What About Us?

10% of Dubai’s total land area is to be given over to the Marmoom Reserve project which was launched by HH Sheikh Mohammed bin Rashid Al Maktoum this week. Sponsored by nine government agencies, the unfenced desert conservation reserve will be home to over 200 species of native birds and 150 types of migratory birds. It will also provide a sanctuary for 19 kinds of endangered animals and birds and be home to 26 species of reptiles and nine varieties of mammals. The development, with forty hectares of shrub land/fertile area and 10 km of lakes, will introduce more than twenty environmental, cultural and sports-related initiatives (attracting 20k participants). The Marmoom Reserve is also the site of the important 3k-year old Saruq Al Hadid archaeological site.

Driven by a myriad of factors, including higher inflation (because of the January introduction of VAT), Core Savills expect another year of downward adjustments, along with tighter investment yields for Dubai realty. However, there is an expectation of prices in the mid and premium level sectors stabilising, whilst there will be a slowdown in the rate of declining rents.

Propertyfinder Group estimates that the four most expensive locations for apartment purchases are Downtown (US$ 581 per sq ft), Old Town (US$ 535), Palm Jumeirah (US$ 501) and DIFC (US$ 489). When it comes to villas, the top five were Emirates Hills (US$ 708 per sq ft), Palm Jumeirah (US$ 664), The Lakes (US$ 373), Jumeirah Islands (US$ 358) and The Meadows (US$ 332).

The latest Cavendish Maxwell survey points to a 2017 decline for Dubai rents and sale prices – a trend that will continue into Q1. Over the year, both villas and apartments have seen average price dips of 2%. Larger than the average declines for villas were witnessed in Arabian Ranches, Jumeirah Islands, The Meadows and Victory Heights, ranging from falls of 3.0% – 3.2%; only two locations (for apartments) saw rentals drop over 3% – Downtown (3.2%) and The Greens (3.0%).

Jumeirah has appointed a new CEO, industry veteran Jose Silva, who has spent the past 25 years with Four Seasons Hotels & Resorts, with his last position being regional vice president overseeing France, Switzerland, Spain and Portugal, as well as general manager of Hotel George V in Paris. In his new role, he will be responsible for international expansion that will see additional properties to Jumeirah’s current global portfolio of 19 (and 25 under development).

TAV Construction Company has been awarded two Emaar construction contracts. The first is for two towers – the 356 mt, 88-storey Promo Tower at The Opera District and a 300 mt, 71-level tower. The other involves two towers (at 65 mt and 55 mt), along with a hotel and hotel apartments. No financial details were available. The developer also announced that its first residential tower, in its almost  five-year Emaar Beachfront Project, Burj Vista 1 – a development of over 20 buildings –  will start selling this Saturday.

Dubai-based RSG Properties expect its 19-storey JVC residential tower to be handed over early next year. The Burj Sabah will comprise studios, 1 and 2-BR apartments.

MAG Lifestyle has announced a new scheme with international partners to offer their staff exclusive discounts on some of their developments. The Dubai-based company has already established relationships with some leading GCC companies and various government agencies. The MAG International Alliances division plans to expand overseas.

DEWA announced its US$ 7.2 billion budget for 2018, 8.2% higher than last year. Capital investments – in both conventional and non-conventional energy sources – are 14.9% higher, at US$ 2.7 billion. The spend will also include power transmission (US$ 1.4 billion), power generation (US$ 736 million), energy distribution (US$ 463 million) and water transmission (US$ 136 million).

Records have been broken over the first two months of Global Village. There have been 2.4 million visitors since its 01 November opening, of which 500k were during the 46th National Day celebrations.

It seems that HEMA, with over 700 stores in twelve European countries, is to set up shop in Dubai. The Dutch discount retailer will make Dubai its first foray outside of Europe by opening three stores, selling its affordable and original design homeware and apparel.

The 72% owner of Damac has indicated that he would be “more than happy” to sell up to 15% of his company to boost the trading in its shares. Formed 15 years ago by now billionaire Hussein Sajwani, who is worth a reported US$ 5.2 billion, the company has a market value of US$ 5.67 billion, with shares trading on 18 January at US$ 0.94.

It seems highly likely that the EU will remove the UAE from a 17-country blacklist of tax havens following “new commitment letters”. The move means that the country will not now face sanctions from the EU.

The 45-year old UAE-based Union Cement Company has divested 92.83% of its business (for US$ 305 million) to Shree Cement. This was the Indian company’s first overseas acquisition, allowing it to boost annual production by 13.6% to 33.2 million tonnes.

It is reported that seven-year old Careem could be involved in an IPO, but probably not in 2018, that will probably value the ride-hailing company at US$ 1.5 billion. In 2016, the Dubai-based company was valued at US$ 1 billion when it raised US$ 350 million from investors that now include Daimler AG, Rakuten and Prince Alwaleed bin Talal.

Another entity that may go public is Emirates National Oil Co which could go the way of its capital neighbor ADNOC by a public offering of its fuel-retailing unit. ENOC could raise US$ 7 billion by hiving off its retail division but any decision would be some time off and may only involve a small share of the business. It operates 116 service stations and services 90 million customers every year.

Following this week’s merger of Al Ansari Exchange and Al Ansari Exchange Services, the new entity, with a US$ 327 million operating capital, becomes the largest exchange and remittance house in the UAE, having a 35% local market share. It expects to see a 14.3% increase in the number of branches to 200.

At this week’s general meeting, Emaar shareholders rubber-stamped the distribution of US$ 817 million this month and a further US$ 272 million in April. This arose after the developer issued 20% of Emaar Development shares in a successful November IPO.

The earnings season began this week in earnest, with mixed results being reported. Despite 2017 revenue climbing 75.5% to US$ 205 million on the back of its on-going Midtown development, Deyaar posted a 39.7% decline in profits to US$ 36 million. However, the 2016 bottom line had been boosted by an impairment write back and an investment gain.

The developer is majority owned by Dubai Islamic Bank which posted an 11.0% hike in net profit to US$ 1.23 billion, driven by higher fee-based income and lower than expected credit costs. Total income was 18.1% to the good at US$ 2.8 billion, with net operating revenue up 13.6% to US$ 2.1 billion.

Emirates NBD reported a 15.0% hike in 2017 profits to US$ 2.28 billion, on the back of marked growth in core fee-based income and lower credit costs. Total income – at US$ 4.2 billion – was 4.8% higher on the year, with net interest income rising 7.0% to US$ 2.9 billion. Recently introduced cost cutting measures resulted in a 1% drop in expenses to US$ 1.3 billion.

Emirates Islamic turned 2016’s Q4 loss of US$ 23 million to a US$ 55 million profit in Q4, as annual returns surged almost sevenfold from US$ 29 million to US$ 191 million. Consequently, its Return on Equity rose from 2% to 10%, whilst customers’ deposits were 2% higher at US$ 11.4 billion.

The DFM opened on Sunday (14 January), at 3495 and nudged 36 points higher (1.0%) by Thursday, 18 January, to close at 3531. Emaar Properties was up US$ 0.04 at US$ 2.00, with Arabtec down US$ 0.03 to US$ 0.72. Volumes were higher at 331 million shares traded on Thursday, valued at US$ 153 million (compared to 180 million shares worth US$ 65 million the previous Thursday – 11 January).

By Thursday, Brent Crude traded US$ 0.25 higher at US$ 69.51, with gold heading the same direction – up US$ 5, to US$ 1,327, by 18 January 2018.

By selling off some 30% of its business in listing its mobile-phone division, SoftBank Group expects to reap some US$ 18 billion. The IPO – expected to use both Tokyo and London stock exchanges – will take place later in the year and will be Japan’s biggest in 30 years when Nippon Telegraph and Telephone Corp went public.

Melrose Industries has made a US$ 9.6 billion hostile takeover bid for UK-listed engineering company, GKN that would leave its shareholders with 57% of the combined business. GKN’s recent problems include a US$ 180 million write-down in its US aerospace plants which it now plans to divest from its car parts division.

Ferrero Group is set to acquire Nestlé’s US sweets and chocolate business in a US$ 2.8 billion deal which would then make the Swiss food company the third largest confectioner in the US. The US market, valued at over US$ 8 billion a year, is the largest in the world with the two biggest companies ahead of Ferrero being Mars and Hershey.

Airbus announced on Monday that if it did not receive any new orders, it would stop production of the A380 superjumbo. In its ten-year history there have been 317 orders, with 142 emanating from Emirates. Three days later a US$ 16 billion order from the Dubai carrier (for 20 planes and an option for a further 16) saved the jumbo from almost certain oblivion. The scale of the problem can be seen from the fact that Airbus was producing 27 planes a year which will fall to only eight in 2019. Further good news for the plane maker came with the announcement that, for the fifth year in a row, it had sold more planes than its arch rival Boeing – with 1,109 orders and 718 deliveries against 912 and 763.

Beating original government estimates by 0.4%, China’s economy expanded by 6.9% last year – the first time since 2010 that the pace of growth had headed north. As is the norm these days, there are analysts who think these figures may be overstated and that expansion has been weaker than reported.

Although he will fail to get any praise from his critics surely President Trump can take some kudos from his recent overhaul of the US tax system which has seen Apple (among others) planning to increase investment as a result of his decision. Furthermore the tech giant will pay US$ 38 billion in tax (based on the US$ 250 billion it holds in overseas vaults) and will create an additional 20k jobs in its home country. By 2022, Apple is expected to contribute US$ 350 billion to the US economy and spend US$ 55 billion with domestic suppliers. The tax programme saw corporate rates slashed from 35% to 21% and will give an immediate boost to an economy that is already in top gear.

Although there was a 0.1% fall to 3.0%, UK’s inflation level is still more than double that of the Eurozone’s 1.4%. However any fall from a six-year high is welcome to UK consumers who have been hammered by the double whammy of falling sterling (pushing up the price of imports) and slow wage growth, lagging well behind the high inflation level. Meanwhile Germany’s consumer price inflation – at 1.8% – rose to a five-year high and well up on the 0.5% rate this time last year.

Sterling is on a roll and was trading this week at over 1.38 to the greenback – its highest level since the June 2016 Brexit referendum when it had sunk overnight to 1.21. Two of the drivers for the latest boost were reports that both Spain and the Netherlands were open to a softer Brexit deal (in contrast to the hard-line approach of the mainly unelected EU bureaucrats) and indications that the ECB may be unwinding its stimulus package.

As widely expected by most – but somewhat of an apparent surprise to the May government – Carillion has gone into liquidation. UK’s second biggest construction company failed to convince its creditors that it would be able to settle its outstanding liabilities – particularly because it had a bank balance of only US$ 20 million and had run up huge debts, after losing money on major contracts.

As the company’s debt levels surged and its inability to pay its liabilities, it was inevitable that creditors would cut off credit lines, including banks that could now face a US$ 2.8 billion loss. What seems to have happened was that Carillion got badly hit by major cost overruns, including three major government construction projects, valued at nearly US$ 2 billion – the Aberdeen bypass, the Royal Liverpool University Hospital and the Midland Metropolitan Hospital.

As far back as 2015, hedge funds and financial speculators were betting (and winning) millions of dollars that Carillion would hit the buffers which came true last July when its share price first crashed. Its former chief executive reportedly received over US$ 2.0 billion in severance pay in 2016 and was still receiving a salary of US$ 830k; other executives were also being paid beyond their exit date.  Of all the stakeholders in this sorry mess, the government seems to have been the most short-sighted, giving the beleaguered company more work of US$ 2 billion, even after the company’s July profits warning. Unfortunately, it will be all the others who will suffer because of this mess and they should be asking the May administration What About Us?

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