More Than You Deserve!                                                                       12 May 2023

The 3,112 real estate and properties transactions totalled US$ 2.56 billion, during the week, ending 12 May 2023. The sum of transactions was 170 plots, sold for US$ 515 million, and 2,261 apartments and villas, selling for US$ 1.46 billion. The top three transactions were for plots of land, one in Al Sufouh 2, sold for US$ 82 million, and the second in Saih Suhaib 4 for US$ 40 million, and the third in Jumeirah Island 2 for US$ 35 million. Al Hebiah Fifth recorded the most transactions, with fifty-seven sales, worth US$ 38 million, followed by twenty-three sales in Madinat Hind 4, for US$ 8 million, and thirteen sales in Al Hebiah Third, valued at US$ 15 million. The top three transfers for apartments and villas were all for apartments, the first in Burj Khalifa, valued at US$ 41 million, followed by a US$ 16 million sale in Palm Jumeirah, and the third in Umm Suqeim 2 for US$ 14 million. The mortgaged properties for the week reached US$ 515 million, with the highest being for a plot of land in Al Karama, mortgaged for US$ 64 million, whilst one hundred and forty-four properties were granted between first-degree relatives worth US$ 74 million.

Nakheel has launched a seventy-one floor, 300 mt residential tower on Palm Jumeirah. Como Residences will only have seventy-six residences starting with 2–7 B/R apartments, encompassing from 10k sq ft of indoor and outdoor living space; it will also house a spacious duplex penthouse. Each floor will be occupied by only one or two homes – served by access-controlled elevators leading to individual private lobbies –  that will have their own private sandy beach, a 25m lap pool, and a rooftop infinity pool. It will also feature multiple swimming pools, padel courts, squash courts, and a gymnasium, as well as a spa and wellness centre.

Having already been delayed for several years for a variety of reasons, including from the impact of Covid, the Kleindienst Group, announced that the first phase of its ‘The Heart of Europe’ will be completed by the end of this year, when forty-eight floating “seahorse villas” will be handed over. This is part of the developer’s US$ 5 billion project, which includes palaces, with private beaches, hundreds of smaller villas and apartments, sixteen hotels, as well as floating “seahorse” villas on the six-island cluster. Located four km off the Dubai coast, completion is expected by 2026. The first property on the project, the Cote d’Azur Monaco Hotel, opened to the public at the start of the year; a further seventy properties are currently under construction.

MAG, one of the leading real estate developers in the UAE, has announced the launch of sales for residential homes at The Ritz-Carlton Residences, Dubai, Creekside, part of the Keturah Resort. The launch follows the successful sales of over 54% of units, including four penthouses at the Butterfly buildings and 16 units at the L-shaped buildings. Keturah Resort by MAG is located on Dubai Creek, facing Dubai’s wildlife sanctuary in Ras Al Khor.

The Founding Chairman of the Al Habtoor Group, Khalaf Al Habtoor, announced the launch of the world’s largest residential building – Habtoor Tower Dubai. Located on the banks of the Dubai Water Canal the 81-floor project will comprise 1,701 keys, with a built-up area of 3.517k sq ft. The Group is in the final stages of selecting the main contractor for the project and expects completion within three years, with the Chairman adding “this new project befits our country’s vision to always be at the forefront of innovation, responsible development and preserving our world for the next generations”.

It appears that Emirates has almost fully recovered from the impact of Covid as it posted a record US$ 2.9 billion profit, (following a US$ 1.1 billion loss the previous year), as revenue came in 81.0% higher, on the year, to US$ 29.3 billion. The group said it will pay the Investment Corporation of Dubai a dividend of US$ 1.23 billion for the fiscal year and will also prematurely repay US$ 817 million of debt raised during the Covid-19 pandemic. The world’s largest long-haul airline carried 43.6 million passengers – 123% higher, year on year – as it ramped up its flight schedules. Currently, the carrier is operating its full fleet of Boeing 777s and eighty-six of its 116 Airbus A380s and expects to return to its full pre-pandemic network over the next twelve months; it also saw its seat capacity jump from 58.6%, to 79.5%, with passenger yields coming in 7.0% higher. The carrier also announced a generous profit-sharing plan for employees, which works out to twenty-four weeks’ worth of salary. Nobody can argue that this was not deserved.

Dnata, its cargo and ground handling, catering and retail, and travel services businesses, tripled its annual profit to US$ 90 million, as revenue was 74.0% higher, at US$ 4.06 billion, with new investments during the year at US$ 127 million. It was inevitable that air freight was unlikely to replicate the exceptional performance post Covid, reporting a 21.0% revenue decline to US$ 4.69 billion – equating to 16.0% of the Group’s total revenue. Workforce numbers for the Group rose 20.0% to 102.4k. Chairman and chief executive, Sheikh Ahmed bin Saeed, commented that “this reflects the strength of our proven business model, our careful forward planning, the hard work of all our employees, and our solid partnerships across the aviation and travel ecosystem.”

With traffic numbers touching 95.6% of pre-Covid 2019 levels, Dubai International (DXB) posted 21.26 million passengers in Q1 – 55.8% higher, compared to the same period in 2022; last year, it had retained its title as the world’s busiest airport, for the ninth consecutive year, with 66.0 million passengers. March saw the highest monthly traffic – at 7.83 million – since January 2020’s 7.8 million. The forecast for 2023 is 83.6 million passengers, almost reaching 2019 levels. The airport is connected to 234 destinations across ninety-nine countries via eighty-nine scheduled international carriers. The top five destination countries continue to be India, Saudi Arabia, UK and Pakistan – with three million passenger traffic, 1.6 million, 1.4 million and 1.0 million respectively – and the top four cities being London, Mumbai, Jeddah and Riyadh, (890k, 645k, 641k and 604k). Whilst cargo handled dropped by 23.0% to 400k tonnes in Q1, total flight numbers headed skywards to 100.9k – 23.0% higher on the year and 1.6% up on pre-Covid 2019 returns.

Good news for the Dubai economy came via April’s S&P Global PMI, with the results indicating that, driven by impressive the travel/tourism sector, business conditions improved at one of the fastest rates since mid-2019, reaching an eight-month high in April. The index reading, at 56.4, was 0.9 higher on the month, driven by a marked increase in sales, (mainly because of new clients, lower prices/increased market activity, and new orders, as demand growth quickened. There were improvements noted in the supply chain, as average lead times on inputs shortened for the fourth straight month, along with sustained efforts by companies “to build inventories in the light of a promising demand outlook, as well as recruiting staff to support higher workloads”. The rate of job creation remained high but had slowed from March’s five year high, as companies added to their workforce in the light of higher output requirements. The rate of charge discounting was “the quickest recorded in three and a half years”, whilst the average prices paid for inputs were broadly unchanged from the previous survey period.

The UAE’s first auction of 2023 dirham denominated Sukuk, worth US$ 300 million, was oversubscribed 7.6 times, as bids worth US$ 2.26 billion were received, with the federal government continuing to diversify its funding resources and supports the growth of the Islamic economy. Two months ago, it raised the same amount from the sale of treasury bonds. Deputy Prime Minister and Minister of Finance, Sheikh Maktoum bin Mohammed, commented that the oversubscription reflected the “UAE’s prudent strategic investment policies and objectives, as the country continues to solidify its position as a global investment destination and one of the most competitive and advanced economies in the world”.

According to UAE’s Central Bank, the country’s GDP climbed 7.6% last year, attributable to significant activity across all sectors, at a time when most international markets reported a slowdown in economic growth due to increases in interest rates and geopolitical tensions. As a bonus, the country’s inflation rate was well below the 4.8% international inflation average in 2022, as was classed as one of the world’s best-performing economies. Some of the factors behind these impressive results were down to the decisions and directives of the wise leadership, as well as its undertaking of proactive measures and the reopening of the economy following the Covid-19 pandemic.

In a move to confront various cyber-attacks by vital sectors, the UAE Cybersecurity Council has appealed to everyone in the public and private sector entities to be on the lookout for cyber-attacks that may target “national digital infrastructure and assets”. In the event that any entity becomes aware of a cyber-attack, it should exercise caution and share data with the competent authorities in order to prevent possible malicious attacks. According to the government’s head of cybersecurity, Mohammed Hamad Al Kuwaiti, it prevents more than 50k cyberattacks each day.

United Properties continued along its recovery path in Q1 announcing a net profit of over US$ 3 million, (compared to a US$ 3 million deficit in 2022), with revenue 18.0% higher at US$ 33 million, driven by Dubai’s robust real estate sector and its subsidiaries returning impressive results. Over the period, as admin expenses dipped 21.0% to under US$ 5 million operating profit skyrocketed by 335% to over US$ 5 million. As at 31 March, its book value was flat at US$ 0.125 per share.

Dubai Investments has posted a 55.2% jump in Q1 2023, year on year, net profit to US$ 86 million, as total income was 34.7% higher at US$ 278 million. Although total Shareholder Equity rose 7.2% to US$ 3.59 billion, Total Assets remained flat at US$ 5.71 billion. The figures were helped by “the response to Danah Bay, our premium beachfront development in the emirate of Ras Al Khaimah, has exceeded all expectations and we are looking forward to launching the next phase”. The Dubai-listed company is bullish on its future growth because of the local economy experiencing robust growth and the current boom in the real estate sector.

Deyaar posted a mega 125.6% increase in Q1 net profit to over US$ 15 million, mainly due to the current boom in the local realty sector, with revenue up 93.0% to US$ 85 million. Over the past few months, the developer has seen successful sales of its recent launches – Regalia at Business Bay, Tria in Dubai Silicon Oasis and Mar Casa at Dubai Maritime City, whilst it has seen its revenue “growing significantly” over the past few months due to construction progress at Regalia and the “exceptional performance” of its developments such as Noor and Mesk in Dubai Production City. The Dubai-based company is majority owned by Dubai Islamic Bank and last June carried out a US$ 510 million capital restructuring programme by writing off accumulated losses from previous years. It also received a payment of US$ 54 million arising from a land dispute with master developer Limitless.

In Q1, Salik posted its highest level of quarterly revenue-generating trips and toll usage revenue in its sixteen-year history, at 113.6 million trips and US$ 124 million, respectively, with toll usage revenue, accounting for 87% of the total increasing by 7.9%; driven by a complete lifting of Covid restrictions, and the marked upturn in the local economy, the Dubai toll operator posted a net profit of US$ 75 million.

Although revenue slipped 5.1% to US$ 1.63 billion, Emaar Properties posted a 42.9% surge in Q1 net profits to US$ 871 million; by the end of March, its backlog stood at US$ 15.18 billion. EBITDA rose 25.0% to US$ 1.09.   Last week, Dubai’s largest listed developer confirmed it will open eight new hotels in the UAE, Saudi Arabia and Egypt, in H2 or in 2024. Late in 2022, Emaar increased its share capital by 8% to US$ 2.40 billion and also increased the foreign ownership limit of its shares to 100%, from 49%, to capitalise on high interest from international investors.

The company’s build-to-sell property development business, majority-owned by Emaar Properties, posted flat Q1 profit, at US$ 271 million, with its revenue stream down 33.0% to US$ 649 million, as EBITDA slipped 9.0% lower to US$ 311 million. Mainly because of business in Egypt, Emaar International, the group’s overseas arm, posted revenue of US$ 114 million revenue – equating to about 7.0% of total revenue – on the back of property sales of US$ 171 million. Emaar’s shopping mall, retail and commercial leasing operations posted a 7.0% hike in Q1 revenue of US$ 171 million. The company’s hospitality, leisure and entertainment businesses posted a 17.0% hike in year-on-year revenue, hitting US$ 241 million, attributable to the boom in Dubai’s tourism sector and high domestic spending. Its hotels in the country attained 75% occupancy rates in Q1.

In Q1, Emaar Development saw a 25.7% hike in property sales to US$ 2.34 billion and a net profit of US$ 288 million, with EBITDA at US$ 311 million. The UAE build-to-sell property development business, majority owned by Emaar Properties, has a sales backlog of US$ 12.45 billion – to be recognised as revenue in the coming years. During the quarter, it successfully launched seven projects – Elora in The Valley, Elvira in Dubai Hills Estate, Palace Residence North, Cedar and Savanna in Dubai Creek Harbour, Anya and Anya 2 in Arabian Ranches III. In Q1, the company, delivered about 1.6k residential units in prime locations such as Dubai Hills Estate, Dubai Creek Harbour, Downtown Dubai, Emaar Beachfront, Arabian Ranches, and Emaar South. To date, it has delivered 59.5k residential units, with over 28.5k currently under development in the UAE.

The DFM opened on Monday, 08 May 2023, 91 points (2.6%) higher the previous fortnight, shed 24 points (0.7%) to close the week on 3,559, by 12 May. Emaar Properties, US$ 0.01 higher the previous week, nudged US$ 0.01 higher to close the week on US$ 1.64. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 3.83, US$ 1.52, and US$ 0.42 and closed on US$ 0.68, US$ 3.81, US$ 1.47 and US$ 0.40. On 12 May, trading was at 255 million shares, with a value of US$ 106 million, compared to 266 million shares with a value of US$ 113 million on 05 May 2023.

By Friday, 12 May 2023, Brent, US$ 16.24 lower (17.7%) the previous three weeks, shed a further US$ 1.12 (1.5%) to close on US$ 74.14.  Gold, US$ 31 (0.2%) higher the previous fortnight, shed US$ 9 (0.4%) to US$ 2,016 on 12 May 2023.

Saudi Aramco posted an 18% fall in Q1 profit to US$ 32.0 billion, mainly down to lower crude prices in the quarter, as revenue dipped 10.6% to US$ 111.3 billion on an annual basis. Aramco’s annual capital expenditure rose 18% annually to about US$ 38 billion last year from 2021, due to continuing crude oil increments and other development projects, with 2023 capex estimated at between US$ 45.0 billion – US$ 55.0 billion. Cash flow, at US$ 39.6 billion, was nearly 4.0% higher in Q1, compared to the same period in 2022, with free cash flow remaining steady at US$ 30.9 billion. The world’s largest oil-producing company plans to pay a US$ 19.5 billion dividend in the current quarter, indicating that it plans to introduce performance-linked dividends, (based on between 50% – 70% of its annual free cash), in addition to the base dividend that it currently distributes.

Ryanair has announced a massive US$ 40 billion deal with Boeing for the purchase of three hundred new planes – half of which will be the 737-MAX-10s and the remainder to be decided later; phased deliveries will occur between 2027-2033. The updated 737 will have 21% more seats – 228 – burn 20% less fuel and will be 50% quieter. Chief executive, Michael 0’Leary is expecting the airline to grow by 80% over the next decade, with traffic numbers topping three hundred million and payroll numbers 10k higher. He also commented that “we are committed to delivering for Ryanair and helping Europe’s largest airline group achieve its goals by offering its customers the lowest fares in Europe”. The deal is still subject to shareholders’ agreement.

LinkedIn becomes the latest tech giant, following in the footsteps of Amazon, LinkedIn’s parent Microsoft, and Alphabet, to announce a culling of its payroll, with its 20k workforce being reduced by 3.5%; at the same time, it is planning to phase out its local jobs app in China, (with its only remaining app being phased out by this August), in a move to streamline its global operations.  In 2021, it mostly withdrew from China, after seven years in the country, where it had been the only major Western social-media platform operating in China; it indicated that it had been operating in a “challenging environment”.

Following the latest Reserve Bank of Australia’s report, it seems that the country’s economy is much weaker, and households are suffering much more, since its February forecast; on the flip side, it appears that inflation is declining at a faster rate than posted three months ago – this was driven by a fall in real household incomes and consumer spending. Three months ago, the central bank forecast fiscal 2023 (year ending 30 June 2023) growth at 2.2% – this has been slashed to just 1.7% – and for the calendar year ending 31 December 2023 from 1.6% to 1.2%. There is no surprise to see household spending remaining stagnant after the 3.0% slump recorded in 2022. Over this year, the RBA had estimated wage growth at 4.7% – now it has been pared back to 2.5%. With any wage growth falling well behind inflation levels, it is obvious that any consumer spending will have to come out of savings or an increase in debt, which has been for some time at one of the highest levels in the world. It is estimated that the 7.0% inflation level seen at the beginning of 2023 will decline to around 4.0% by 31 December which will still be above the RBA’s 2-3% target range. In other words, many analysts are of the opinion that the RBA prime short-term aim is to get the inflation level moving lower on a quicker timescale.  Its governor, Philip Lowe, says Australia remains on its “narrow path” to avoid a recession, at a time when living costs are the highest, they have been on record, and, having risen by between 7.1% to 9.6%, are higher than the current 7.1% rate of inflation. Food, housing and mortgage interest charges were the biggest contributors to the cost-of-living increases, with employee households recording a 78.9% increase in mortgage interest charges in the past 12 months.

The recent Ai survey only reiterated what most analysts already knew – Australian business has hit the buffers, having contracted every month since April 2022 – the same time the RBA started hiking rates. The report by the Australian business group posted that its Industry Index had fallen by 14 points to -20.1 points – an indicator of deeply contractionary conditions – with activity and sales down -18.9 points in March and exports slumping by -24.1 points. There is no doubt the Australian business is caught in a web of supply constraints and falling demand, caused by price pressures and shortages for supply chains and labour. Any further rates hikes, by the RBA, will only make matters worse, with its Governor, Philip Lowe noting that rising  “interest rates, while necessary to contain inflation, will add more pain to businesses facing a worsening economic outlook.”

A lot can happen in two years as illustrated by the current state of the US economy, which has come down from boom status, with economic growth at 5.9%, to a marked slowdown, and a probable recession on the near horizon. In H1, the economy struggled to attain 1.1% growth mainly because of the Fed finally deciding to tweak rates higher so as to hit the brakes to cool the economy. Over the past fourteen months, the central bank has raised rates by 5.0% which has brought the economy to a shuddering stop. The economy is in trouble, with big banks – including Silicon Valley Bank, Signature Bank and First Republic – failing and having to be bailed out to prevent a banking meltdown, whilst big companies, (including Amazon, Disney, Ford and Tyson Foods), that were posting record profits just two years ago, have been slashing their workforces in a bid to preserve margins, as demand declines and other costs move higher. One major casualty of the interest rate hikes is the housing sector, which accounts for 15% of the country’s GDP, which saw a 20% slump in the number of homes sold, with hundreds of mortgage bankers losing their jobs. Other sectors, such as tech, finance and crypto, that boomed in an era of low interest rates, are now struggling, and will suffer even further in a slowdown.

By early next month, and if Congress does not act to raise the US’s debt ceiling, to US$ 31.4 trillion, the consequences could be dire and that without an agreement, it could run out of money by early June. Treasury Secretary Janet Yellen, noted that the federal government might not be able to make wage, welfare and other payments and that “it’s Congress’s job to do this. If they fail to do it, we will have an economic and financial catastrophe that will be of our own making.” In April, the House of Representatives passed a bill to raise the ceiling, currently roughly equal to 120% of the country’s annual economic output but included in the bill sweeping spending cuts over the next decade, with US President Joe Biden against any conditions. This will not be the first – or last – time that negotiations have gone down to the wire which has often been the case in the seventy-eight times the debt ceiling has been raised or amended since 1960. Even with a slowdown, the IMF expects growth of 1.6% in the US this year – the fastest of the seven major advanced economies, viz., Canada, France, Germany, Italy, Japan and the UK.

Yesterday, and as widely expected, the Bank of England raised interest rates, by 25bp to 4.5%, (for the twelfth consecutive time and to their highest level in fifteen years), as it belatedly tries to stop prices rising so quickly and put a stop to surging inflation which is still hovering in double digit territory, exacerbated by food prices increasing at their fastest rates for forty-five years. The increased bank rate will impact 1.4 million on tracker and variable rate deals who will see an immediate increase in their monthly payments of some US$ 30 per month; mortgage rates started moving north in December 2021, and since then average tracker mortgage customers is paying about US$ 525 more a month, and variable rate mortgage holders about US$ 332 extra. According to the Financial Conduct Authority, an estimated 356k mortgage borrowers could face difficulties with repayments by July next year. The BoE is facing a fine balancing act, weighing up whether to move rate higher to curb inflation and dampen economic growth or cut rates with the possibility of the opposite effect.

The good news, if there is any, is that the BoE’s chief noted that the UK, helped by the fact that average energy prices are expected to drop to US$ 2.7k by the end of the year, is no longer expected to go into recession. The change in outlook for the economy contrasts sharply with the Bank’s forecast six months ago when it said the UK would enter the longest recession on record. This is the same character who said inflation would “fall sharply in April” but not as far or as fast as it previously thought. It seems to the casual observer that if the BoE were a company, the senior managers would have all been sacked for mismanagement long ago, for not keeping to their targets. In this case, the BoE’s inflation target had been 2.0% for several years and for some time hovered below that figure. In August 2021, inflation reached the magical 2.0% mark but after that, it started moving higher and by the end of that year was at 5.1%, but the bank rate was still at 0.25%! The question nobody seems to want to answer is why the BoE did nothing when it was obvious to anyone that inflation had climbed 155% to 5.1% and that increasing rates would be a formality to bring inflation down. By August 2022, inflation had nearly doubled to 9.9% but still little bank action with the rate having only moved to 1.75%. Over the next four months inflation went even higher to 10.1%, with the BoE finally taking some action – but far too little and far too late – pushing rates up to 3.50% by the end of December 2022. By March 2023, inflation was still in double digit territory whilst the interest rate had risen to 4.25%. It was some consolation to see that the BoE’s chief economist said that the UK citizens needed to accept that they are poorer, or inflation will keep rising.

The latest in the episode of claims that UK male business leaders have acted inappropriately in the presence of members of the other sex have been brought against John Allan, a former president of the now disgraced CBI, between 2018 – 2020, and chairman of Tesco for the past eight years. He has strongly denied claims in the Guardian newspaper that that he touched women’s bottoms on two separate occasions – one at last year’s Tesco AGM and the other in 2019 at a CBI event. Tesco has confirmed that it has never received any complaints and that his conduct has “never been the subject of a complaint during his tenure as chair of Tesco”. The Guardian also claims that Mr Allan commented on a CBI employee’s dress and bottom in 2021 – an incident that he said he does not recall – but admitted he had made a comment to a female CBI worker in late 2019 about a dress suiting her figure. It does seem that sordid behaviour from the past will be continued to be dug up well into the future, and that several will be caught and brought to some form of justice. Just as for the likes of Jimmy Savile, Rolf Harris, Gary Glitter and Stuart Hall, who probably thought they would be immune from any legal action, the clock is ticking, and if you get caught it is no More Than You Deserve!