be completed by year end. Developed by Kleindienst, all the seven-bedroom beachfront villas will be furnished by Bentley Home – that company’s first project in Dubai.

Naresco has won a US$ 50 million contract to build Danube Properties’ Glitz Residence 3. The US$ 95 million project, based in Dubai Studio City, will comprise 352 residential units and is slated for completion by late 2017.

Emaar Hospitality Group is set to open its latest – and first in six years – Address ­hotel, the 196-key Address Boulevard, by the end of the year. Linked to the Dubai Mall, it will be located on the lower floors of the new 72-storey Downtown Dubai Tower. The upper floors will house 530 serviced apartments, with the top 2 levels reserved for a ‘lifestyle dining’ restaurant and bar.

The developer will also add a further 35 properties to its portfolio over the next five years, covering both local and international sectors, as well as its various brands – The Address, Vida and Rove. Last year, the division, with four hotels and two serviced residences, contributed 12.0% – US$ 447 million – to the Group’s revenue. Three Rove hotels will open this year in Dubai Mall, Downtown and Port Saeed, in conjunction with Meraas Holdings.

Due for completion in 2019, the 5-star Taj Exotica Resort and Spa, located on the western crescent of The Palm, will have 325 rooms. The property, owned by Dubai’s Arenco Group, will be the Indian operator’s second in Dubai, after its opening of the Taj Dubai in Business Bay last year.

Another property on the Burj Khalifa Boulevard has been announced for opening next year. The 40-floor Mövenpick Hotel Apartments Al Burj Business Bay will have 300 apartments and become the Swiss operator’s 7th hotel, with a further two in Downtown and Media City, to open within the next two years.

The first of Dubai’s new theme parks is set to open in August. The 1.5 million sq ft US$ 1 billion IMG Worlds of Adventure – the largest indoor facility in the world – expects 4.5 million visitors in its first year of operations and to be profitable within a year.

CEO Raed Al Nuaimi has reiterated that the US$ 2.9 billion Dubai Parks & Resorts, due to open in October, will generate US$ 654 million in its first year of operations and will break even within 8 years. It is expected that first year numbers will top 6.7 million, with the figure growing 3% annually thereafter; the current daily capacity of the resort is estimated at 55k.

Nasdaq Dubai-listed Emirates Reit posted a 57.8% surge in Q1 profit to US$ 14.3 million as portfolio occupancy levels grew by 17.3% to 77.4%. Its asset value also rose – by 2.8% to US$ 692 million – whilst outstanding debt stood at US$ 251 million.

Dubai Opera – overlooking the Burj Khalifa and Dubai Fountain – is set to host Placido Domingo for its first event on 31 August. Reflecting the emirate’s maritime history, its design depicts vintage dhows. In the coming months, there will be world class line ups for both opera and ballet buffs, with the theatre having a 2k capacity.

La Perle, MENA’s first permanent water show, will open by year-end. The aqua theatre, with 1.3k seats, and a stage filled with 2.5 million litres of water, will be located in the new Al Habtoor City; it is scheduled to show 450 performances in its first year.

This week witnessed the 4-day Arabian Travel Market, with an expected 26k+ global travel executives and operators descending on the emirate. Dubai reported a 7.5% 2015 increase in overnight visitors to 14.2 million and is on track to reach its target of 20 million by 2020. There will be a tweaking in strategy which will see a little more emphasis on the mid-market segment, to expand the pool of visitors. The oil crisis, international sanctions and the strong US$ have had a negative impact on visitors from Russia – with the slack being taken up by rising numbers of Chinese and Indian travellers.

Latest Q1 figures are encouraging with a 5.1% rise in overnight visitors to 4.1 million, compared to the same period in 2015, with GCC accounting for 25% of the total. The two main contributors were Saudi Arabia and India with 476k (up 14.0%) and India’s 467k visitors, up 17.0% – both well ahead of 3rd place UK’s 334k.

Although Dubai Q1 room rates have fallen10.1% over the past year to US$ 235, they remain the highest in the world, as occupancy still hovers around the 80% mark. At the end of March, the emirate had 82.8k hotel rooms.

It is estimated that the travel and tourism sectors add US$ 194.5 billion, equivalent to 8%, to the GDP of ME countries; this is expected to grow at an annual 3.5% over the next decade. The UAE ranks 28th in the global tourism economy, generating US$ 36.5 billion, equating to 8.7% of GDP.

Fuel prices are set to increase next Sunday, 01 May, with Special up 10.6% to US$ 0.455 per litre.

Al Futtaim Motors has won a US$ 33 million, 1.5k-vehicle order from Dubai Taxi Corporation. 83% of the current taxi fleet of 4.8k cars are Toyota, most of which are Camry branded.

Passenger numbers at Dubai International continue to grow with a 7.4% jump last month to 7.24 million – and 21.0 million in Q1. In March, freight traffic was flat at 217k tonnes but 3.1 higher in Q1 to 615k tonnes. It is noted that most of the cargo is now routed via DWC.

The Federal Customs Authority reported that the country’s 2015 non-oil trade reached US$ 425.1 billion, of which 67.9% was direct trade and the balance emanated from the various free zones. Exports jumped 17.0% to US$ 50.5 billion, as imports totalled US$ 259.5 billion. The UAE is ranked 20th in the WTO’s list of the top global trading economies, accounting for 1.9% of the worldwide total.

According to UK reports, Dubai International Capital is planning to auction off one of its trophy assets, the UK-based Doncasters. The engineering aerospace group, which has been impacted by the low oil prices, reported a 6% fall in 2015 revenue to US$ 918 million, whilst EBITDA also fell by 12% to US$ 172 million.

Nasdaq Dubai-listed Emirates Reit posted a 57.8% surge in Q1 profit to US$ 14.3 million, as portfolio occupancy levels grew by 17.3% to 77.4%. Its asset value also rose – by 2.8% to US$ 692 million – whilst outstanding debt stood at US$ 251 million.

Contrasting results this week from two Dubai banks, with Noor Bank posting a credible 40.0% surge in Q1 profits to US$ 153 million, as assets rose by 34.5% to US$ 10.6 billion.

Meanwhile Mashreq saw its Q1 profit fall by 18.3% to US$ 145 million on the back of an 86.7% hike (US$ 100 million) in net impairments, mostly related to non-performing loans. The emirate’s 3rd largest lender reported increases in both its loans and advances, up 7.9% to US$ 16.6 billion, and deposits up 6.3% to US$ 20.6 billion.

Emaar Malls returned a 22.2% increase in Q1 profit to US$ 144 million, as rental income was up 14.0% to US$ 227 million, compared to a year earlier. Occupancy rates remained at the 96% level.

Dubai-based Aramex posted a healthy 11.9% hike in Q1 profits to US$ 26 million, as revenue expanded 12.9% to US$ 286 million. The courier company indicated that the profit would have been 50% higher but for its January acquisition of Fastway Couriers’ New Zealand and Australian businesses for US$ 86 million.

As expected, and mainly because of increased forex losses, Etisalat posted an 8.3% fall in Q1 profit to US$ 545 million.

It is reported that Hapag-Lloyd is in merger discussions with Dubai-based United Arab Shipping Company that would see the German container shipper holding 72% and UASC the balance. If the deal goes through, the new entity would become the 4th biggest in the world – behind MSC, Maersk and CMA CGM.

There were impressive 2015 growth figures from Jebel Ali Free Zone with an 8.5% increase in the workforce to 144k and an 8.0% rise in company numbers. During the year, Jafza One was opened and will be followed this year by Jafza Two – 24-level twin towers.

As the result of a one-off project loss relating to a fertiliser plant in the USA, Orascom Construction reported a US$ 334 million loss, despite revenue of US$ 3.9 billion. The Dubai Nasdaq-listed contractor made provisions of US$ 159 million including a US$ 136 million charge against “onerous contracts”.

DP World has been awarded a 25-year concession to operate the main port in Cyprus, Limassol, with its 25% JV partner, GAP Vassilopoulos Public. The Dubai port operator’s subsidiary, P&O Maritime Cyprus, also has a similar 15-year agreement to manage the port’s marine services.

Dubai’s largest listed company by market value is also planning to buy back 29.05 million US$ 2 shares, equivalent to 3.5% of the company’s total shareholding. The shares have been hovering around the US$ 19 level on Nasdaq Dubai. DP World also reported a 2.4% increase in Q1 gross container volumes to 15.5 million TEUs (20’ equivalent units), despite its Latin American operations posting a 5.9% decline to 3.6 million TEUs.

As pledged at last year’s Sharm El-Sheikh conference, the UAE has now allocated US$ 4 billion to Egypt, by dint of a 50% investment and a 50% deposit with the Central Bank, to support the country’s dwindling foreign reserves.

The DFM opened on Sunday at 3584 and lost 92 points to close on 3492 by Thursday (28 April 2016). Bellwether stocks, Emaar Properties and Arabtec, lost ground falling US$ 0.04 to US$ 1.84, and US$ 0.03 to US$ 0.44. Trading volumes were much lower on Thursday at 304 million shares, valued at US$ 131 million, changing hands, (cf 825 million shares for US$ 285 million, the previous Thursday).

Brent crude had another good week – surging 6.6% (US$ 2.85) to US$ 46.03 – whilst gold rose US$ 17 to US$ 1,267 by Thursday (28 April) close.

Over the past 21 months, Schlumberger NV, the leading oil services provider, has slashed its workforce by 26.2% to 93k in response to a slump in energy prices. Its Q1 revenue and profit continued to slide down – by 36.4% to US$ 6.52 billion and 48.6% to US$ 501 million respectively.

In a similar vein, Halliburton Co reported a Q1 US$ 39 million operating loss in North America, its largest region, on revenue of US$1.8 billion, as it booked a massive US$ 2.1 billion impairment provision for write-offs and job cuts. The world’s second largest oil services provider has delayed full Q1 reporting until 03 May, so as to try and finalise its US$ 25 billion takeover of Baker Hughes.

A recent US government report estimates that US onshore oil producers have lost US$ 67 billion over the past 12 months, as a result of the slowdown in the energy sector, their over dependence on debt and working on sliding margins. Even if oil prices rebounded, some companies will be financially unable to resume “normal” business. Having doubled production over the past five years to 10 million bpd, latest figures indicate a fall off to under 9 million – with more of the same to come. It is no surprise to read that there was a fourfold increase in US oil company bankruptcies last year.

VW has had to increase its provision relating to the diesel emissions scandal from US$ 7.5 billion to US$ 18.3 billion, resulting in a 2015 loss of US$ 6.2 billion, compared to a US$ 2.8 billion profit a year earlier. The problem is spreading as similar irregularities are being discovered with other global car makers.

A German government report has indicated irregularities in 16 global car brands but none were found to have the “defeat device” technology used by VW. Currently Daimler and Mitsubishi are facing US investigations, whilst Peugeot offices in France have been raided. Five German brands – Audi, Mercedes, Opel, Porsche and Mercedes – have agreed to recall 630k vehicles to reset technology.

Having been sold by retail billionaire, Sir Philip Green, for US$ 1.44 last year, to Retail Acquisitions, BHS has called in administrators which might see the loss of 11k jobs in the UK. The struggling retailer operates 164 shops and 74 franchise stores in 18 countries and its demise will be the biggest retail collapse since Woolworths went under in 2008. Also this week, another high street name, Austin Reed, employing over 1k, went into administration.

Although Starbucks Q1 revenue was up 9.0% to US$ 5.0 billion and like to like sales rose 6.0%, Starbucks has had to overhaul its loyalty programme to boost future sales growth. Another interesting development was the coffee retailer’s US food sales surpassing the 20% level of total sales for the first time.

Google’s parent company, Alphabet, saw its shares drop 4%, despite a 17.4% hike in revenue to US$ 20.26 billion. The web search company reported that its profit was affected by the strong greenback.

Troubled times continue for Twitter as its shares sank 13.6%, following the release of disappointing Q1 results. Although there were 5 million more monthly users, recent growth has been stagnant and its Q1 revenue of US$ 594 million is relatively low considering its 310 million client base.

Microsoft also reported falls in both March quarter revenue, by 5.5% to US$ 20.53 billion, and profit by 24.6% to US$ 3.76 billion, as EPS dropped US$ 0.14 to US$ 0.47. The tech company is being dragged down by a continued softening in its core PC market, although its cloud business revenue was up 3.3% to US$ 6.1 billion.

After 13 years of continuous growth, Apple’s quarterly revenue took a dive, falling on the back of a 16.1% drop in iPhone sales to 51.2 million, compared to the same quarter in 2015. Despite this slowdown, the tech giant still came in with credible numbers – US$ 50.6 million in revenue (of which 66% emanated from iPhone sales) and US$ 10.5 billion in profit.

Despite past conflicting national interests, that have seen individual countries decide their own policy to deal with overseas tax locations, the 28-bloc EU has agreed to draft a common blacklist of tax havens and to introduce sanctions for non-cooperative jurisdictions. The EU president, Jean-Claude Juncker, was prime minister of Luxembourg for 17 years to 2013, during which time some would say he turned the country into a major centre of corporate tax avoidance – almost a case of the poacher turning gamekeeper.

This week the Saudi government unveiled a massive economic restructuring plan – Vision 2030 – for the kingdom. The blueprint is based on three pillars – use of its strategic location, its own investment capabilities and an Arab and Islamic division.

There was some good data from the eurozone with a 0.6% Q1 growth rate (up from 0.3% in Q4) and a fall in the 19-country bloc’s unemployment rate to 10.2% – its lowest level in nearly 5 years. On the negative side, deflation returned with April showing a negative 0.2% rate, from zero the previous month – still some way off the ECB’s 2.0% target. However, with political turmoil and sluggish global growth, confidence remains fragile.

Likewise the US saw slowing growth with Q1’s 0.5% rate well down on the previous quarter’s 1.4%. The main drivers appear to be the strong greenback and a fall in domestic demand, with consumer spending increasing at the much slower rate of 1.9%. Furthermore, business investment fell by 5.9% – its biggest quarterly fall since the GFC.

Thursday saw both Japanese and Chinese currencies registering huge daily gains, as the dollar weakened. The yen had its best daily gain in six years to close over 3% up at 107.3, whilst the People’s Bank of China raised its rate by 0.56% to 6.46 – its biggest increase in 11 years. There is no way that the Bank of Japan, or the country’s exporters, can afford to let the yen become too strong and another dose of QE is inevitable.

Much to Japan’s disappointment, the French company DCNS won a US$ 39 billion, 35-year contract to build 12 submarines in Adelaide for the Royal Australian Navy. The Japanese had been recent front runners for the contract and PM Abe had been confident of success – the rejection will do nothing to enhance bilateral relations. No doubt he is thinking that he could have done With A Little Help From My Friends.

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