Ticket To Ride!

fäm Properties expect that over the next five years to 2022, Dubai’s property portfolio will rise by 164 k, with 7.3k handed over before the end of the year. Other consultancies have estimated far more so there is a wide divergence of views on future supply. The past three years, handovers have been half of what most “experts” had expounded at the beginning of each year, viz 14.9k in 2015 and 11.9k last year with  say 26k for 2017. Assuming the current population is 2.9 million and the number of residential units is 500k, the average unit houses 5.8. If the population increases at the current 8.1% rate, the population by the end of 2019 will have reached 3.38 million which would indicate that an extra 82.8k units would be needed to house 5.8 people. Over the past three years, the total number of handovers has only been 52.8k or 17.6k per annum so where’s the problem?

It has been estimated that 2017 construction contracts of almost US$ 3 billion have been awarded in connection with Expo 2020, together with a further US$ 112 million relating to non-construction. With the event edging nearer vital deadlines, more procurement opportunities will arise in 2018.

The owner of Emirates and flydubai has posted flat H1 profits. The Investment Corporation of Dubai, that also has major stakes in Emirates Global Aluminium and Emirates NBD, reported a marginal 0.6% decline in profits to US$ 2.25 billion, dragged down by a 52.0% slump in its transportation segment to US$ 300 million. Revenue was 13.1% higher at US$ 25.4 billion.

DMCC is to build a Jebel Ali coffee centre, that can handle up to 20k tonnes of green coffee beans annually with a value of over US$ 100 million, to be developed by Chinese companies, Mega Capital Halal and Yunnan State Farms Group. The country is the hub of a region that consumes 8% (equivalent to US$ 6.5 billion) of the global coffee consumption and would benefit by the fact that global exports jumped 4.8% last year to116.9 million bags.

Petrol prices are set to rise from tomorrow (01 November). Special 95 will be 6.3% higher at US$ 0.556, with the higher grade Super 98 up 5.9% to US$ 0.620 per litre. Having risen 6.5% in 2016, Special 95 is 13.5% higher so far this year, starting on 01 January at US$ 0.490.

Dubai Investments has acquired the two-year old Kent College Dubai campus in a long-term sale and leaseback deal which will see the operators working on a triple net basis to manage the school. With a student population of 2.2k, the UK school operates in Nad Al Sheba and is a subsidiary of Mir Hashem Khoory. The Dubai-listed company appears to be focusing on education-related ventures, as it expands its reach into income-generating real estate assets.

The UAE ambassador in Washington, HE Yousef Al Otaiba, stated that he thought that “US companies remain the preferred supplier for the country’s commercial and military’s aviation needs”. In the past decade alone, it is estimated that UAE customers – Emirates, flydubai, Etihad and Air Arabia plus the military – have purchased units valued at over US$ 150 billion from Boeing alone that represents a large share of the US$ 19 billion trade surplus the country has with the UAE.

The latest BMI report highlights the country’s transportation infrastructure as a leading driver in the construction sector with a total of 71 projects, valued at US$ 54.6 billion, under construction or in the planning stage. The fifteen railway projects account for US$ 13.9 billion of the total spend, with the largest being the 1.2 km Etihad Rail development. Both Dubai and Abu Dhabi are spending significant amounts on their airport expansions whilst half of the total projects are road-related but they only account for 8% or US$ 6.7 billion.

The latest BNC report estimates that there is currently 11.8k active construction projects in the country, valued at an impressive US$ 818 billion. The UAE’s number of projects accounts for 52% of the total and 33.6% of the total value of all the MENA projects.

Emaar Properties has agreed to start construction on Al Rasheed Residential City in Iraq; work on the US$ 10 billion project will begin early next year.

Long-standing creditors of Drydocks have agreed to DP World taking over the UAE shipbuilder in return for a US$ 225 million capital injection; this money will be used to pay out the junior creditors around 23% of their initial US$ 1.4 billion outstanding balance.  The remaining senior debt of US$ 649 million will be paid in two tranches – one of three years at 200 basis points over Libor and the other a five year repayment at 250 bp. The original US$ 2.2 billion debt (a three year loan of US$ 1.7 billion and the balance over five years) occurred in 2000 when Drydocks was planning to expand operations into Singapore.

A Chinese company, EHang Inc, has developed a one-passenger flying car that it hopes to roll out in Dubai next year prior to regulatory approval. The taxi drone, powered by four battery propellers, will have a100 km cruising speed and can remain airborne for 25 minutes.

The world’s busiest international airport continues to grow and looks set to welcome a record of over 89 million passengers by year end. Dubai International posted a 6.9% hike in October passenger numbers to 6.9 million, although flight movements were lower offset by an 11.6% increase in passengers per flight to 213.

The cruising season has restarted in Dubai after the summer break, with the emirate confident of beating last year’s total of 625k cruise visitors – a 15% hike on numbers from a year earlier. This year will see a rise in cruise calls to 155 with over twenty different cruise lines making use of the world class facilities, one of which will be Crystal Cruises which has chosen the city for the maiden voyage of its recently refurbished Crystal Symphony.

On Monday, the federal cabinet issued decree number 52 in relation to the introduction of Value Added Tax as from 01 January 2018. The executive regulations detail the supply of goods and services and initially will only apply to the UAE and Saudi Arabia, with other GCC states joining later. Any entity, with revenue over US$ 100k, is required to register although some companies will be considered exempt. The tax rate is currently fixed at 5% with some specified goods and services being zero-rated. To those hoping for an implementation extension, there is bad news – the Director General of the General Tax Authority has reiterated that there would be no delay. It is also reported that failure to submit a registration application by 01 January 2018 could lead to a possible US$ 5.4k fine.

Following the announcement that Shuaa Capital had abandoned plans to buy into Global Investment House of Kuwait, its shares fell 1.7%; in June, the Dubai-based investment back pulled out of merger talks with Bahrain’s Gulf Finance House. Once the region’s largest investment bank, its fortunes declined on the back of the GFC and, having returned to profitability over the past two years, it was planning to expand its balance sheet partly through acquisitions.

The DFM opened Sunday (26 November), at 3461 and by the end of the shortened week (because of the National Day holidays) was 41 points off to close on Wednesday, 29 November, at 3420. Volumes were higher this week, with trading of 345 million shares, valued at US$ 217 million, (cf 356 million shares for US$ 172 million, on Thursday, 23 November). Emaar Properties was US$ 0.08 lower at US$ 2.06, with Arabtec continuing its recent downward trend, nose-diving by US$ 0.08 to US$ 0.61.  For the month, the bourse was 5.9% lower from its opening of 3461 (YTD 3.1% down), with Emaar and Arabtec both heading south dropping US$ 0.21 and US$ 0.14 from their respective November openings of US$ 2.27 and US$ 0.80.

By Thursday, Brent Crude was 2.6% higher closing at US$ 62.94, with gold flat at US$ 1,278 by 30 November 2017. The month opened with the yellow metal trading at US$ 1,276 and Brent at US$ 60.79.

There was some sort of consensus in Vienna with OPEC deciding in principle to cap production for another nine months. This comes after a year of output cuts of 1.8 million bpd involving all stakeholders including non-cartel members which led to oil prices stabilising upwards. It is estimated that compliance to this output reduction was over 90%.

The Abu Dhabi National Oil Company is planning to spend US$ 110 billion over the next five years, as it continues expansion by further exploration, development and production of its energy assets. It is also expected that ADNOC will look closely to worldwide downstream investments to become a global player in that sector. The oil giant recently announced a partial IPO (of between 10-20%) of its fuel distribution unit, with shares valued at between US$ 0.64 and US$ 0.71.

Keeping to his promise to the South Australian government – and at the same time winning a US$ 50 million bet – Tesla chief executive Elon Musk has delivered the world’s biggest lithium-ion battery within 100 days. The state had suffered a series of “load-shedding” blackouts earlier in the year that had left 1.7 million residents without power. In September he stated that the 100 Mw battery, enough to provide emergency power to 30k homes, would be up and running within 100 days or it would be given free.

A surprise development saw Xavier Rolet step down, at the board’s request, as chief executive of the London Stock Exchange with immediate effect. This follows a bitter boardroom battle with some members not happy with him. Mr Rolet will leave with payments that could be as high as US$ 17 million – US$ 1.1 million annual salary, US$ 2.3 million bonus and the balance from a number of long-term incentives.

The UK’s biggest tobacco supplier, Palmer & Harvey has entered administration, leaving 2.5k people jobless. The main driver was finance-related as a potential buyout by private equity firm Carlyle did not materialise.

Another week and another Japanese corporate scandal. Following in the wake of fake data from the likes of Kobe Steel, Mitsubishi and Nissan, Toray becomes the latest to be embroiled in falsifying product data. The synthetic fibre-maker has admitted rewriting quality tests before shipping products to several companies, including those that make car parts and tyres.

Black Friday saw footfall in the UK high street shops down 4.2%, and 3.6% in shopping locations, against market expectations of only 0.6%. The usual suspects, the continuing squeeze on household income and the recent rate hike, came into play but many stores already had prior sales bargains in place.

The Consumer Financial Protection Bureau has had two directors this week following the resignation of its previous incumbent who nominated Leandra English as his replacement. However, President Trump had other ideas and installed his budget chief Mick Mulvaney to the position – a man who has called the consumer financial watchdog “a sick, sad joke” that should be scrapped. The agency has tried to curb the power and influence in Wall Street following the GFC whilst others consider it stifling economic growth with too much red tape and overbearing regulations.

Société Generale is to provide US$ 678 million in Q4 in relation to tax changes and redundancy payments with plans to cut a further 900 jobs on top of the 2.6k already announced. The bank is focusing on enhancing its tech investments and mobile banking to boost both revenue and profitability.

Troubled Uber Technology will reportedly post a Q3 loss of US$ 1.5 billion as it faces several legal battles, intense competition and regulatory problems in several jurisdictions. Two of its early backers want out and they have received a bid from Japan’s SoftBank to acquire a large shareholding but at a 30% discount on its last US$ 69 billion valuation. Other possible suitors for a stake in the ride-hailing company include Dragoneer Investment, Sequoia Capital and Tencent as General Atlantic and DST Global have dropped out of discussions.

In 2014, Time Warner divested itself of the iconic magazine publisher which has struggled, like many other in the printing world, from falling advertising revenues; it posted a 9.5% fall in Q3 revenue to US$ 679 million. In its home country Time publishes Entertainment Weekly, Fortune, People and Sports Illustrated.

The OECD is yet another global institution bullish about the global economy and has upped its 2017 forecast to 3.6% followed by 3.7% and 3.6% over the next two years. Over the three year period, US and euro area growth will be 2.2%, 2.5% and 2.1%, with the latter at 2.4%, 2.1% and 1.9%. There is no surprise to see the UK economy with figures of 1.5%, 1.2% and 1.1%. However, it is highly likely that these forecasts will not ring true and will probably come in higher as they do appear to be on the low side.

Zimbabwe is not the only country in an economic downturn. S&P have downgraded South Africa’s local currency debt score to junk status of BB+. It highlights the fact that the country’s economy has stagnated and, with its external competitiveness softening, a worsening of its economy and public finances is all but certain. The end result would be a widening of its budget deficit with borrowing costs increasing.

It appears that Prince Miteb bin Abdullah is one of the first detainees in the recent Saudi corruption crackdown to be released after reportedly settling to repay US$ 1 billion as “compensation”. Earlier in the month, Crown Prince Mohammed bin Salman hinted that most of the 200 or so Saudis detained in the Riyadh Ritz Carlton would be freed if they agreed to repay some of the money they had acquired via illicit means. The Public Prosecutor has the final say whether to take any of the suspects, that include Prince Alwaleed bin Talal and billionaire Mohammed Al Amoudi, to court instead; to date, at least five will face prosecution whilst several have already settled with cash payments.

Having started the year trading at US$ 1k, virtual currency Bitcoin was trading at just over US$ 8k last Friday (24 November) and by Wednesday had risen by a further 25% to top US$ 10.0k for the first time. Most bank chiefs have trash talked the virtual currency, likening it to a Ponzi scheme, mainly because it is encroaching on their traditional business. International authorities are also concerned especially with the lack of regulation and not being backed by any government, or central bank, no entity is responsible for backing their value. Like similar crypto currencies, Bitcoin makes use of blockchain – an online ledger of transactions – backed up by a network of unknown computer operators on the internet. There is no doubt that anyone who purchases crypto currency will have bought a roller-coaster Ticket To Ride!

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