Father and Son

This week HH Sheikh Mohammed bin Rashid Al Maktoum launched the ambitious Marsa Al Arab, to be developed by Dubai Holding. The project will have two islands, one of which, located to the left of the Burj Al Arab, will have 140 luxury villas, a private marina and a boutique hotel.

The second island will include the Dubai Pearl Museum (including a mollusc farm and a pearl-inspired hotel), a 1.7k capacity theatre to be used by Cirque du Soleil and an expanded Wild Wadi / Marine Park, encompassing 2.5 million sq ft.

The mainland will have 20k sq mt of retail space (built on the current Wild Wadi Water Park site), a convention centre (with commercial lots) and a hotel. 300 seafront residential apartments are also included in the plans, as are 400 food-and-beverage outlets.

Nakheel has signed a US$ 409 million, 30-month construction contract with Shapoorji Pallonji to build The Palm Gateway. The three-tower development, to be built above the Palm Monorail terminal, will house 1.3k luxury apartments for lease, along with a retail and beach complex.

MAG Property Development is going upmarket, as it adds MAG 318 and MAG 230 to its growing portfolio; the former will be located in Downtown and the latter will be part of City of Arabia.

A three-day pre-Ramadan sale starts today, with more than 1k retailers offering discounts of up to 90%! If today is anything to go by, the shopping malls will be filled to capacity over the weekend.

It was no surprise to ascertain that e-commerce site, JadoPado, which went off-line last month, has been acquired by a tech fund led by Mohamed Alabbar. He also announced this week that his US$ 1 billion e-commerce platform, noon, is to go live later in the year and then have its permanent base in Riyadh – 50% of its backing is from Saudi Arabia’s Public Investment Fund. Interestingly, on-line trading has little traction in the region, with an estimated 2% of the retail market, but this is expected to grow to US$ 70 billion by 2025 – a good enough reason to get a toehold in the sector.

In a bid to discover tech entrepreneurs and innovators, the Chairman of Emaar Properties has also bought a large stake in ME Venture Partners, a company that already has US$ 120 million of assets under management and a further US$ 60 million in co-investments. He also has a number of interests in this sector, including a 40% stake in the US$ 145 million JV with Yoox Net-A-Porter to start regional on-line trading for the Italian fashion house.

It seems that the image of Financial Advisors will have to improve as the Central Bank has given them 90 days, from its 11 May circular, to resolve all of their outstanding mis-selling complaints amicably. These include certain fixed term savings schemes, banned in many western countries, that have been criticised by some as being the most expensive financial products available anywhere in the world. Other complaints include that under-trained staff, selling these products, have neither the wherewithal to understand clients’ risk profile nor the ability to explain their intricacies. It looks as if formerly opaque plans will become simpler and more transparent indicating how much the client has to pay in commission which in the past has often been front-loaded and biased in favour of the advisor.

There was a 2.9% increase in Q1 Metro users to 51.4 million compared to a year earlier, whilst Dubai Tram saw numbers up by an impressive 23.1% to 1.6 million.

The completion date for Dubai World Central has been put back a year to 2018, when its capacity will jump fivefold to 26 million passengers, growing to 146 million by 2025. It is expected that both Dubai airports will serve more than 100 million people this year. The Dubai government has secured a US$ 1.6 billion 7-year conventional loan along with a 7-year US$ 1.5 billion Ijara facility as part of its two airports’ financing strategy.

Although revenue was some 20.4% higher at US$ 640 million, Damac Properties returned a 16.2% fall in Q1 profit to US$ 240 million, with cost of sales 40.3% up at US$ 242 million. Booked sales for the quarter – at US$ 599 million – were 10.0% higher, with the developer still expecting growth of US$ 1.9 billion this year. (It was also announced that Ziad El Chaar has resigned his position as MD for the developer, with whom he has worked for the past 12 years).

With higher property sales of 44% and its other divisions – entertainment, hospitality, leisure and malls – performing well, Emaar Properties posted a 14.0% jump in profits to US$ 376 million, with revenue 15.3% higher at US$ 1.11 billion. The four divisions saw their revenue jump 44%, whilst contributing 39.1% to the total group revenue. The developer has a backlog amounting to US$ 12.6 billion.

Emaar Malls had comparatively flat results with Q1 revenue just US$ 1 million higher at US$ 228 million whilst profit nudged 1.9% higher to US$ 147 million.

Union Properties announced a 0.9% rise in Q1 net profit to US$ 12 million, although revenue climbed at a much higher rate – 25.2% to US$ 73 million; direct costs were up 39.7% at US$ 69 million.

Having made just a US$ 3 million profit in Q1 last year, embattled Drake & Scull turned in a US$ 228 million loss this quarter, as revenues fell 22.7% to US$ 217 million. The company has already incurred deficits over the past two years of US$ 256 million (2015) and US$ 214 million last year.

Amanat Holdings saw Q1 profits 49.0% higher at US$ 4 million, whilst Gulf General Investment Company posted a US$ 12 million loss (Q1 2016 profit – US$ 2 million) as revenue declined 30.8% to US$ 40 million.

The DFM opened Sunday at 3420 and traded 1.2% lower this week – closing on Thursday (18 May) at 3378. Volumes were again wafer thin, closing on Thursday at 195 million shares, valued at US$ 64 million, (cf 250 million shares for US$ 93 million, the previous Thursday). Emaar Properties shed US$ 0.01 to US$ 2.03, whilst struggling Arabtec yet again closed lower, down US$ 0.01 at US$ 0.20.

By Thursday, Brent Crude continued the previous week’s upward trend to close US$ 1.74 (3.4%) higher at US$ 52.51, with gold again also on the up, gaining US$ 29 to US$ 1,253 by 18 May 2017.

The increase in oil prices have come about because of  Monday’s announcement by Saudi Arabia and Russia that they will abide with the oil quota cuts until next year and US oil inventories falling  during the week from 2.3 million bpd to 520 million.

Facebook has only been fined US$ 125 million – and not hit by other sanctions – by the EC for “incorrect or misleading” information in relation to its 2014 takeover of WhatsApp. Not surprisingly, the US tech giant has indicated that it will not fight the penalty.

A slowdown in April saw China’s annual industrial output soften to 6.5% – well down from March’s return of 7.6%, A feeling that the world’s second biggest economy is losing the momentum of Q1 came with news that fixed asset investment, at 8.9% for the first four months of 2017, was lower than estimates with retail sales, at 10.7%, 2 notches lower than a month earlier. Growth, which was at 6.5% in Q1, is now being stymied by the government’s effort to marginalise risky debt and a notable softening in domestic demand.

The market was surprised by Japan’s Q1 GDP expanding by a creditable 0.5% from 0.3% the previous quarter, equating to an annual 2.2% hike – and well above previous 1.7% expectations. These figures reflect that the country has recorded its longest period of expansion since 2006, driven by an increase in domestic consumption, stronger exports (helped by a falling yen) and the knock-on impact of the upcoming 2020 Tokyo Olympics. It has taken a long time but finally the world’s third largest economy may be thankful for their Prime Minister’s style of economics.

Last month, RBA governor, Philip Lowe, indicated that Australian household debt was on the high side, having risen. 6.5% over the previous 12 months. During that time, median house prices in Melbourne and Sydney rose by 15.2% and 13.1% respectively, equating to a growth of about 3% in aggregate household income. It can only be a matter of time before the property bubble bursts – the only question will be by how much?

Greek Prime Minister Alexis Tsipras has had to eat a little more humble pie as he agrees reluctantly to a further round of pension cuts and lower tax breaks (totalling US$ 5.4 billion in 2019/2020) in order to avail of further bailout funds next month from the EU/IMF. This has led to demonstrations and some social unrest in cities like Athens and Thessaloniki.

Angela Merkel has had a good start to the year with the German economy growing at 0.6% in Q1, compared to 0.4% the previous quarter, equating to an annual 1.7% uptick. Its consumer price index climbed to 2.0% in April (up from March’s reading of 1.6%), driven by a 5.1% jump in energy prices.

The Australian tax authorities have been shaken by one of its deputy commissioners, Michael Cranston, being charged with an abuse of his position. The case involves his 30-year old son Adam, one of nine people arrested for defrauding the government of US$ 122 million in a payroll scheme that saw monies being siphoned off to be used for the accused’s lavish lifestyle which has seen 2 planes, 18 houses, 25 cars and vintage wine being seized. It appears that the father may have unwittingly helped him access some confidential information and, if so, their relationship may be somewhat strained in an unfortunate reprise of Father and Son.

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