Take A Chance On Me!

Last year, Dubai International Convention and Exhibition Centre hosted more than three million delegates and attendees at various events and trade shows; this was an 11% annual hike in footfall that saw 51.7k exhibitor companies from 185 countries. The MICE sector (meetings, incentives, conferences and exhibitions) is proving an important driver in the growth of the emirate’s hospitality sector.

The 24th Arabian Travel Market will open next week which will see the event attended by 2.6k exhibitors and 30k visitors. The 4-day event, one of the largest of its kind in the world, will give a much needed boost to both the hospitality and retail sectors.

Latest data from Reidin-GCP seems to support that, after a 3-year decline, there has been a significant improvement in the local real estate sector, with activity and prices in most areas on the rise, including Springs / Meadows recording year on year Q1 gains of 6%. This in direct contrast to earlier reports that the market was still in a down cycle and there was little hope of a pick up until later in the year at the earliest.

Al Hamad Group (the major investor) and Schon Properties have signed a JV to establish a massive iSuites US$ 870 million hospitality project in Dubai Investments Park. The 21-building development, to be constructed by Al Hamad’s Dubai Civil Engineering, will see the building of 2.55k hotel apartments on a single site and be ready in time for Expo 2020. The complex will also include 125k sq ft of shopping space, 52 restaurants, with a man-made beach and a lagoon.

Azizi Developments has appointed Belhasa Projects to build three residential towers, housing 1.9k apartments, in Dubai Healthcare City. This is part of the developer’s strategy to launch 50 new projects this year alone.

According to JLL’s latest report, Dubai’s current retail supply of 3.4 million sq mt of gross leasable area has expanded by 17% over the past three years and is expected to grow to 4.1 million sq mt by 2020. There is a possibility that some of the proposed mega malls may be cut back or put on the back burner in the wake of a troubled retail sector. However, despite the slowdown, rents have yet to move southwards, remaining flat and unchanged.

The foundation stone for Lulu’s US$ 272 million Silicon Mall was laid this week by HH Sheikh Ahmed bin Saeed Al Maktoum. The development, encompassing 2.3 million sq ft and hosting 300 stores and 50 food outlets, will be ready by 2020.

In an agreement with Dubai Wholesale City, Enviroserve UAE is investing US$ 33 million to build a 228k sq ft Swiss-designed waste disposal plant specifically for unwanted electronics and electric equipment. Phase 1 of the development will see 39k tonnes of waste being processed. Such a facility is long needed as data suggests that each UAE resident will produce 16.2 kg of e-waste every year and that such waste in the GCC will grow 50% to 900k tonnes by 2020.

The 3-year old DEWA drinking water company, Mai Dubai, is slowly picking up market share in the country but is still some way off the industry leader, Masafi which accounts for 27% of the total supply. The company is investing US$ 163 million that will see it more than treble its current output to 50 million units by 2020.

It has been reported that the Gargash family has acquired a 100% stake in Gargash Enterprises LLC for an undisclosed sum. The Dubai company is the world’s largest independent distributor for Mercedes Benz vehicles.

Dubai-based Altitude Mask has signed up both footballer Gareth Bale and boxer Anthony Joshua as brand ambassadors for its innovative state of the art resistance masks; online prices range between US$ 100 – US$ 112. Developed and marketed in Dubai, they boost oxygen intake whilst enhancing endurance and fitness levels.

The new US$ 16 million Centre Point Warehouse facility in Dubai South is now operational. The Dubai-based logistics company is expecting to post a further US$ 14 million boost in revenue this year.

Nautica products are back for Dubai shoppers, following a deal with new partner, Apparel Group. The New York fashion chain has relaunched this week in its Dubai Mall store and has currently 12 stores in the region, with a further 18 expected over the next five years.

Although no data was readily available, it seems that Emirates traffic to US destinations has been badly hit by President Trump’s travel ban on six Muslim countries and the on board electronics restriction. Accordingly, the airline has cut certain flights to five of their twelve US destinations. Some of the resulting slack has been taken up by Chinese traffic that has seen recent double-digit growth.

As part of its 2017 expansion plans, DP World is expected to invest US$ 1.2 billion in various locations, including here in the UAE, Africa (Egypt and Rwanda), Canada, Greece, Kazakhstan, and South America.

There is talk that Dubai is in the market for future financing, possibly utilising sukuks rather than more traditional vehicles such as bonds, banks etc. The money would be used to plug its 2017 budget deficit expected tome in at US$ 680 million.

The latest WTO report shows that the UAE is now ranked 19th in a list of the world’s top exporters, with a total value of US$ 266 billion – a 2% decline over the previous year. The world body still has concerns about political and further economic problems but is expecting a global improvement in 2017.

It has not been a good four months for traditional local media. At the end of last year, the last edition of 7 Days was printed and now there are reports that The National is cutting jobs as revenue slides. The slowdown in the market and the impact of low oil prices has now claimed its third casualty – Dubai-based TV station City 7.

A new Standard & Poor’s report indicates that the 29 listed insurers in the country continue in the black having turned profitable in 2016, after losses in prior years. The insurers, which represent 46% of total gross premiums in the UAE, posted a cumulative 2016 profit of US$ 247 million following a US$ 42 million deficit a year earlier. The main drivers behind this turnaround are the introduction of compulsory medical insurance and increases from both the motor and property sectors.

Nasdaq Dubai announced that Saudi’s Islamic Development Bank has issued its eighth sukuk on the local bourse; the US$ 1.25 billion bond brings the bank’s total to US$ 9.8 billion. Its listing total has now reached US$ 53.8 billion (the highest of any similarglobal bourse), with the latest issue being a US$ 500 million bond from Dar Al-Arkan; this brings the total listing for the Saudi-based construction firm  to US$ 1.35 billion.

Emirates NBD posted a 4.0% hike in Q1 profits to US$ 510 million, although total income slipped 3.0% to US$ 981 million. Dubai’s largest bank has managed to reduce its impairment charges by 22.9% to US$ 174 million and its general and administrative costs by a credible 11.0% to US$ 305 million.

In a similar vein, its sister bank, Emirates Islamic, posted a 1.8% rise in total income to US$ 198 million whilst profit almost quintupled to US$ 60 million from US$ 12 million a year earlier. The main drivers were impairment charges falling 48.7% to US$ 37 million and operating expenses down some 18% – with 300 staff retrenched throughout 2016. (Last year total provisions for bank loans throughout the country jumped 7.8% to US$ 21.4 billion – these Q1 figures from the two banks indicate somewhat of an improvement in the situation).

However, CBD posted a 33.5% decline in year on year Q1 profit to US$ 44 million although operating income actually increased 9.0% to US$ 171 million. The main drag factor was a 91.2% surge in net impairments to US$ 66 million, as its non-performing loan ratio nudged marginally higher to 7.1%.

As expected, Emaar declared a 15% cash dividend for 2016, equating to US$ 292 million with the developer having posted a US$ 1.4 billion profit. It also reported that it has a US$ 11.7 billion project backlog including its Dubai Hills Estate JV with Meraas, encompassing 11 million sq mt, as well as an extensive land bank which now stands at 24 million sq m, in the UAE, with a global total of 190 million sq mt. Not content with the two residential towers, Emaar is to build a third within its Downtown Views II project overlooking the Burj Khalifa.

Emaar Malls also announced a 10% cash dividend totalling US$ 355 million; the shopping mall and retail business arm of Emaar Properties had posted a US$ 511 million profit last year, on revenue of US$ 879 million.

The DFM opened Sunday at 3509 and, having shed 57 points the previous week, continued its losing way – down another 39 points to end the week 1.1% lower by Thursday (20 April) at 3470. Volumes were again disappointingly low, closing on Thursday at 278 million shares, valued at US$ 97 million, (cf 336 million shares for US$ 106 million, the previous Thursday). Emaar Properties regained some of the previous week’s loss up US$ 0.04 to US$ 2.02, but Arabtec remained in the doldrums down US$ 0.01 at US$ 0.24.

By Thursday, Brent Crude had shed much of its recent gains, down US$ 3.27 (5.9%) to close on US$ 52.59, with gold creeping lower (US$ 6) at US$ 1,284 by 20 April 2017.

Vijay Mallya has been bailed in London after a US$ 812k bond was posted after his arrest on Tuesday. The disgraced Indian tycoon reportedly owes banks US$ 750 million and was arrested following a request from Indian authorities (who had already cancelled his passport last April). He made his original fortune from the Kingfisher beer brand and then later expanded his empire into aviation and Formula 1 racing.

It would be interesting to ascertain the amount of UK tax Starbucks will pay after its 900 outlets posted an annual 6% fall in revenue to US$ 470 million, with profits tanking 60.8% to US$ 17 million. The usual suspects are again in play for these disappointing results – Brexit, terrorism threats and the fall in sterling.

Two of the UK’s leading retailers are to close further stores this year. Debenhams plans to close 10 of its 176 outlets, along with its DHL-run Northampton distribution centre and ten small in-house warehouses. Although it plans to open 36 new stores – all but two will be food-only – M&S will close six shops of its 344 portfolio; the company also has 615 food outlets operating in the country.

Notwithstanding all its negative publicity, United posted dismal Q1 results with the airline’s profit sinking 69% to US$ 96 million, although revenue edged 3% higher to US$ 8.42 billion. The troubled airline was badly hit by operating costs up 8%, driven by a 28% surge in fuel costs and maintenance/ repairs up by 13%.

Following last week’s mostly favourable results from the three of the US major financial institutions, Bank of America followed suit. The country’s second largest bank posted a 44.0% hike in Q1 profit to US$ 4.35 billion, as revenue increased by 7.0% to US$ 22.25 billion.

Based on recent events, it seems that the 23-year old media and content company Vice could be valued at US$ 5.5 billion. The last time, in 2015, the Canadian company went to market for financing – with Disney spending US$ 400 million for an almost 10% share – the company had a US$ 4.2 billion valuation. Now it is looking for a further US$ 500 million tranche with a possibility that Disney may be considering a 100% buy-out.

Having acquired Weetabix in 2012, China’s second largest food company, Bright Food Group, has sold the brand to Post Holdings for US$ 1.8 billion. This traditional cereal has failed to impress the Chinese public and has made no inroads; indeed 83.8% of its total US$ 433 million 2016 revenue emanated from its home base in the UK.

Weak Q1 sales were reported by two major global consumer companies. Unilever posted a revenue figure of US$ 14.0 billion whilst rival Nestle posted a growth of less than 1% to US$20.7 billion. The Swiss conglomerate blamed currency fluctuations and the sale of an ice cream business for the disappointing turnover.  However, if still expects to reach its up to 4% target figure by year end.

Last season, the 20 English Premier League clubs posted a 10% hike in revenue to US$ 4.5 billion but still turned in a pre-tax loss of US$ 139 million, according to a recent Deloitte study. The main cost drivers saw both wage bills and other operating costs increasing – by 15.0% to US$ 2.9 billion and 12.5% to US$ 1.1 billion respectively. The two Manchester clubs accounted for half of the total revenue increase, with United generating a US$ 650 million revenue stream making it the world’s highest revenue-generating club.

Silvio Berlusconi has sold his AC Milan football team for US$ 627 million to a Chinese consortium. The new owners have committed a further US$ 297 3-year million investment in the team that the former playboy prime minister of Italy bought in 1986.

After being run by a gang of charlatans for so many years, it is no wonder that major companies are keeping their distance from FIFA. With the World Cup in Russia just over a year away, the world body is finding it difficult to find sponsors, with only 10 of the possible 34 deals signed up. Over the past three years, as the FIFA brand became so toxic, sponsors such as Emirates, Castrol, Continental Tyres, Johnson & Johnson and Sony have given FIFA their red cards. It seems that  there have been only three new sponsors – two from China (electronics group, Hisense and Wanda), along with Russia’s Alfa-Bank.

The Brazilian Supreme Court has claimed that there was illegal profiteering from builders and politicians arising from the construction of football stadia for the 2014 World Cup. Following a plea bargaining by Odebrecht executives, it is alleged that there were irregularities in the bidding for six stadia including the iconic Maracana; the cost of renovation at the Rio venue should have been US$ 225 million but the final bill was 40% higher at US$ 315 million. In Sao Paulo, the cost of work at the Corinthians stadium was four times higher than originally planned. (Odebrecht is the continent’s largest construction company and last year, agreed to pay US$ 3.5 billion to authorities in Brazil, Switzerland and the US after admitting using bribery to secure other major contracts).

China’s Q1 figures surprised the market as the economy expanded by an impressive 6.9%, driven by demand for new property and public infrastructure spending; the figures came a month after the National Bureau of Statistics had cut its 2017 growth target to 6.5%. February retail sales also jumped 10.9%, indicating a move up for domestic consumption. However, the country is still bedevilled by debt which accounts for over 250% of GDP and the problem will continue to deteriorate unless the government take furtive action; this will entail cutting back on growth, a move that may not be good news for the Chinese leaders.

After surging to 71 in March, then nearing a twelve year high, the NAHB/Wells Fargo Housing Market Index dropped 3 points to 68 this month. Despite this blip, the US housing market is still in robust health and the demand for housing continues upwards, despite rising building material costs and higher regulatory expenses.

The latest IMF forecasts paint a promising picture for the global economy with 2017 growth four notches higher than last year’s 3.5%, driven by “a long awaited cyclical recovery in manufacturing and trade”. The UK’s expected growth rate of 2.0% will be the best of any of the other major economies barring the US. For a welcome change, not one of the world’s leading economies, including Brazil and Russia, are expected to post falls in economic activity over the next two years.

The February seasonally adjusted eurozone trade balance beat market expectations coming in at US$ 20.6 billion, up US$ 3.8 billion from a month earlier; exports nudged 0.4% higher with imports falling 1.7%. March returns indicate year on year increases in both imports (5%) and exports (4%). Eurozone inflation, at 1.5%, slowed to a three-month low in March, following a 2.0% increase the previous month. This figure is almost in sync with the ECB’s 2% target.

UK employment figures in February showed a 39k increase thus maintaining annual growth at 1%, with the unemployment rate unmoved at 4.7% – its joint lowest level in 42 years – and almost in line with the Bank of England’s 4.5% equilibrium rate of unemployment. It is expected that consumer spending growth (now at 2.3%) will continue to be subdued even though the labour market continues to tighten.

In a move that surprised the market, Theresa May called an 08 June general election which saw sterling move higher, touching 1.29 to the US$, and the FTSE 100 diving the other way, losing US$ 58 billion. By Wednesday, the main stock market had eroded all of its 2017 gains and was trading at 7114, having started the year on 7142.

With the opposition labour party in complete disarray, there is every chance that the Conservatives will return with a bigger majority, which in turn should give the May administration more leverage in Brexit discussions. However, the good lady may rue this decision and regret asking the electorate To Take A Chance On Me!

Advertisements
This entry was posted in Finance and tagged , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s