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What We Ain’t Got!

Posted on March 29, 2015 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum launched the 22 million sq ft phase 2 expansion of Dubai Healthcare City which will cost up to US$ 1.36 billion. It will include the Nashami health project as well as retail and hospitality outlets. This will be a major boost for Dubai as it aims to become a major player in the global healthcare and medical tourism sector.

Union Properties expect work to commence on the five-tower The Vertex in Q1 2016. Located in Motor City, the US$ 300 million project will have 700 residential units and 66k sq ft of retail space, with the first tower ready by early 2018. A separate US$ 117 million, 4-tower development, also in Motor City, will have 200 apartments, with work starting in September.

Arabtec reported disappointing 2014 net profits, down 49.4% to US$ 66 million, largely because of a H1 blow out in general and administrative costs which soared 74.7% to US$ 204 million. The board indicated that it had intervened in June to curb unnecessary expenses – such as suspending some non-core operations including in Pakistan and Russia – at the time the then CEO Hasan Ismaik stepped down. Revenue was up 46.0% to US$ 2.26 billion, with gross profit showing a healthy 68.0% hike to US$ 250 million and the order book up at US$ 2.62 billion. However, Q4 results indicated a US$ 26 million loss which sent the developer’s shares sharply down. Subsequently, the Board has decided to streamline operations and started with plans to sell four of its five Saudi operations in which it has major shareholdings.

As the bottom was falling out of its share price early in the week, Arabtec announced a US$ 283 million Saudi order to build 380 villas in Dhahran for Aramco. The company is also set to soon conclude an Egyptian contract to build 1 million housing units, initially estimated at US$ 40 billion.

For the first time, the British Export Credit Agency has guaranteed a sukuk issue. Emirates has set the initial price for the US$ 913 million facility which will be in the region of 100 basis points over midswaps. The Dubai carrier will use the funds for the acquisitions of four new Airbus 380s.

MAF currently operates over US$ 10 billion worth of property, including 17 shopping malls, 11 hotels and 3 mixed-use communities in the MENA. The Dubai retailer has just appointed Bertrand Julien-Laferriere as its CEO.

Dubai Holding Commercial Operations Group, which manages several entities including Jumeirah Group, Tecom and Dubai Properties Group, saw its 2014 net profits up 42.0% to US$ 1.28 billion, as revenue rose 14.0% to US$ 3.60 billion.

Dubai Investments has gone into a 50:50 JV with the Saudi/Lebanese realty firm, RED House, to manage projects in the Kingdom, the first of which will be a Riyadh industrial park. The set-up, similar to that of Dubai Investments Park, will cover an expanse of 11 million sq mt.

The first tender for work on Nakheel’s Al Khail Avenue will be released later in the month. Located adjacent to the Al Khail Road, the 3.6 million sq ft dining, entertainment and retail hub, with over 350 outlets, will open in 2018.

Ahead of the final formalities in the Dubai World US$ 14.6 billion debt restructure, it seems that Lloyds and Natixis have sold their outstanding debts, whilst RBS has reduced its exposure.

DP World is liaising with the Maldives to further develop that country’s ports and logistics facilities. Negotiations have been going on for some time, as 2013 reports indicated that a JV was to be established with the local government to build an international port.

The Dubai-based port operator has also launched a new company, P&O Ports, to develop and operate marine and inland ports. The company has already signed agreements with clients in Albania, Madagascar and Somaliland to improve their port infrastructure.

According to recent statistics from the Permanent Committee for Labour Affairs, Dubai has 569k labourers working for 3,039 companies.

China – with a 29.0% increase in trade to US$ 47.7 billion – now tops India as Dubai’s leading trade partner. The emirate’s non-oil foreign trade of US$ 362.7 billion comprised imports (US$ 230.2 billion), reexports (US$ 101.4 billion) and exports (US$ 31.1 billion). Further analysis indicates that direct trade US$ 223.1 billion accounted for 61.5% of the total with free zones contributing US$ 133.2 billion (36.7%) and customs warehouses US$ 6.4 billion (1.8%).

In 2014, Dubai International recorded 15.1k flights of the Airbus 380 – 42.3% up on the previous year and well ahead of second placed Heathrow with 5.4k. Meanwhile the airport had an 11.0% rise in revenue, with help from a 15.0% jump in non-aeronautical revenue, accounting for 53.0% of total revenue. The balance came from aeronautical revenue, including aircraft parking fees, which had a 7.0% rise.

UK’s Leslie Jones Architecture has been appointed to carry out commercial design work on the US$ 32 billion expansion at Dubai World Central. Dubai’s second airport will eventually have the capacity for 200 million passengers. DWC, which started passenger flights 18 months ago, will be developed in two phases, with the initial phase, covering 56 sq km, due for completion before Expo 2020.

Unsecured creditors in the liquidation of ES Bankers (Dubai) Ltd discovered there was no money left for them, despite being owed US$ 14 million. Depositors were luckier receiving an 82.7% payment on the US$ 93.5 million owed. The fallen bank was the Dubai arm of the Portuguese Espirito Santo, recipient of a US$ 5.35 billion bailout payment in August 2014.

Al Etihad Credit Bureau seems to have captured a lot of data since its January official opening. It is reported that the company already has information on 2.8 million individuals, representing 97% of the country’s population with a credit history. It estimates that 16.3% (or 65k) of all UAE-registered companies have credit facilities and the bureau is now in a position to give enquirers up to date and detailed information on companies’ financial standing.

Aster DM Healthcare will issue an IPO later in the year with the favoured locations being Mumbai, Dubai or London. It is estimated that 90% of the privately-held company’s revenue of US$ 600 million was from its GCC operations.

Damac Properties announced a 10% bonus share issue.

Borse Dubai, owned by Investment Corporation of Dubai, has sold its 17.4% share in the London Stock Exchange at a share price of US$ 33.6. In 1997, it had bought 28% of the LSE from Nasdaq at US$ 21.1 per share so this sale for US$ 2 billion has returned a tidy profit. There appears to be no hurry to divest itself of its interests in Nasdaq OMX and other stock exchanges, including an 80% holding in the Dubai Financial Market.

Amlak Finance, 48% owned by Emaar, is to have a 16 April shareholder meeting to approve a move for it to resume trading on the Dubai bourse. The company was delisted in November 2008 – at the height of the local real estate collapse and the GFC – as its shares sank to US$ 0.28, having fallen 79% over the preceding six months. Last November, it finally signed a creditors’ restructuring deal.

The DFMI started the week trading on Sunday at 3473 and dropped 1.9% to close at 3407 on Thursday, and 9.7% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both well down – by US$ 0.17 and US$ 0.11 – to US$ 1.75 and US$ 0.60 respectively. Trading on the day was at 488 million shares, valued at US$ 179 million, being transacted. The market was not helped by the escalating problems in Yemen and had dropped 6% in early morning trade on Thursday before recovering. More of the same is on the cards for next week.

Brent crude closed on Thursday at US$ 59.12 – 8.6% up on last Thursday’s close of US$ 54.43. There are fears that the conflict could see Gulf oil supplies being disrupted as Yemen is an important location with European oil supplies passing through the Red Sea, between Aden and Djibouti.

Lloyds is selling its remaining 50% share in TSB to Sabadell, as the Spanish bank made a share offer of US$ 5.08 – 4% higher than the market close last week. TSB has agreed to the US$ 2.54 billion deal that still remains to be approved by the various regulatory authorities in the UK and Europe. Since Sabadell’s offer, the share price has risen 27% in the past two weeks.

A week after the US rebuked the UK for supporting the recently formed China-led Asian Infrastructure Investment Bank, Christine Lagarde has indicated that the IMF would be “delighted” to cooperate with the new banking facility. Now it seems that Germany and France are set to join, much to US chagrin who see the bank as a rival to their “baby”, the World Bank and a method for China to expand its global reach.

According to reports, close allies of the former Sri Lankan president, Mahinda Rajapaksa, have managed to park more than US$ 2 billion in Dubai accounts. This represents only 20% of monies allegedly stashed away overseas. Needless to say, claims have been rejected by Mr Rajapaksa’s cronies.

For the first time since records started in 1988, UK inflation rate dropped to 0% in February, with obvious signs that it may soon fall into negative territory. The rate will hover around the zero level for most of this year, with the worry being that if prices fall much further than the danger of stagflation becomes more probable. A drop in economic activity will occur as companies and individuals defer purchasing.

A mega deal will see Kraft and Heinz, owned by Warren Buffett’s Berkshire Hathaway Inc and the Brazilian private equity firm, 3G Capital, merging to form the 5^th largest food and drinks company in the world. Kraft Heinz will have combined revenue of US$ 28 billion and expects to save US$ 1.5 billion in annual costs.

In the complicated global telecoms world, it has been announced that Spain’s Telefonica will hive off UK’s O2 to Hutchinson Whampoa from Hong Kong for a reported US$ 15.4 billion. The deal, which will take over a year to finalise, is subject to regulatory approval as the buyer already controls the 3 Network in the UK. Last November, BT pulled out of talks to buy O2 and bought EE for US$ 18.6 billion, whilst five months earlier Vodafone paid US$ 8.0 billion for the Spanish cable firm Ono.

As Australian property prices, particularly in Sydney and Melbourne, hit record highs, it seems that a big correction will occur sooner rather than later. When a property bubble is inflating, speculators tend to push prices up in the hope of a quick capital gain and this is exactly what is happening. For the past two years, 50% of all new lending in NSW is by investors which have pushed prices up beyond what would be considered a true market price. Just like Dubai six years ago, there could be major fall-out when the inevitable correction occurs.

It is no surprise to see that Greece’s February state revenue was down 11% from its target, at US$ 8.43 billion – a shortfall of US$ 1.04 billion. As it is still in the throes of finalising term and payment details with its creditors, the outstanding bail-out funds from the troika remain unpaid until an agreement has been completed.

On Wednesday, eurozone authorities advised the Tsipras government that it would not be receiving an expected US$ 1.3 billion for its bank recapitalisation fund. In the absence of incoming funds that come 09 April, the date it needs to repay the IMF part of its bailout loan, there is the distinct possibility that, for Greeks, money is What We Ain’t Got!

Posted in Finance | Tagged Al Etihad Credit Bureau, Arabtec, Damac, DFM, DP World, Drake & Scull, Dubai, Dubai Financial Market, Dubai Investments, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

The Times They Are A Changin’

Posted on March 21, 2015 by howesdubai

Property developer Nakheel has defended its right to increase villa extension application fees which, in some cases, have risen quite dramatically. Prior to September 2014, the standard tariff ranged from US$ 41 per sq ft in its Jumeirah Village development to US$ 163 in Palm Jumeirah. Then it was announced that the fee would be raised to US$ 545 per sq ft for Palm residents wishing to add an extension to their existing property. Although its tenants are none too happy with this development, Nakheel is holding firm. (In contrast, residents living in an Emaar development are subject to a flat US$ 545 fee).

St Regis Hotel announced Dubai’s first polo resort in association with the Al Habtoor Group. The 136-room hotel will be the focal point of the development that will include a polo club, 24 luxury bungalows, 138 villas, 500 stables and several restaurants.

A new Knight Frank report estimates that H2 Dubai villa prices fell 6.2% but for the year showed a marginal 0.8% increase.

Landmark Group is planning to invest US$ 41 million, over the next three years, in adding a further 20 iCARE clinics to its current Dubai portfolio of six.

Dubai Investment Properties (DIP) has signed an agreement with Yotel to operate a 42-storey, 438-key hotel adjacent to the new Dubai Water Canal Project. The development will also include 127 serviced apartments and should be finished within three years. The Kuwait-managed company currently runs four establishments in New York and has seven more under development.

A new US$ 108 million JV between two Dubai-based companies – Habtoor Leighton Specon and Drake & Scull – will carry out all the mechanical, electrical and plumbing on the upcoming US$ 1.1 billion Jewel of the Creek project. The work involves five tower blocks (of between 15-19 storeys), including residential, hotel and serviced apartments, and is slated for completion by June 2017.

It is reported that the Al Futtaim Group will close three of its stores in Singapore citing that there are too many malls and not enough shoppers in that city. One Marks & Spencer outlet and two John Little stores will soon shut down. The Dubai-based company still controls Robinson & Co which includes John Little, Marks & Spencer, Principles, Trucco, River Island and Fat Face in its portfolio.

MAF announced that it is planning to invest a further US$ 590 million in Egypt, in addition to the US$ 2.4 billion already scheduled for projects earlier. This last tranche will be used for the construction of four shopping malls and several VOX cinemas in Greater Cairo. The property developer is not the only Dubai entity that sees great opportunities in rebuilding that country’s shattered economy and infrastructure.

Egypt is planning to spend nearly US$ 45 billion establishing a new capital for 7 million. Located east of Cairo, the area will cover 700 sq km and should be completed by 2022. The announcement was made at a major investment conference in Sharm el-Sheikh attended by HH Sheikh Mohammed bin Rashid Al Maktoum and Egypt’s president, Abdel Fattah El Sisi. Emaar chairman, Mohamed Alabbar, signed the land deal with Minister of Housing, Mustafa Madbuli.

However, despite all the recent hype relating to mega projects in Egypt, it is reported that Emaar is not involved in the development of the new capital city. It appears that Capital City Partners, a private real estate investment fund headed by its founding partner, Mohamed Alabbar, will manage the new city’s construction.

According to reports, Arabtec has already agreed some of the terms with Egypt’s Housing Ministry relating to the US$ 40 billion project to build one million houses. A potential sticking point, prior to the final contract being signed, is the number of gratis units to be handed over in lieu of the land payment.

JAFZA reported a 9.8% hike in 2014 revenue to US$ 458 million, as its debt level fell 6.2% to US$ 1.23 billion. Profits were higher following a one-off gain from Dubai World which acquired the Economic Zones World, the parent company of JAFZA, for US$ 2.6 billion last December. (It appears that DP World will also take over the US$ 859 million net debt).

Meanwhile DP World recorded an 11.7% jump in profit to US$ 675 million, as revenue rose by 11.5% to US$ 3.41 billion. A US$ 0.235 dividend was approved. At the end of 2014, the company had 77 million TEU capacity, with a further 8 million twenty-foot equivalent units to be added this year, with new facilities coming on line in Turkey, India and the Netherlands as well at Jebel Ali.

It seems that DP World’s majority shareholder, Port and Free Zone World, (a subsidiary of DP World) has finalised a US$ 1.1 billion, 5-year loan to be utilised for meeting its upcoming financial commitments. The facility is reportedly priced at 2.25% points above Libor – a much better rate than the 3.5% it paid on a September 2011 loan.

Dubai Silicon Oasis reported 2014 revenue of US$ 138 million as profit jumped 43%. Over the year, the freezone operator saw a 28.9% increase in operating companies to 1.15k, 63% of which were in the IT sector.

Several government related enterprises (GREs) are planning a seven-day exhibition in Beijing to showcase what Dubai has to offer, with the aim of expanding trade and tourist links. Over the past year, trade has risen by 27.0% and now stands at over US$ 34 billion for the first nine months of 2014. It is estimated that Dubai is home to at least 200k Chinese who run over 3k companies. Tourist numbers have shown healthy increases in recent years and the 25% rise last year saw numbers top 344k.

Du shareholders approved a dividend of US$ 0.054 per share, in addition to the US$ 0.033 interim paid earlier. This follows the 22.8% hike in 2014 net profit before royalty of US$ 1.01 billion.

Dubai-government owned Enoc is looking at buying out the remaining 46% shares it does not currently own in Dragon Oil. The offer made last Friday was at the market price (US$ 7.37) plus an undisclosed premium. Since then the share price has risen and closed on Thursday at US$ 8.72 – 17.2% up on its 15 March price of US$ 7.44.

Dubai has a monorail, a metro and a tram system and now Emaar is currently testing a trolley tram for use in Downtown. When testing is finished and stations built, the hydrogen and electric-powered trolley trams will operate across the whole 7km span of the area.

The latest business to be listed on the local bourse will be Daman Investments. The asset management firm, established in 1998, will sell 55% of its shares in the IPO with listing taking place in April; the company will be hoping that market conditions have improved by then. Three years ago, the company privately sold a 22.7% stake for US$ 120 million.

The DFMI started the week trading on Sunday at 3708 and dropped 6.3% to close at 3473 on Thursday, and 8.0% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both down by US$ 0.14 and US$ 0.08 to US$ 1.92 and US$ 0.71 respectively. Trading on the day was low with 196 million shares, valued at US$ 157 million, being transacted; total market capitalisation was at US$ 25.4 billion.

Another major bank has been caught for illegal activity. Germany’s Commerzbank has had to pay US authorities US$ 1.45 billion for breaking sanctions in dealings with Iranian and Sudanese businesses. Belatedly, the country’s second biggest bank has indicated that it will address the deficiencies highlighted by the US authorities. Last year, BNP Paribas paid a massive US$ 8.9 billion whilst the likes of Standard Chartered HSBC and Credit Suisse have been apprehended for similar illegal behaviour.

Although Cold Play’s Chris Martin and Gwyneth Paltrow had a successful decoupling last year, it seems that the US is having difficulty in decoupling from the rest of the global economies. The outcome from this week’s long-awaited Fed meeting was that it was in no hurry to lift rates and the pace of any future rises would be slower than initially expected.The dollar’s strength is curtailing economic growth, making US exports more expensive and not helping the country’s too-low inflation – 0.2% in January. However, the first rate hike since 2007 will still occur this year but a little later than analysts had expected and then watch what capital outflows from emerging economies will do to the markets.

The IMF chief, Christine Lagarde reiterated what many already know – the global recovery “is too slow, too brittle and too lopsided”. She warned eurozone and Japanese authorities of the risk of continuing low growth and low inflation which, in turn, will result in high unemployment and rising debt levels.

Brent closed on Thursday (19 March) at US$ 54.43, as market indicators point to more turmoil in the market. Kuwait reiterated OPEC’s stance that there is no other alternative but to continue to produce at current levels in an oversupplied market just as Saudi sees recent output up some 3%, touching 10 million barrels per day, and exports rising to 7.5 million. Furthermore US stock levels – at 458 million barrels – are at record highs. The dollar plays an important role in pricing oil – a strong greenback will result in reduced demand for commodities, including oil, denoted in US$, with the opposite impact when the currency weakens.

An embarrassing week for Lufthansa’s CEO Casfar Spohr. The German airline has apparently joined three major American airlines in alleging that Emirates receives an unfair advantage with fictitious government subsidies. As a result, he thinks that this gives the Dubai operator an unfair advantage which could ultimately destroy its competitors and eliminate consumer choice. A day later, Lufthansa pilots began a 3-day strike action beginning Wednesday, and affecting the whole of the carrier’s schedule. Maybe Herr Spohr should put his own house in order first and stop blaming non-existent external factors for Lufthansa’s deficiencies. The Times They are A Changin’.

Posted in Finance | Tagged Arabtec, DFM, DP World, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, JAFZA, Majid Al Futtaim, Mohamed Alabbar, Nakheel, UAE | Leave a comment

Shake It Off

Posted on March 18, 2015 by howesdubai

Although Abu Dhabi recorded a 14.7% 2014 growth in the luxury residential property sector, Dubai only managed a marginal 0.3% price increase, compared to 17.0% the previous year. The Knight Frank’s Prime International Residential Index had Muscat, at 13.2%, the best performing in the GCC and ranked 8^th globally. New York topped the ranking with an 18.8% hike whilst, at the other end of the scale Singapore contracted by 12.4%.

According to Luxhabitat, there were surprisingly only 420 sales of villas and 356 apartments, costing more than US$ 1.36 million, in Dubai last year. The most popular sale areas for villas were Arabian Ranches, Palm Jumeirah and Emirates Hills whilst Downtown, Dubai Marina and Palm Jumeirah were the top three locations for apartment sales.

Meanwhile the Palm’s first large scale commercial project will incorporate a 200m observation tower and will have the existing monorail run through the middle of the upcoming Nakheel Mall. Covering an area of 300k sq mt, the project will also include a 200-key 5-star hotel and 500 serviced apartments.

Nakheel also announced the completion of 90 villas in Jumeirah Village Circle, with delivery slated to start in April. This is part of a 570 hectare development, which will eventually house 250k people; 615 villas have already been handed over in 2013 and the 1 million sq ft retail and dining Circle Mall is due to be completed by 2017.

Hilton Worldwide is the latest hotel chain to announce a new Dubai property, following a management agreement with AIG Investments. The 336-room Hilton Garden Inn Dubai Al Jadaf will open in 2017.

On Monday, there was the launch of the Trump PRVT residences, part of the Akoya by Damac development. With villa prices starting at US$ 1.77 million, there will be gated access to the island location.

Now in its 19^th season, the ever-popular Global Village will have attracted over five million visitors and generated US$ 463 million by the time it closes on 11 April, after running for 159 days. The massive extravaganza has over 3.5k outlets, as well as 31 pavilions, 25 restaurants, and 150 kiosks.

The Chinese seem to be taking over the mantle of the Russians – with Chinese tourist numbers to Dubai expected to double within a decade to 545k whilst in January there 27.3% fewer Russian visitors. Last year, the Chinese spent US$ 488 million in Dubai and stayed, on average for 3.3 days.

The Dubai Airport Freezone has had to lease a 17k sq mt Al Ghusais block from the government-owned Al Wasl to meet pent-up demand. DAFZA will build 32 light industrial units to add to the 260, already operating at the airport, and hope to acquire more land to build a business park in the area.

Emirates Group company, dnata, has bought a 51% share in UK-based Imaging Cruising – a major player in not only the cruise market but also in other aspects of stay holiday distributorship.

Saturday was the last day of the Dubai International Boat Show which attracted over 26k visitors and 800 exhibitors, as well as generating sales of US$ 50 million. The exhibition highlighted the progress made by local shipbuilders including Al Shaali Group, whose showcase luxury yacht is the US$ 5.45 million AS100, and Al Hareb Marine which came away with four sales totalling US$ 2.2 million.

The Korath Group is to spend US$ 27 million in introducing the Hawes & Curtis brand to the MENA, with an ambitious expansion strategy of 25 outlets. The first men’s retail shop, located in the Wafi Mall, was launched this month by Bollywood star, Shahid Kapoor.

Last year, New World Wealth estimated that 26k millionaires resided in Dubai. A new Knight Frank report has ranked Dubai as the 8^th most important city for the ultra-rich, only behind London, New York, Hong Kong, Singapore, Shanghai, Miami and Paris.

It has been reported that a subsidiary of Dubai World (which itself has a US$ 14.6 billion debt), Drydocks World, may request creditors for a restructuring of its US$ 2.3 billion outstanding balance. As did its parent company, the shipyard may opt for an early repayment, and better terms, for the balance of the debt, followed by a repayment extension. US$ 800 million is due for settlement in August 2017, with the remaining US$ 1.5 billion in 2027.

Celebrating its 50^th year, Dubai Chamber of Commerce reported that its members were involved in US$ 49.0 billion of export and re-export trade within the GCC. Saudi Arabia accounted for 54% of the business – US$ 26.4 billion – with Qatar (13%) and Kuwait (12%) the other major players.

Union Properties declared its first dividend in over twelve years; patient shareholders will receive US$ 0.008 cash and a 5% bonus issue.

Official approval has been given for a 20% hike in the price of bottled water.

February saw a 3% increase in volumes on the Dubai Gold & Commodities Exchange, with 929k contracts valued at US$ 35 billion. There was a 103% surge in Indian Rupee Options to 7.2k, as well as a 22% increase in the Exchange’s Indian Equities portfolio.

Earlier in the week, Orascom Construction began trading for the first time on NASDAQ Dubai and rose 3% on the day.

Bad news for the public sector with reports that there will be no pay rises for those employees between Grades 7 – 14. The Finance Minister, HE Obaid Al Tayer, indicated to the FNC that he considered the current salary levels as sufficient.

Following an internal enquiry, it seems that six Dubai-based employees of ABN Ambro have resigned or been dismissed for apparent fraudulent behaviour and contravening the bank’s policies and procedures.

Next month will see Amlak Finance returning to the DFMI over six years since its November 2008 suspension. The mortgage lender reported a 22.2% rise in 2014 attributable profit to US$ 16 million including a US$ 572 million write off on its portfolio and a US$ 518 million gain on its restructuring deal on a mudaraba instrument

Having recorded a 2014 US$ 207 million profit, compared to US$ 78 million a year earlier, the Dubai Financial Market has approved a 7% dividend, equivalent to a total pay-out of US$ 153 million.

The DFMI started the week trading on Sunday at 3747 and dropped 1.0% to close at 3708 on Thursday, and 1.7% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both down by US$ 0.02 and US$ 0.01 to US$ 1.92 and US$ 0.79 respectively.

Subsequent to February’s devaluation of the pound, it is no surprise to see Egypt’s inflation rate hit double digits – up 0.9% to 10.6% – as imports became more expensive. The currency slipped to 7.6 to the US$, compared to 7.2 at the beginning of the year but perhaps the currency has to fall even further for Egyptian exports to compete in the global arena.

There was mixed US market news with February data indicating 295k new jobs (following January’s revised figure of 239k) and a fall in the unemployment rate to 5.5%. If this trend were to continue, it is inevitable that the Fed will lift interest rates by July, particularly because of the strong dollar. On the flip side, some analysts are cutting US Q1 growth estimates from 2.3% to 1.5%, as several indicators point to some problems ahead. These include wholesale inventories rising 0.3%, wholesale sales declining 3.1% (the biggest fall in nearly six years), slowing construction spending and poor auto sales. Whether this is just a blip remains to be seen.

Even the ever optimistic ECB have got in on the act forecasting a stronger 2015 growth in the eurozone from 1.0% to 1.5% and that the current low negative inflation would turn the corner by the end of the year. This Monday (09 March), the long-overdue QE programme, with over US$ 1.25 trillion of assets being bought over the next 18 months, started as the euro was trading at the 1.09 level to the greenback. By Thursday it had sank even further to 1.05 – its lowest level in over 12 years, as Deutsche Bank forecast a further drop to 0.85 by the end of 2017.

In December, EC President, Jean-Claude Juncker introduced a US$ 341 billion investment plan to encourage growth by financing numerous projects. To date, Germany has promised US$ 16.2 billion, France US$ 8.7 billion and Spain US$ 1.6 billion.

February data from China indicates a record trade surplus of US$ 60.6 billion, with exports up 48.3% and imports down by 20.5%. However, the figures may be skewed somewhat by the fact that the Chinese New Year occurred mid-February. Where the export figures may indicate a rise in demand for Chinese goods, imports highlight the problem of weak domestic demand and the worry of deflation taking hold.

Brazilian president Dilma Rousseff’s government is being tainted by the expanding Petrobras scandal, with 54 people accused of taking bribes including many senior politicians. Although she chaired the petroleum company’s board for seven years, the president has been cleared of any charges!

It does seem incongruous that HSBC top management was unaware of the illegal activities of their Swiss private bank. Details of the scandal, involving some 30k accounts, were made known to the French authorities in 2007 and passed on by them to their UK counterparts. It was only last month that the information came into the public domain and since then the HSBC executives have been ducking and weaving.

The latest data from Baker Hughes Inc indicates that the number of US operational drilling rigs fell for the 13th straight week to 922 – 42.7% down on the October figure of 1,609. Thanks to the shale oil revolution US production, over the past five years, has risen by 67.3% from 5.2 million bpd to 8.8 million bpd. The worry is that if prices keep falling (and they were at US$ 55 at the end of the week), shale oil production becomes a loss making venture and bankruptcy becomes a fact of life. If the financial institutions have been bankrolling these ventures willy-nilly, the economic fall-out could be much worse than the sub-prime crisis and more difficult to Shake It Off.

Posted in Finance | Tagged Arabtec, DFM, dnata, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, Trump, UAE | 1 Comment

Leaving On A Jet Plane

Posted on March 10, 2015 by howesdubai

The Investment Corporation of Dubai is teaming up with Canadian asset manager, Brookfield, to build a US$ 1 billion 50-storey tower next to the DIFC. ICD Brookfield Place, comprising a hotel, offices and retail outlets, will be ready in 2018.

Al Rostamani Pegel has won a Deyaar Development contract to build its two-tower The Atria in Business Bay. The US$ 245 million project, slated for completion within two years, will consist of a hotel and 219 residential apartments, all of which were sold out on their release in March 2014.

Emaar Hospitality has teamed up with Nshama to operate the new 180-key Vida Town Square hotel and serviced apartments. The hotel will be a focal point of the recently announced 31 million sq ft Town Square project, located near Al Barsha, which will also include 3k townhouse, 18k apartments, 600 shops and other facilities. At around US$ 163 per sq ft, villa prices will start at the US$ 272k level. Meanwhile, following a 28.0% surge in 2014 profit to US$ 896k, Emaar has proposed a 15% (US$ 0.04 per share) dividend.

There was a 5.6% rise in 2014 hotel guests to 11.6 million, as revenue jumped 9.6% to US$ 6.51 billion, and guest nights by 7.4% to 41.6 million. The hotels’ biggest source markets were Saudi Arabia, India, UK, USA and Iran, with Russia a notable – but not surprising – faller. During the year, the number of properties increased by 7.5% to 657 and available rooms rose by 9.2% to 92.3k.

The RTA will consider a private partnership for the development of the emirate’s first Transit-Oriented Development model. Tenders will be called in May for the Union Oasis project which will involve construction of mixed used tower blocks, and other amenities, on a 15k sq mt plot above the Union Metro Station.

Another report has again highlighted the fact that more schools will be needed to meet the ever-growing demand in Dubai, with an expected 33.3% increase to 360k students. Colliers estimate that a further 52 establishments, to meet this demand in student numbers, will be required by 2020 – with an estimated total investment of at least US$ 3.9 billion, based on an average cost of US$ 75 million per new facility.

Dubai International reported a 7.7% increase in January passenger traffic to 6.9 million compared to the same month last year – and is already well on track to beat 2014’s total of 70.4 million. There was no surprise that the number of Russian and CIS travellers fell 22.7% over this period. With the move of much of the cargo to the new Al Maktoum International, freight traffic dropped 5.5% to 186.2k tonnes.

flydubai recorded impressive 2014 results with revenue at US$ 1.20 billion and profit up 12.3% to US$ 68 million. During the year, the airline added 23 new routes, whilst passenger numbers increased to 7.24 million and daily flights to 200.

A study by Frontier Economics estimates that Emirates adds US$ 7.6 billion and 85k jobs to the EU economy, not including US$ 3.8 billion and 41k jobs emanating from buying 40% of all of the Airbus 380 production.

In conjunction with two European entities, Abraaj Capital is planning to invest US$ 200 million in North Africa Hospital Holdings Group. The Dubai-based private equity firm is financing 80% of the total in the company that will enhance healthcare in Tunisia and Egypt, where the operation already has four hospitals.

Zoom, a division of ENOC retail, with 170 convenience stores in its petrol outlets and Metro stations, as well as 22 market stores across the UAE, is expanding into Bahrain. The company already has a presence in Saudi Arabia and has plans for a further 250 units in the GCC, over the next five years.

The latest Forbes World Billionaires List, now totalling 1,826, shows that the five richest persons in the country are Abdulla Bin Ahmad Al Ghurair, ranked number 220, (with a net worth of US$ 6.4 billion), Majid Al Futtaim (US$6.2 billion), Micky Jagtiani (US$5.2 billion), Saif Al Ghurair (US$3.4 billion) and Abdulla Al Futtaim, ranked at 557, (US$3.2 billion).

A decision in the Dubai Cassation Court confirms the need for proper documentation where contracts are involved. A developer asked an architect to carry out design work on two proposed 51-storey buildings in Business Bay – with no written contract. The work was carried out but the developer declined to pay the fees as Dubai Municipality refused planning permission, indicating that the land was allocated for parking. The Court, in awarding the engineering firm US$ 2.0 million for its design work, confirmed that proof of an agreement, other than in writing, can be used.

Another recent court case has again reiterated that owners of free zone companies will not be held liable for company debts – either in a personal capacity or company debts, more than the paid up capital. Both the Court of First Instance and the Appellate Court ruled against the owner of a decoration company that was being sued for US$ 63k. However, the Court of Cassation reversed the decision based on the provisions of the Commercial Companies Law No. 8 of 1984.

Dubai Islamic Bank has sold its 25% share in Emirates REIT to Eiffel Management, giving it 100% ownership of the country’s first real estate investment trust, with assets of US$ 600 million.

The DFMI started the week trading on Sunday at 3865 and dropped 3.1% to close at 3747 on Thursday, and 0.6% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both down by US$ 0.12 and US$ 0.07 to US$ 1.94 and US$ 0.79 respectively.

According to a 2015 Economist Intelligence Unit report, there was no change in the top five most expensive cities this year with Singapore, again taking the top spot, followed by Paris, Oslo, Zurich and Sydney.

Two major UK banks published 2014 results with Barclays and Lloyds TSB announcing profits of US$ 8.5 billion and US$ 2.7 billion in turn. Barclays’ chief executive had a total pay package last year of US$ 8.5 million whilst Lloyds’ Antonio Horta-Osorio is up for a bonus of US$ 17.82 million as the respective bonus pools were set at US$ 2.85 billion and US$ 570 million. Barclays provided for US$ 4.8 billion for potential claims, mainly in relation to its misselling of payment protection insurance, with a warning it could face “substantial monetary penalties” regarding its involvement in forex rigging. Lloyds reported that potentially there is a further 600k potential complaints over PPI in 2015 and that it may have to increase its current US$ 18.6 billion provision accordingly.

Even the sacrosanct Bank of England is being investigated by the Serious Fraud Office for possible manipulation of so-called liquidity auctions during the GFC. Although the terms of the enquiry are unknown it seems to revolve around whether the BoE was colluding with certain banks in illegal activities.

It was not long ago that the Brazilian, Russian, Indian and Chinese economies shone like beacons in a recession-hit world. There is more evidence that the Russian economy will struggle this year with reports that the Finance Ministry has updated its 2015 budget deficit to 3.8% of GDP, compared to the original forecast of 0.6%.

Whilst two other BRIC countries, China and India, have cut rates, Brazil has gone the other way by raising its interest rates to 12.75% in an attempt to reduce inflation from its current 12.4%, nine year high, to 6.5% this year. Some analysts forecast that its economy will contract by 0.5% as indicators, such as January industrial production which fell 5.2% compared to last year, head south. The country’s progress is being stymied by corruption at the state-owned Petrobras, lack of consumer confidence and reduced public and private investment.

The Indian authorities have set a consumer inflation target of 4.0% in a move to curb that country’s ubiquitous price volatility in the market. This seems to be a progressive move by the RBI Governor, Raghuram Rajan, which has received the support of Prime Minister Narendra Modi. This week his government’s first budget was seen as business-friendly, with a 25% corporate tax reduction over the next four years. It is expected that Asia’s third biggest economy will see an 8.0% growth this fiscal year and will cut its fiscal deficit by 0.4% to 4.1% of GDP. (However, a higher growth rate will be needed to ensure that the country develops faster and cuts the “economic gap” with the likes of China). Following a similar move in January, the RBI has surprisingly cut its repo rate again by 25 basis points to 7.5%.

There was contrasting economic data coming out of China with the latest Purchasing Managers’ Index (PMI), registering 49.9, indicating that China’s factory sector has again contracted, and employment falling to 47.8. However, the service sector, which accounts for US$ 4.9 trillion (48% of the country’s economy), had a reading of 53.9. Any figure below 50 indicates contraction and above denotes expansion. On the back of these figures, the Central Bank reduced interest rates in a further bid to boost growth; the authorities had already reduced rates in November and cut the banks’ reserve requirements in February. This week the National People’s Congress set a 7.0% forecast for 2015 as the authorities aim for a slower but more sustainable growth.

Another country that will probably chop rates this month is Australia which should not only enhance demand but also support a weak Australian dollar which will make exports more competitive.

The new Prime Minister, Alexis Tsipras, continues with his plan to put an end to the troika-imposed austerity cuts and to try arrange some sort of haircut for the country’s outstanding debt of US$ 360 billion.

After nine months of growth, it appears that the Greek economy will sink into another recession, mainly caused by uncertainty pre and post the January election; this has had a damaging impact on business and consumer confidence. Following Q4’s 0.4% contraction, all indicators point to the country slipping further in Q1 even though only last month the EU was predicting that the country’s 2015 growth would be 2.5%.

In October, Lufthansa will launch its new long haul budget carrier, Eurowings, with one way tickets to Dubai at an unbelievable US$ 111. At those prices, there will be a lot more people Leaving On A Jet Plane.

Posted in Finance | Tagged Arabtec, DFM, Drake & Scull, Dubai, Dubai Financial Market, Dubai Islamic Bank, Emaar, Emirates, emirates airline, Emirates NBD, Euro Wings, Eurowings, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

Don’t Call Me!

Posted on March 3, 2015 by howesdubai

It seems that Dubai will see its first rainforest, as plans are afoot by Damac Properties to incorporate one in its latest development – Akoya Oxygen, encompassing 55 million sq ft. The developer will try and replicate the eco-system in the desert by the use of numerous plant species with the dome man-made jungle slated to become a big tourist attraction.

This Saturday, Emaar – in a JV with Meraas Holding – will launch Acacia at Park Heights, in Dubai, Abu Dhabi, London and Karachi. Located in Mohammed bin Rashid City, the Dubai Hills development includes a championship golf course and will house 479 apartments – with no prices yet available.

A recent report by Luxhabitat analysed 2014 sales of luxury apartments (priced over US$ 1.36 million) by location. The most popular was Downtown with an average price of US$ 1,084 per sq ft,, with sales of US$ 300 million, followed by Dubai Marina (US$ 684 and US$ 210 million) and Palm Jumeirah (US$ 544 and US$ 136 million).

Texture Global Investments has bought Union Properties’ Auto Mall development, covering 450k sq ft, for US$ 143 million. The troubled developer will use funds raised from the sale for “other development streams” which could mean phase 3 of Green Community or a proposed 4-star, 150-key hotel in Dubai Investment Park.

The Minor Group has joined forces with Dubai Properties to develop the Anantara Creek Hotel, due to open in 2018. The Thai-based hotel management company has indicated that the 290-room luxury property will be the first to be located in the new Culture Village and will have a waterfront setting.

Yet another major boost for a British related company – Al Futtaim Carillion has won two Meraas contracts. The first, valued at US$ 350 million, is for a Dubai Creek waterfront mixed use development and the other, for La Mer at Jumeirah, for US$ 240 million, including the creation of a 1km beach.

Arabtec has picked up contracts, valued at US$ 253 million, for work in upgrading facilities for Aramco in Saudi Arabia.

The reporting season is in full swing, with Etisalat announcing a 26.0% hike in 2014 profits to US$ 2.42 billion, as revenue rose in tandem to reach US$ 13.30 billion. The board declared a US$ 0.19 dividend (equating to US$ 1.51 billion) and a 10% share bonus issue. Globally, the telecoms provider saw a 14.1% increase in its subscriber base to 169 million, as its UAE network rose 6.0% to 11 million.

Empower reported a 76.0% surge in 2014 revenue to US$ 409 million as profit surged 65.0% to US$ 112 million. The district cooling services provider acquired Palm District Cooling – at a cost of US$ 500 million from Istithmar World – in late 2013, which then gave Empower the world’s largest district cooling portfolio.

Dubai Airport Free Zone Authority reported 2014 profits rose by 48.0%, as revenue was up 13.0%, with its total assets rising by 3.4% and office space acquisition by 11.3%. It is estimated that DAFZA contributes US$ 29.7 billion to Dubai’s non-oil trade.

HH Sheikh Hamdan bin Rashid Al Maktoum inaugurated the Mai Dubai factory – the emirate’s most recent entrant into the bottled drinking water market. The company is a subsidiary of DEWA, which currently has an installed capacity of 470 MIGD of desalinated water so will have no problem with supplying the new entity.

Emirates is planning a 5-10 year US$ 1 billion sukuk which will be backed by the UK Export Finance – a body that seems to be becoming more active in the region. Two Dubai banks, Emirates NBD and Dubai Islamic, are part of an 8-bank consortium arranging the facility.

Whilst it is no surprise to see that Emirates is considered the most valuable regional airline brand, valued at US$ 6.6 billion, it is one that it only makes 196^th in the 2015 Brand Finance Global 500 report.

Government-owned Dubai Aerospace Enterprise is reportedly selling its services facility for over US$ 1.8 billion. StandardAero, based in Arizona and is involved in repairs and maintenance, was bought by the Dubai company in 2007 for US$ 1.8 billion, in a deal that also included Landmark Aviation.

An Investment Corporation of Dubai entity, Emirates National Oil Company (ENOC), is negotiating a 9-year US$ 1.5 billion finance deal, some of the proceeds of which may be used for expansion beyond Dubai. Its last major investment was seven years ago when it bought 48% of Dragon Oil for US$ 1.8 billion.

Visa reported that it had a 12% increase in spend over the first two weeks of the one-month long Dubai Shopping Festival. Among the high performers were restaurants up 31.3% to US$ 53.7 million and electronics 22.0% to US$ 37.2 million, whilst fashion retail was the best earner at US$ 151.2 million. Saudi and UK were the biggest spenders at US$ 35.2 million (up 17.3%) and US$ 30.0 million (up 8.1%) respectively, with Angola registering the biggest percentage increase – 98.0% – to US$ 28.5 million.

To the surprise of many, Dubai is well on its way to becoming the tea capital of the world, thanks mainly to the huge Lipton factory located in Jebel Ali Free Zone. The Unilever-owned facility has seen a 50% expansion since 2010 and now produces the equivalent of 20 billion cups of tea annually (33k tonnes). Coincidentally, its near Jebel Ali neighbour, Al Khaleej Sugar, produces 1.5 billion metric tonnes annually, making it the world’s largest stand-alone sugar refinery.

Dubai-based Abraaj Capital has expanded its interest in the burgeoning Turkish market with a minority stake in Hepsiburada.com, a leading on-line trader. It also plans to buy into that company’s furniture and home accessories subsidiaries, Evmanya and Altincicadde, which would bring its total investment to eleven entities in that country.

The DFMI started the week trading on Sunday at 3858 and rose 7 points to close at 3865 on Thursday, and up only 18 points in the month, (2.2% higher than its January opening of 3774). Bellwether stocks, Emaar Properties and Arabtec, were both up US$ 0.02 at US$ 2.06 and US$ 0.86.

Two major Australian companies reported disappointing financials – an indicator that all is not well Down Under. BHP Billiton saw H1 profits sink 31.0% to US$ 5.4 billion, on the back of falling commodity prices, and has cut exploration and other costs by 23.0% to US$ 6.4 billion. Meanwhile, the government-owned Australia Post performed even worse, as H1 profits sank 56.0% to US$ 77 million, with the distinct possibility of an annual loss at the end of June – for the first time in over thirty years. However, national carrier Qantas did return to positive territory, reporting H1 profit of US$ 289 million, after its biggest ever annual loss for the year ending June 2014.

For wilful and illegal use of three Smartflash patents by iTunes, Apple has been fined US$533 million by a Texan court. Apple will appeal the case which involved accessing and storing downloaded music.

After agreeing, in 2012, to pay the US government US$ 4.5 billion to settle criminal responsibility, BP has lost its fight to reduce the US$ 13.7 billion maximum civil fine it could face following the 2010 Gulf of Mexico oil spill. To date, the oil company has estimated it has incurred costs of a massive US$ 42 billion following the Deepwater Horizon rig explosion.

Over the past month, gold and oil have showed mixed fortunes but YTD are heading north. The yellow metal closed on Thursday at US$ 1,218 per oz whilst Brent Crude was trading at US$ 61.89 /bbl, both up on their 01 January openings of US$ 1,186 and US$ 57.33. Meanwhile, the global share markets continue to show significant gains – including the Dow Jones, S&P 500, NASDAQ, Germany’s DAX, Japan’s Nikkei 225 and the FTSE 100. With low interest rates, and the QE being introduced into the eurozone, this may continue in the short-term but it is obvious that there will be a major correction before the end of the year.

Recent data indicates softness in the US housing market and a slower Q4 expansion (with 2014 growth rate down from 5.0% to 2.6%) despite other positive indicators; these include falling unemployment (with 336k jobs being created monthly over the past three months), positive consumer sentiment and historically low interest rates. This week, Fed chief, Janet Yellen, has been testifying before Congress and although she was concerned with foreign economic developments (including the eurozone and China) and a fragile domestic employment position, analysts do not expect any rate increases until July at the earliest.

Russian debt rating descended to junk status, as Moody’s cut its ranking to Ba1, following S&P’s similar move last month. Most analysts forecast that the country is at the start of a recession that will be exacerbated by continuing low oil prices, a troubled rouble and weak consumer confidence: all indicators are that the on-going capital flight out of the country will continue unabated.

Some Italians will be far from happy with news that the country has signed a bilateral tax information sharing deal with Switzerland. It has been estimated that 70% of cash stashed abroad by Italians is in Swiss banks, costing the country upwards of US$ 100 billion p.a. Any monies collected will help the exchequer to reduce its forecast 2.9% of GDP deficit figure for 2015.

January figures show that eurozone’s second largest economy, France, has seen prices drop into negative territory for the first time in five years. The -0.4% reading is a further problem for the 18-country bloc, with a 2.0% target, which has just introduced QE to reverse this downward spiral and attempt to boost growth and economic activity.

So as to avail of a four-month bailout extension, Greece finally submitted details of reforms requested by the troika; these include measures to curtail both tax evasion and smuggling, as well as trimming its bloated civil service and fighting endemic corruption. 76% of its US$ 366 billion debt is owed to the troika – EC – US$ 220 billion, IMF – US$ 37 billion and ECB – US$ 22 billion. The country has temporarily escaped Grexit which would have resulted in a run on the banks and state bankruptcy.

After being one of six banks fined a combined US$ 4.3 billion, for forex market manipulation, last month, RBS has now suspended five employees in relation to their own internal enquiries. (The bank has not made a profit since 2007 – with its 2014 loss of US$ 5.4 billion an improvement on the preceding year’s figure of US$ 13.9 billion). It seems that government agencies have finally woken up to this scandal and there are several on-going investigations by regulators into the massive US$ 5.3 trillion a day market.

Sad news for senior staff at UK banks, as reports indicate that bonuses will be 15% lower than last year. It is expected that the bonus pool for staff at Barclays, Lloyds and RBS will be US$ 4.3 billion. The much troubled HSBC saw a 17.0% fall in 2014 profits to a mere US$ 18.7 billion but has apparently reported that bonuses will only be 7.0% down on last year. Chief Executive, Stuart Gulliver, has to make do with his total package down 5.4% to US$ 11.74 million. HSBC’s Chairman, Douglas Flint, and Mr Gulliver have been hauled before the UK MPs’ Treasury Committee and forced to apologise for “unacceptable” practices in its Swiss private bank. It seems that the bank’s internal controls did not pick up these anomalies and neither did the auditors nor the government regulators.

It is obvious from events this week that there are endemic problems with organisations’ systems and procedures, with the House of Westminster joining the banking industry. Two heavyweight UK politicians, and both ex-Foreign Ministers, Jack Straw and Malcolm Rifkind, have been caught in a sting operation over cash for access claims – and both, not surprisingly, deny any wrongdoing! The former was recorded on how he operated “under the radar” and got paid US$ 93k annually for using his influence to change EU rules.

Meanwhile Rifkind, who was also chair of the parliamentary committee overseeing Britain’s intelligence services, boasted of his contacts and offered his “services” for up to US$ 12k per half day, whilst claiming that MPs could not live on their US$ 104k salary. It is reported that among his directorships, he receives US$ 133k (Unilever), US$ 54k (Adam Smith) and US$ 39k (LEK Consulting).

Apparently the following current serving MPs are the three biggest earners – Gordon Brown, Geoffrey Cox and George Galloway. In 2014, the former Labour PM earned US$ 1.49 million, on top of his parliamentary remuneration, including US$ 95k for a speech in Beijing and US$ 72k for speaking at the American University in Dubai. He also holds positions as Chairman of the World Economic Forum Policy Coordination Group, Distinguished Global Leader in Residence at New York University and United Nations Special Envoy for Global Education. The Conservative Cox made an extra US$ 1.27 million mostly from his legal work, with almost 2k hours of work registered (including from previous years). The third major earner was George Galloway with US$ 465k.

Then there is FIFA where there either has been a breakdown in internal control or it has never existed. How can such an august body take a year to realise that it is too hot to play football in Qatar in July? Or did they have other plans?

To the outsider, the banking industry, politicians and FIFA represent an old boys’ club with their own internal rules and modi operandi.

In the UK, the government is clamping down on “cold calling”. It is taking a more stringent approach with the prospect of larger fines and making board-level executives responsible for nuisance calls and messaging. Its aim is to stop companies bombarding the general public with unwanted marketing calls and texts. There will be many financial advisory companies in Dubai hoping that the same approach does not happen here but until it does, Don’t Call Me!

Posted in Finance | Tagged Abraaj, Akoya, Arabtec, Damac, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

One Vision

Posted on February 27, 2015 by howesdubai

This week, HH Sheikh Mohammed bin Rashid Al Maktoum launched three new wasl projects including Zabeel Park 1 which, apart from being a mixed-use development, will also have a year-round snow fountain, as well as the feature main tower in the shape of the number “1”. The other two were Al Wasl Tower that will resemble an integrated vertical city, with the world’s largest ceramic façade, and Dubai Gate in Jebel Ali.

Saudi developer, Tanmiyat, will finally deliver 150 villas of its US$ 1.9 billion Livings Legend development, which had been hold ever since the GFC, over six years ago. On completion next year, the 14.4 million sq ft project, located near to Downtown, will encompass 500 villas, 12 apartment towers, a hotel, retail / dining outlets and a 9-hole golf course.

So far this year, Damac has awarded five contracts – for work on Akoya by Damac, Akoya Oxygen, Celestia, Privé and Vantage – totalling US$ 327 million. The developer has already delivered 13k units and has a 38k pipeline, including 10k hotel rooms and serviced apartments for its new Damac Hotels & Resorts division.

Following the 2008 GFC, AZIZI Developments was forced to cancel several projects, as liquidity and demand dried up. Having successfully launched five developments, totalling US$ 1.23 billion, last year, it has plans for further expansion in both the luxury residential and hospitality sectors.

As the supply of hotel inventory continues to rise quicker than demand (not helped by the drop in Russian and eurozone visitors), it is inevitable that both occupancy and room rates will fall. January Average Room Rates fell 3.6% to Dhs 1,070, along with Revenue per Average Room by 6.4% to Dhs 916, as occupancy rates dropped 2.9% to 85.6%. With 80 new properties in the pipeline, and inventory set to rise by 22.2%, over the next two years, to 110k rooms, there may be a further softening in price when supply is greater than demand. According to MasterCard Global Cities Index, Dubai – with 11.95 million visitors – is the fifth largest tourist destination in the world, after London (18.69 million), Bangkok, Paris and Singapore.

With the Jumeirah Group moving into its next three-year expansion phase as it plans, , to add a further 20 properties to its existing 22-portfolio, there has been changes to its Board. CEO of the highly successful flydubai, Ghaith Al Ghaith, is to become vice chairman, whilst Richard Hartman, the ex CEO of Millennium & Copthorne Hotels, will replace Sir David Michels as a director.

The luxury hotel company also launched its JRG Dubai (Jumeirah Restaurant Group) management company that already operates some 60 franchises, including The Noodle House (with 23 global branches), Pai Thai, Pierchic and 360°.

Starwood is one of a raft of hotel groups that have brought different branding to Dubai with an announcement that, in conjunction with wasl hospitality, it would introduce both Aloft and Elements into the local market. Located in Maritime City, both the 165-key Aloft Dubai Raffa and the 96-room Element Dubai Raffa will open in 2018 which will bring the total number of Starwood brands in the emirate to nine.

Carlson Rezidor, which manages the Radisson Blu and Park Inn by Radisson, is planning a further two properties in Dubai as part of its two year regional strategy of 12 additional hotels.

Later in the month, Taj Hotels will open its second Dubai property in Downtown. The Indian hotel group is confident of further expansion and is reportedly in discussions with investors in The Palm, JLT and SZR.

Emaar Properties recorded increases in both Q4 revenue and profit – 3.3% to US$ 777 million and 13.9% to US$ 235 million respectively. The company has invited bids for a Dubai Marina plot , with a minimum price set of US$ 76 million. The block could be used for a hotel building with a total gross floor area of 698k sq ft.

Drake & Scull, the Dubai-based mechanical, electrical and plumbing company, blamed a slowdown in its two major markets, UAE and Saudi Arabia, for disappointing 2014 results. Revenue was marginally down to US$ 1.32 billion whilst net profit flatlined 31.8% to US$ 30 million. However, its order backlog jumped 20.0% to US$ 3.92 billion.

Despite a 4.0% increase in 2014 revenue to US$ 1.1 billion, Dubai-based Dragon Oil reported a 15.9% fall in operating profit to US$ 158 million. The exploration and production company, 54% owned by the Dubai government, blamed the fall on a 9.2% hike in cost of sales, plus a US$ 24 million impairment cost in the Philippines.

Du reported its Q4 results – revenue up 12% to US$ 880 whilst profit fell 10.1% to US$ 140 million (although annual profit came in at US$ 676 million, 6.05% higher than in 2013). The telecom operator saw its royalty bill rise to 43% of profit to US$ 433 million, compared to 36% a year earlier.

Government-owned Meraas Holding is pursuing a US$ 234 million loan to finance retail development around the world’s largest Ferris wheel on Bluewaters Island, off JBR.

National Petroleum Services (NPS) has secured financing in the form of a US$ 150 million fixed rate sharia-compliant facility and US$ 50 million working capital funding. No other details were made available from the Dubai-based oilfield services company that was acquired last year by a group of regional investors, including Apicorp and Fajr Capital.

As widely expected, Dubai World finally won 100% creditor support for the amendment and extension of its outstanding 2011 US$ 14.6 billion debt. The new structure sees an early repayment of US$ 2.9 billion and a 4-year extension of a US$ 10 billion balance to 2022.

Due to launch in October 2016, the Dubai Parks and Resorts mega theme park, located in Jebel Ali, has forecast first year revenues at US$ 654 million. The Meraas Holding company recorded a US$ 6 million 2014 loss, with total assets valued at US$ 1.88 billion.

The Chalhoub Group, with 11k employees and 600 retail stores, is the first big name to set up headquarters in the upcoming Dubai Design District (d3). The retail group has franchise agreements with the likes of Louis Vuitton, Fendi and Michael Kors, as well as its own retail brands, including Wojooh and Tanagra. The development of d3 can only enhance the emirate’s edge in the luxury goods sector where it is estimated that it holds 30% of the regional market.

Another indicator of local economic confidence was that the Department of Economic Development (DED) reported a 13.0% jump in commercial licenses last year to 59.1k.

Yet another report points to a softening in the local real estate sector, with the three main causes cited being the global economic slowdown, flagging consumer confidence and new projects – 78 of which were launched last year – ratcheting up the supply curve. Standards & Poor’s indicated a 15% – 25% fall over the past nine months and suggest that the market is now in a stabilisation stage with a possible 10% – 15% future annual rise.

Having seen a 14.8% increase in 2014 net profit, to US$ 1.46 billion, and a confirmed cash balance of US$ 965k, DEWA announced that it will use its own funds to repay a US$ 1 billion bond maturing in April. It will also pay the government a dividend of US$ 136 million. The authority recently approved its 2015 budget of US$ 6.23 billion – up 11.3% on 2014 – and introduced a plan to reduce energy demand by 30%; this would cost US$ 8.2 billion but bring in revenues of US$ 22.3 billion – a potential US$ 14.1 billion saving.

Beehive, the recently launched peer-to-peer online lending platform, has introduced a further financial aid for local SMEs. Such companies will now be able to list their 60 – 120 day invoices, at a monthly starting rate of 0.75%, and hope that investors buy into the scheme.

The Al Futtaim Group has added an aviation division to its expanding portfolio. DC Aviation Al-Futtaim, in a JV with DC Aviation GmbH, flew its first commercial flight from Stuttgart, having been issued an Air Operator Certificate from the federal civil aviation authority.

It seems that relations between the local airlines and some of the bigger US carriers have worsened as Delta Airlines’ boss is reportedly arguing that local airlines, such as Emirates, “are not airlines but governments”. Richard Anderson is claiming that regional carriers have received over US$ 40 billion in subsidies, blaming 9/11 – “involving terrorists from the Arabian Peninsula” – for the company’s 2005 bankruptcy and denying that Delta ever received government hand-outs – although it was allowed to forego US$ billions in debt. Perhaps it would help Mr Anderson if he flew Emirates and saw the difference in the quality and service between the two carriers; he may then realise why one is making money and the other not as much.

The International Civil Aviation Organisation has announced that the UAE has been ranked number one in the world in complying with global aviation standards. Its award of 98.86% is the highest ever awarded. Furthermore, its result of 98.86% is the highest ever awarded by the international body and is an indicator on the amount of time and money, the authorities have spent on air safety and infrastructure..

Since 2007, the GCC has been considering the possibility of the introduction of VAT for the six-bloc nation. It is reported that discussions are on-going and that an upcoming meeting will try and iron out areas of disagreement. Although nothing has been finalised, any new tax rate will be no higher than 5%.

A 4.5% year on year inflation rate in January was Dubai’s highest level since May 2009. The main driver was a 7.6% jump in housing and utility costs (that equates to 445 of total expenditure) whilst the food basket , accounting for 11%, actually fell by 1.6%.

Nasdaq Dubai will introduce a new company next month as Orascom Construction Industries is planning to list its construction division. Having delisted from the Cairo bourse, when the Mohammed Morsi government was in charge, it will offer 15% of the new entity in an IPO and will see trading in three locations Dubai, Cairo and Euronext Amsterdam.

The DFMI started the week trading on Sunday at 3903 and fell 45 points (1.15%) to close at 3858 on Thursday (2.2% higher than its January opening of 3774). Bellwether stocks, Emaar Properties and Arabtec, were trading at US$ 2.04 and US$ 0.84 – up 2.5% and flat,in turn, on the week.

The HSBC fiasco continues with the bank publicly apologising for its misdeeds, including possibly helping clients to evade tax, and confirming its cooperation with the Swiss authorities. The bank is facing criminal investigations in Switzerland, as well as in Argentine, Belgium, France and USA but not to date in its home country UK. Meanwhile informant Herve Falciani has indicated that he has much more harmful information to reveal, including damaging details of a major oil company

Brazilian court papers indicate that a Petrobras employee, turned informant, received US$ 200k in kickbacks from Rolls Royce, manufacturer of gas turbines used on the company’s oil platforms. With the UK company also being investigated by the Senior Fraud Office over similar cases in China and Indonesia, it has stated that it does not “tolerate improper business”.

A security firm has alleged that a gang from Russia, China and Ukraine, has been involved in an on-going cyber robbery that may have cost some 100 banks, in 30 countries, over US$ 1 billion. Their modus operandi seems to have been the use of viruses to corrupt banks’ networks with malware, with each attack netting the criminals US$ 10 million on average. This is a timely reminder to all computer users to take preventative measures, with the latest software, to stop potential hackers.

There was a smidgen of good news for the eurozone with Q4 growth of 0.3%, and 0.9% year on year, with the 18-member bloc being led by Germany’s 0.7% and 1.6% returns. However the likes of France and Italy still give rise for concern as they recorded 2014 growth of 0.4% and negative 0.4% respectively and the Greek problem will not be going away soon. However optimists will point to the fact that the fall in the oil price and the massive inflow of new money from QE should stimulate growth.

By Thursday, it seemed likely that a short-term compromise would be reached with the ECB agreeing a short-term extension to Greek bailout funds. How much and for how long remain to be seen but any arrangement is only delaying the inevitable Grexit.

A 0.4% January decline in Chinese new home prices – the ninth straight month of declines – sees the asset class in deep trouble. With the country reporting its worst annual growth in 24 years, an oversupply of inventory and the stock market becoming a more attractive investment vehicle, the global economy will feel the shockwaves when the inevitable bubble bursts and the banks left with massive debts. These factors, along with slowing government investment and a weakening export market, will ensure that China’s 2015 growth, of 7.0%, will be less than its disappointing results last year.

Following two quarters of negative growth, Japan’s economy moved northwards as Q4 saw the embattled economy expand by 0.4% but as the world’s third largest economy had zero 2014 annual growth, following a 1.6% increase in 2013, it is inevitable that more monetary easing by the Bank of Japan will be needed. However there was welcome news that January export volume had surged 11.2% – a sign that the weak yen could be the driver that pulls the country out of recession.The Nikkei index topped the 18,000 level for the first time in seven years and then on Wednesday was heading for 15-year highs.

HH Sheikh Mohammed bin Rashid Al Maktoum’s quote, “although we live in a civilised society, the business world remains a jungle”, could hold true for the shenanigans going on in the EU. By Thursday, it seemed likely that a short-term compromise would be reached with the ECB agreeing a short-term extension to Greek bailout funds. How much and for how long remain to be seen but any arrangement is only delaying the inevitable Grexit.

The Dubai Ruler has always demanded the best and the newly planned Zabeel Park 1 main tower, in the shape of number 1, signifies his continued quest for Dubai to be number one. This reflects his vision that “Dubai will never settle for anything less than first place”. One Vision.

Posted in Finance | Tagged Arabtec, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, One Vision, Tanmiyat, UAE | Leave a comment

Take The Money And Run!

Posted on February 16, 2015 by howesdubai

With the 2k-seat Dubai Opera slated for completion by 2016, Emaar have wasted no time in appointing the ex-COO of London’s Royal Albert Hall, Jasper Hope, to head up the venture. Located in Downtown, the Opera District development promises to enhance Dubai’s cultural ambitions and will also feature residential units, luxury hotels and waterfront promenades.

Meraas announced the launch of Boxpark – a novel urban lifestyle located in Al Wasl. The 44-unit development, based on warehouse containers, features retail, culinary and entertainment outlets and hopes to emulate the success of similar projects found in London, New York and Paris. However, London lawyers have apparently claimed that intellectual property rights may have been breached.

Work started this week on the Danube Group’s initial two residential projects. The US$ 136 million Dreamz By Danube is slated for completion within 18 months whilst the 300-apartment Glitz By Danube, costing US$ 82 million, should be ready by Q3 2017.

A month after announcing its massive US$ 8.2 billion Desert Rose project, Dubai Municipality confirmed that work will start on Aladdin City next year. Located on Dubai Creek, but outside the possible World Heritage zone, the project will comprise three towers, housing hotels and commercial space.

Last week’s announcement by Kleindienst, developers of the six-island Heart of Europe project on The World, that it was launching the sale of underwater villas, on Monaco Island, has hit an early snag – Nakheel has yet approve the development!

It is reported that government-owned Dubai World is looking at a US$ 1.2 billion syndicated loan to help it meet upcoming payments. Only last month, an agreement was finally made to repay US$ 2.9 billion, before this September’s deadline, and extend the remaining US$ 10.6 billion debt a further four years to 2022. At the same time, its property division, Limitless, is in the throes of renegotiating a US$ 1.2 billion debt.

The newest addition to the emirate’s hospitality sector will be the 328-room InterContinental Dubai Marina, due to open in May. The property is part of the Bay Central development and will include nine eateries.

Developer Muraba confirmed that phase 1 of the Muraba Residences Palm Jumeirah has been finalised and that the 46-apartment and 4-penthouse development will be ready for hand over, on time, in April 2016.

With over 80 million visitors, Dubai Mall retained its position as the world’s most visited lifestyle destination – well ahead of its main competitor, Times Square (39.2 million). It is estimated that the Emaar mall, with 1.2k retail and 200 F&B outlets, contributes about 5% to Dubai’s GDP.

An RTA study has indicated if the authority had not carried out US$ 16 billion worth of infrastructure work, the annual cost of congestion would have been 5.7 times higher than the estimated US$ 790 million, based on lost working hours.

There was good news for some motorists this week with ENOC (Emirates National Oil Company) reducing diesel prices by 6.4% to US$ 0.79. This is less than half of what the UK consumer pays for a litre – US$ 1.77.

As Gulfood got under way this week, Dubai Customs reported a 13.4% hike in the emirate’s food foreign trade to US$ 18.0 billion, for the first nine months of 2014. This comprised of rises in all three sectors – imports of US$ 11.7 billion (14.4%), re-exports of US$ 3.6 billion (18.2%) and exports of US$ 2.7 billion (4.2%).

Emirates Group expects to increase its manpower by 14.7% to 87k over the next year – a sure sign of the buoyancy in the market and the airline’s continued progress and profitability. The carrier’s success often flummoxes rivals, including, in the past, Air Canada, Air France and Lufthansa, who inevitably blame “unfair subsidies”, including cheap fuel, for the fact that it is a more efficient and better operation. The latest attack comes from the US trinity of American, Delta and United, who have forwarded a 55-page joint report requesting the authorities to revisit US air treaties, alleging that Emirates, Etihad and Qatar have been the beneficiaries of subsidies totalling US$ 40 billion. Such a work of fiction is better suited for the upcoming Emirates Festival of Literature.

IATA reported that growth in ME 2014 passenger traffic of 13.0% was more than double the global average of 5.9%. Regional capacity rose 11.9%, with load factor up 0.8% to 78.1%, compared to the global average of 5.6% and 0.2% (to 79.7%) respectively.

Gulf Finance Corp, owned by Shuaa Capital, has applied for a Saudi operating licence to offer sharia-compliant leasing products. The Dubai-based company hopes that this will fill a gap in the market by giving regional SMEs the opportunity to access funds and to ameliorate bi-lateral deals.

Emirates NBD has delivered its second Australian dollar bond in ten months with a US$ 348 million 7-year issue. The so-called kangaroo bond, which is a popular vehicle with local banks, had a 4.75% coupon rate.

Under new Central Bank regulations, Indians can now buy overseas property – equivalent to US$ 250k and double the current balance – without official permission. Whether there is a positive knock-on effect on the local real estate sector remains to be seen but Indians continue as the number one buyers of Dubai property, having bought over US$ 12 billion in the past three years alone.

Last month, Aabar Investments received SCA’s approval to purchase up to 75 million Arabtec shares. This week, they were in the market and spent US$ 21.8 million, scooping up 24.8 million units; this brings their total shareholding to 36.1%, or 1.59 billion shares.

Damac Properties first listed on the DFMI on 11 January, with a share value of US$ 0.76 which, by 29 January, had fallen to US$ 0.48. At the close of Sunday business (08 February), six trading days later, the stock stood at US$ 0.84 – an almost 75% surge. This Monday (09 February), impressive 2014 results were reported, indicating a 190.0% jump in profits to US$ 948 million, followed by a board recommendation of a 10% share bonus issue. That day’s trading saw Damac shares drop to US$ 0.76.

In January, the local bourse’s market capitalisation jumped – month on month -1.8% to US$ 89.5 billion whilst volume, at 8.9 billion shares, and value traded, at US$ 4.2 billion, were well down 28.2% and 34.1% respectively.

The DFMI started the week trading on Sunday at 3887 and was up 16 points to close at 3903 on Thursday (3.4% higher than its January opening of 3774). Bellwether stocks, Emaar Properties and Arabtec, were trading at US$ 1.99 and US$ 0.84 – down 0.5% and up 3.6%, in turn, on the week.

With little chance that the rest of Europe will come to the Greek party as it tries to convince the eurozone to slash its outstanding US$ 275 billion debt, Standard and Poor’s downgraded the country’s rating to B-; this is at a level showing that it is vulnerable to default of its debts.

There was no Greek joy to be had in the European corridors of power to their pleas for leniency and there was more bad news when the ECB withdrew the right of Greek banks to use government debt as collateral for loans. Time is indeed running out for Syriza to reach a deal with its creditors, as the 28 February deadline looms. There is a very serious credit crunch coming soon to Athens, if and when the banking system has no access to funds.

The inevitable stalemate occurred at Wednesday’s meeting of eurozone and Greek officials, with not much progress being made in solving that country’s debt crisis. The dichotomy between what Greece wants – an end to austerity measures and a further write down of the outstanding US$ 375 billion debt – and the eurozone – no amendment to the existing arrangements – remains. (China is watching events with interest).

In 2014, the UK saw its trade deficit widen to US$ 53.0 billion with falls in both exports – US$ 22.2 billion – and imports – US$ 11.1 billion. A report by the Institute of Fiscal Studies indicates that there will have to be massive 14.1% government departmental spending cuts of US$ 78.3 billion over the life of the next parliament – well up on the current US$ 58.3 billion. The end result is that this year will see the fewest number of government workers in 40 years and the sector will be receiving its lowest share of national income in 66 years.

As the euro heads south, Danish authorities are doing their utmost to weaken the krone with their fourth rate cut in three weeks – to minus 0.75% – and market intervention of US$ 16 billion. The country has pegged its currency to the euro since the latter’s 1999 inception and, just like Switzerland, it has been looked on as a safe haven. Whether the Danes go down the same path as the Swiss, who allowed their franc to surge in value last month, has speculators guessing.

With the likes of Greece, Chinese slowdown, the euro QE, unethical bank practices and the Russian crisis dominating both the front and business pages, there is one more major problem facing the global economy. The so-called currency war sees countries – including Australia, Canada, China Denmark and India – take steps to weaken their currency, so as to ensure an unfair trade advantage. Such competitive currency devaluations are often short-term measures that have long-term negative repercussions.

SE Asia’s largest economy reported disappointing 2014 growth figures. Indonesia’s weaker than expected 5.0% growth was down 10.4% on the previous year, as falling commodity prices kicked in during the year. The country’s new president, Joko Widodo, will have his work cut out to get the economy moving again, having to reduce both the high inflation rate, currently standing at 6.96%, and the current account deficit, which equates to 3.1% of GDP.

Below par figures from China saw January falls in both exports by 3.3% and imports by 19.9%, compared to the same month last year, resulting in a record monthly US$ 60 billion trade surplus. Both Australia and Russia saw their exports – mainly commodities and fuel – to China fall by 38.34% and 28.7%. China’s total trade value increased by 3.4% over the year – much lower than the official 7.5% target – whilst growth at 7.4% was the lowest in 24 years.

Many analysts continue to be cautious about China’s official economic data and now it seems that India’s new formula, in calculating GDP, is causing sleepless nights for economists. Although the latest revision sees 2015 growth at 7.4%, up from an earlier 6.9% estimate, it is way above the 4.7% figure that emanated from using the old method. Many had thought that the country was experiencing its worst downturn in more than 30 years. It is similar to a recent report estimating that 363 million Indians (29.5% of the population) lived below the poverty line, in contrast to the official government figure of 269 million; the government uses a base of US$ 0.45 a day against the more realistic US$ 0.55.

Despite 30% of state income originating from energy exports, which have seen recent falls of up to 50%, Malaysia surprised analysts with a Q4 growth of 5.8% – its highest in over four years – and 6.0% for the year. The main driver for this was a boost in domestic demand.

All is not well in Australia as the unemployment rate reached 6.4% – its highest level since 2003. All signs are for another Reserve Bank rate cut to 2.0% in March but no immediate end to the dole queues getting slightly bigger in the coming months. Something has to be done when currently the economy is creating jobs at 1.50% whilst the net working population is increasing at the greater rate of 1.75%.

Over the past three months the US labour market has created one million jobs which equate to 336k jobs a month – well up on the 197k recorded over the same period last year. Although this indicates that the economy is improving, the unemployment rate – at 5.7% – has edged up and it must be remembered that six years ago, pre GFC, 81.0% of men were in employment compared to the current 76.5%.

Qualcomm has been fined a massive US$ 975 million by Chinese authorities. The US chipmaker is the largest supplier of smartphone chips, with half of its US$ 26.5 billion revenue, originating from China. The company has agreed to alter its patent licensing practices by charging royalties at 65%, rather than 100%.

Another bank cover up looks in the offing with news that an HSBC Swiss subsidiary marketed schemes for clients to avoid tax, conceal undeclared accounts whilst allowing clients to withdraw “bricks” of cash on a regular basis. This fraud was on-going throughout 2005-2007 and is said to have involved 100k account holders (and US$ 119 billion) with Swiss (11.2k), French (8.8k) and UK (8.7k) the countries with the largest number of “offenders”, whilst the countries with the highest US$ value were Switzerland (US$ 31.2 billion), UK (US$ 21.7 billion), Venezuela (US$ 14.8 billion) and USA (US$ 13.4 billion).

To date, HSBC has admitted failings in its subsidiary, the Swiss government has charged the whistleblower, Herve Falciani, with industrial espionage and breaching the country’s secrecy laws, the UK taxman has clawed back a miserly US$ 205 million and Steven Green, ex CEO from 2003-2006, and then Chairman of the bank, was appointed to the House of Lords and made a trade minister in 2010. It will be no surprise to see more startling revelations over the coming weeks but it will be one to see any prosecutions. UBS, already hit with over US$ 1 billion in fines last year, could be another bank in the firing line over its selling of bearer bonds.

British lawmakers have accused the Big 4 accounting firm, PwC, of promoting tax avoidance on an industrial scale and cited the example of Shire. The pharmaceutical company employs 5.5k globally with just two in their Luxembourg office. It appears this arrangement, with the duchy was only one of 343 made by PwC in the eight years to 2010 and ensured that the drug maker paid tax at an effective rate of only 0.0156%! Shire join an increasing number of companies that just Take The Money And Run!

Posted in Finance | Tagged Arabtec, Danube, DFM, Drake & Scull, Dubai, Dubai Financial Market, Dubai Opera House, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

I Won’t Back Down

Posted on February 12, 2015 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum announced plans to transform the Dubai Creek area, with the aim to raise public awareness of Dubai’s tradition, history and culture. Covering an area of 1.5 sq km, the renovation work will concentrate on four areas – Al Faheidi, Bur Dubai, Deira and Shindagha – with more than 60 projects included in the renovation work.

At an estimated cost of US$ 33 million, there will be new aerospace supply chain facilities developed at Dubai World Central. Due for completion by Q1 2016, the project will include a multi-purpose building, specifically for supply chain tenants in the Maintenance, Repair and Overhaul (MRO) sector.

Damac reported a 64.0% jump in 2014 revenue to US$ 2.0 billion (helped mainly by the delivery of 3.6k units and two land sales, bringing in US$ 874 million) and a 46.1% hike in profit to US$ 937 million. During the year, the company saw a 24.0% increase in booked sales to US$ 3.1 billion, with properties under construction at year end up 20.0% to US$ 2.33 billion.

Arabtec announced that it had won two Emaar contracts, valued at US$ 102 million, to build villas for the Arabian Ranches extension and Al Mira Residences.

Kleindienst, developers of the six-island Heart of Europe project on The World, is launching the sale of villas, some underwater, on Monaco island. The 1.7k sq ft villa prices will start at US$ 1.36 million, with handover slated for 2017.

Now in its 19^th season, Global Village expects to attract more than 5 million visitors this year before the 157-day event closes on 11 April. Encompassing 2.7 million sq ft, there are more than 3.5k outlets from 70 participating countries.

Jumeirah manages 22 hotels and has a further 26 in the pipeline, with the latest being the first bearing its new Venu brand. It has signed a management agreement with Meraas Holding to operate a 300-room, 119-apartment property on Bluewaters Island, located off JBR.

Dubai Healthcare City will join up with Northern Ireland’s Queen’s University to establish the Mohammed bin Rashid University of Medicine and Health Sciences. It is expected that the first intake of students will be in September 2016.

Mashreq, Dubai’s third largest bank, is planning to move its HQ from Deira to Downtown, as it issues a tender for a 151 mt tower to be located near Burj Khalifa. With a record US$ 654 million 2014 profit reported last week, the family-based bank should have no problem with financing the project. (This week, the bank forecast that it expected retail lending to fall by 25%, in the wake of a fall in consumer confidence and the introduction of the Etihad credit bureau).

DP World reported an 8.9% increase in gross container volumes in 2014, handling 60 million TEUs. During the year, two new operations opened – Embraport in Brazil and London Gateway – whilst Jebel Ali will have an extra 11.2% capacity later this year when its total capacity will expand to 19 million TEUs.

David Haigh, who has been incarcerated for the past nine months, has launched a US$ 50 million claim against GFH Capital, former owners of Leeds United FC. The ex-MD of the club has been accused by his former Dubai-based employer of embezzling at least US$ 6 million, by faking invoices.

The local courier company, Aramex, posted its 2014 results which showed a 14.5% hike in its net profit to US$ 87 million, of which US$ 24 million was attributable to Q4, a 17.0% increase.

Despite a 10.5% jump in 2014 revenue to US$ 2.1 billion, Dubai Duty Free was edged out of the global number one slot by South Korea who recorded US$ 100k more sales.

Next week sees 4.8k exhibitors and 80k food professionals in Dubai for Gulfood exhibition – a huge boost for the MICE (meetings, incentives, conferences and exhibitions) sector. Now in its 20^th year, the five-day event is now the largest of its kind in the world and will expand even more with 600 companies already on next year’s waiting list.

Kia Motors recorded a 10.0% rise in sales to the MENA region to 323.8k vehicles, of which UAE contributed 16.5k – a rise of 11% on the year.

In what appears to be a logical move, Continental, the German tyre manufacturer has shifted its MENA office from Hanover to Dubai. This is another indicator on how the commercial world is increasingly considering Dubai as a regional hub.

It is reported that Dubai-based Buroj Property Development has signed a MoU with the Sarajevo mayor to build a luxury US$ 2.6 billion development in the Bosnian ski resort.

Dubai Investments made two announcements this week – its 2014 results and a major acquisition. Last year the Dubai-listed investment company, with a paid up capital of US$ 954 million, recorded increases in both its Revenue and Net Profit – 12.3% higher at US$ 869 million and 63.0% up at US$ 365 million respectively. The company also showed a 14.3% hike in Total Assets to US$ 3.93 billion. It also announced that it would acquire 60% in Abu Dhabi’s Al Mai Capital for an undisclosed amount.

The DFM reported a massive 167% jump in 2014 profits to US$ 207 million as revenue rose 109% to US$ 255 million. Total trading value for the year surged 139% to US$ 104.0 billion.

The DFMI started the week trading on Sunday at 3674 and recovered all of the previous week’s losses by surging 5.8% to close at 3887 on Thursday (3.0% higher than its January opening of 3774). Bellwether stocks, Emaar Properties and Arabtec, were trading at US$ 1.99 and US$ 0.84 – up 8.7% and 6.3%, in turn, on the week.

In a bid to boost growth, Australia became the latest country to cut rates to a historic low of 2.25%. The 25 basis points reduction resulted in a fall in the dollar to 0.766 to the US$ and a 1.1% jump in the stock market. This seems a deliberate move by the Reserve Bank to ensure that the overvalued currency continues in a southward direction, especially because commodity prices have fallen off sharply. Political turmoil may well see the demise of Tony Abbott as Prime Minister next week but this attempt will probably fail.

Barack Obama is hoping to raise an additional US$ 238 billion as he plans to close a tax loophole by which many US firms avoid paying tax on overseas profits, The money raised, by imposing an initial 14% levy in 2016 and thereafter a 19% annual tax, will be used for road projects. The top five companies with most money stashed overseas are GE (with an estimated US$ 110 billion), Microsoft, Apple, Merck and Pfizer, Whether Congress agrees remains to be seen.

Amazingly still behind the UK’s 3.2%, the US recorded annual 2.4% growth in 2014 but there were warning signs with December returns showing a growing trade deficit and lower business spending. Although there was a December dip in consumer spending (which accounts for 67% of the country’s economic activity), one of the positive indicators was the 4.3% annual jump, attributable to fact that pump prices have fallen 43% over the past six months.

As oil prices have plummeted, the knock on effect is that it has speeded up the rate of deflation in the eurozone with January levels down 0.6% compared to the previous year, as energy prices dropped 8.9%. The main problem is the repayment of debt; falling incomes result in borrowers having difficulty settling liabilities whilst governments see a shortfall in tax revenue.

It is estimated that the 60% drop in oil prices may have contributed an additional US$ 175 billion for consumer spending in the US; as this sector accounts for 67% of the country’s economy, this will fuel confidence and help speed up growth which in Q4 was at an annualised 2.6% – weaker than market expectations.

One casualty of the drastic fall in oil prices was Royal Shell, as the Dutch oil company announced that it was slashing spending by US$ 15 billion over the next three years. Last year, the company reported a 14.0% jump in profits to US$ 6.2 billion.

Despite Chancellor Merkel’s assertion ruling out any further debt relief for the beleaguered Greek economy, Prime Minister Alexis Tsipras is still following his anti-austerity stance and to drastically amend the terms of the current rescue package. In 2012, the country saw US$ 113 billion written off as creditors and banks took a reluctant “haircut” but even now the total outstanding is US$ 356 billion, equivalent to 175% of GDP. The economy has seen a 25% contraction since the start of the crisis and has frightening unemployment levels – 25% of adults and 50% of youths are out of work. There is no doubt that if the impasse is not breached then “Grexit” is one step nearer moreso because both the main protagonists’ mantra seems to be I Won’t Back Down!

Posted in Finance | Tagged Arabtec, Damac, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Kleindienst, Nakheel, UAE | Leave a comment

Forever and Ever

Posted on January 31, 2015 by howesdubai

Greece hit the international headlines this week with news of the death of one of its main exports, Demis Roussos, and locally that Greece was one of more than 150 Dubai projects cancelled, according to the Dubai Courts website. The Hellenic development was to include 65 luxury residences on the proposed 485k sq ft island on Nakheel’s The World project.

Of the other cancellations, two Khyool Investment ventures (Abjar Tower and Faras 2), have already been liquidated, 17 projects of Reliance Real Estate Development are currently subject of a RERA committee hearing and a further 34 have almost been cleared, to the stage of moneys being returned to investors. The remainder is still outstanding with the notable casualty being the 16-storey Rotating Residence in Jumeirah Village, which was due for completion over six years ago!

It is well-nigh impossible to forecast what is going to happen in the realty sector as another week sees another housing forecast, with different findings. This time, JLL expects a 10% fall in house prices (after a two-year 56% rise) and a similar decrease in rents.

Dubai Properties report that 9% of the total construction work of its US$ 218 million Dubai Wharf project has already been completed.

Dubai Municipality confirmed that it would be in a position to totally finance the proposed US$ 8.2 billion Desert Rose project. On completion, by 2025 at the latest, the sustainable city, located south of Emirates Road, will have 30k units and be home to 120k nationals and 40k expatriates. 10k units will be affordable housing for expatriates.

It seems as if the launch of the 700-unit Millennium Square in Meydan City has started well with reports that one unnamed investor has already put down US$ 150 million for 125 units. G&Co will start work on phase 1 of the US$ 409 million development in Q3, comprising 210 villas, with starting prices at US$ 1.2 million.

Union Properties has started work on phase 3, covering 1.48 million sq ft, of its Green Community development. The US$ 185 million 227-villa project should be completed by early 2017 and will bring the total number of residences there to 1,782.

Nakheel has announced massive plans for 80 new buildings near to its Dubai Waterfront site, with the building of 4k new apartments to be started shortly. The original concept was for a huge beachfront city, with a population of 400k but this was put on hold as the GFC scuppered many of Dubai’s grand plans.

A subsidiary of Drake & Scull, Gulf Technical Construction, has secured a tender to build a 38-storey tower for Reef Real Estate. Reef Towers will host 378 units and will be located adjacent to the Els Golf Club. Another subsidiary has secured a US$ 54 million MEP contract for an unnamed 5-tower hotel and apartment complex, already under construction in the emirate.

Target Engineering – 98% owned by Arabtec – won two more Abu Dhabi contracts worth US$ 153 million. An ADNOC tender for building a housing complex in Ruwais was valued at US$ 94 million whilst the other successful bid was from ADCO, for a new management building.

The 40^th Arab Health and Congress opened this week with 4k exhibitors and 125k trade visitors – a huge boost to the local economy. It has been estimated that UAE consumers spend some US$ 780 million on medical-related products, expected to increase by 9.8% this year. The 4-day exhibition, one of the largest of its kind in the world, highlights the fact that Dubai is becoming a major hub for medical tourism.

As the number of Russian visitors tumble, the vacuum is being filled by the Chinese, with 2014 numbers showing a 25% year on year increase to 276k.

Despite the absence of many Russian tourists, due to their economic and currency problems, this year’s Dubai Shopping Festival looks set to break all records when it closes on Sunday. Early figures indicate an 18% jump in shopping mall footfall and retail sales are set to show at least a 5% increase.

According to Issam Kazim, the chief executive of Dubai Corporation for Tourism and Commerce Marketing, Dubai hotels will have an additional 20k rooms within the next two years; this will increase the inventory by 22.2% to 110k, with an estimated 45k rooms being added in the three years leading up to Expo 2020. This number should be able to cope with the expected 20 million visitors at that time.

Accor has just opened its second Dubai Pullman brand hotel in JLT – a 35-storey tower with 296 rooms and 58 serviced apartments.

Two Dubai properties make Trip Adviser’s latest listing of the top 25 global destinations, based on travellers’ reviews. Emirates’ desert location, Al Maha, comes in 8th whilst Dar Al Masyaf at Madinat Jumeirah makes a creditable 13th.

Year-end results show that Dubai is the busiest international airport in the world, replacing Heathrow in top spot. In 2014, the facility handled 70.5 million passengers – 6.1% more than in the previous year – and expects an even bigger increase of 8.9% this year. These figures are even more impressive considering the partial 80-day closure for runway maintenance in Q2.

With the transfer of freight operations to the new Dubai World Central, it came as no surprise to see a slight fall in freight volumes to 2.37 million tonnes – a 3.1% drop. Overall both Dubai airports recorded more than 2.4 million tonnes, making it the 3^rd busiest in the world after Hong Kong (4.3 million tonnes) and Seoul (2.46 million tonnes).

Emirates reportedly pay Real Madrid an annual US$ 34 million in a 5-year shirt sponsorship. Now the Spanish club may rename its Santiago Bernabéu stadium Abu Dhabi Bernabéu, in a deal with the Abu Dhabi government fund, International Petroleum Investment Co.

Local consumer confidence is exemplified by recent figures from Christie’s, the Department of Economic Development, Audi and Renault. The London auction house reported increased business activity with 2014 Dubai auction revenue surging 59% to US$ 46 million. Meanwhile DED recorded a 13.3% increase in the number of licences issued in 2013 to 21.4k, with the number of LLCs increasing by 17.1% to 14.7k.

Al Nabooda Automobiles has reported a 13.6% rise in Audi sales to 3.0k whilst Renault sales jumped an impressive 44% to 3.7k in 2014. Al Nabooda is currently building a US$ 36 million workshop in Dubai and also a US$ 70 million pre delivery centre in Jebel Ali. If these figures are anything to go by, the local auto sector is in rude health.

It is no surprise to see that the multi-faceted Dubai public transport system had a 20.7% surge in passengers in 2014 to 531 million, which equates to 1.47 million users a day. The importance of the transport system can be gleaned from the fact that its usage has risen from 6% in 2006, to 14% last year with estimates indicating a rise to 20% by 2020. In 2014, Metro users jumped 19.3% to 164.3 million whilst taxi, bus and marine transit saw 108.9 million, 91.9 million and 13.3 million passengers respectively.

Although Expo 2020 is still five years away, a JV, between CH2M Hill – Mace, has already been appointed to manage the delivery of all construction-related services for the 438-hectare site. The US/UK partnership comes with excellent credentials, having already had a major input into the success of the London 2012 Olympics, and both entities have had local exposure with projects such as JBR, MoE and Masdar City.

The year-end reporting season is in full swing with Majid Al Futtaim announcing a 11.0% jump in revenue to US$ 6.8 billion with an operating profit of US$ 980 million. The company’s total assets were valued at more than US$ 12.3 billion, with plans for a doubling in size over the next five years.

Dubai Islamic Bank followed the same trend as other local banks when it announced impressive Q4 figures, showing a 64.1% rise in net profit to US$ 232 million, on top of a 63.2% rise in annual revenue to US$ 763 million. Meanwhile, Deyaar Development, 45% owned by Dubai Islamic Bank, reported a 50.0% jump in 2014 profit to US$ 63 million.

Emirates REIT, the Dubai-based Islamic real estate investment trust, announced that 2014 net profit rose 39.3% to US$ 48.6 million. Total assets jumped almost 80% to US$ 599 million, comprising seven properties, including its biggest acquisition made in June last year – 67% of the floor area and 700+ parking spaces in DIFC’s Index Tower.

Union Properties did not fare as well with disappointing 2014 figures. A 55.8% fall in revenue, to US$ 561 million, saw the Dubai developer coming in with a reduced 45.7% bottom line of US$ 234 million. Its share price on Thursday was lower at US$ 0.29.

The regulatory authorities have approved Aabar Investment’s option plan to purchase a further 100 million Arabtec shares to bring its holding to 37.27%.

It is reported that Emaar Properties is planning to hive off Emaar Misr, its Egyptian division, in a US$ 270 million flotation. Although smaller than its last September US$ 1.58 billion Dubai bourse IPO (for 15.4% of its Malls Group), it will be the largest seen on the Cairo exchange since 2007.

Some of the recent IPOs still need time to find their feet with the following down on their original opening prices: Damac – 37% at US$ 0.49, Dubai Parks & Resorts – 29% at US$ 0.19, Amanat – 20% at US$ 0.22 and Emaar Malls – 4% at US$ 0.76. Liquidity still seems a problem with this Thursday trading volume of 273.6 million shares, totalling US$ 130 million.

The DFMI started the week trading on Sunday at 3883 and fell 5.4% to close at 3674 on Thursday (2.6% lower from its January opening of 3774). Bellwether stocks, Emaar Properties and Arabtec, were trading at US$ 1.83 and US$ 0.79 – down 10.3% and 3.7%, in turn, on the week.

Largely as a result of the phenomenal success of iPhone 6/6Plus, launched last September, and subsequent sale of 74.5 million units, Apple announced a record US$ 18 billion profit in Q4. Sales and profit were 116% and 77% higher, quarter on quarter. As 60% of Apple’s profits are structured through three Irish-based companies, where the so-called “Double Irish” procedure results in much lower tax liabilities, the question is should it be paying more?

Mark Carney, the Bank of England Governor, has weighed into the debate about certain international companies minimising their tax obligations. Like many others in Davos earlier in the week, he considers that many of the large companies – especially tech – take advantage of international tax deals. It is time that tax rules are updated, simplified and become more transparent and that governments come up with a unified tax system.

Two UK companies are in talks about possible acquisitions, the largest of which involves O2. Li Ka-shing’s Hutchinson Whampoa has reportedly offered US$ 15.4 billion for the UK’s second largest mobile provider (after Vodaphone). As Asia’s richest person, he already owns the Three network which has 12% of the UK market and, if successful, he will then control 41% of market share compared to Vodaphone’s 23%. Whether the competition watchdogs – in both the UK and EU – would allow such dominance in this sector remains to be seen.

Meanwhile IAG, the parent company of British Airways, has made its third – and a much improved offer – of US$ 2.85 per share to take over Air Lingus. The two major shareholders, who will have to agree to the sale are Ryanair (30%) and the Irish government (25%) which would value the airline at US$ 1.45 billion. (At that price, Etihad, as a 4.1% shareholder, could see a US$ 60 million windfall).

Russian business confidence took a further two hits this week. S&P slashed its credit rating to BB+; the junk status rating will make loans more expensive and more difficult to obtain. The double whammy effect of low oil prices and international trade sanctions will ensure that the economy will contract by at least 5% this year, as the government is expected to pump in US$ 35 billion to keep the economy afloat. As a result, the rouble fell again this week and closed Thursday on 68.8 to the US$.

It is reported that the Chinese government will announce a 2015 7.0% growth forecast – its lowest since 2004. This could be the year that China takes stock of the situation by cutting growth so that it can introduce much needed economic and structural reforms to better manage such an unwieldy economy. Last year, it was estimated that such continuous rapid growth led to unnecessary over investment in some sectors, costing the country US$ 7 trillion! There is also some worry of deflation, as last year’s 2.0% consumer price rise was well below the 3.5% target.

By the end of 2014, China had become the 5^th most widely used payments, moving up eight places over the past two years: with a 2.2% share of the market it is behind the US$ (44.6%), euro (28.3%), sterling (7.9%) and the yen (2.7%).

The economic flavour of this month has to be gold largely because of the uncertainty of most central banks on how to deal with deflation and to boost sagging economies. The yellow metal started the year at US$ 1,186 and closed the month on US$ 1,277 – a jump of 7.7%. It is unlikely to have too many months like January.

The main aim of last week’s eurozone’s QE announcement was to encourage borrowing, which in turn will boost spending, by increasing the supply of money that theoretically keeps interest rates low. To date, the historically low rates have failed to ignite growth in the 19-country bloc. The twin negative impact of low growth and high unemployment is a conundrum that needs to be solved. Current policies seem certain not to meet the challenge because a complete overhaul is needed but there is a lack of the political for it to be carried out.

Singapore joined a host of other countries, including Canada, Denmark, India, South Africa and Turkey, who have begun a currency war. Their use of monetary policy is an attempt to reverse an economic slowdown, whilst supporting growth and inflation. In short, it has made its dollar weaker against other currencies, and against the greenback it fell to its lowest level in almost five years, having slipped 6% over the past three months. When the dust settles, there is unlikely to be many winners in this currency war.

Germany led the eurozone in warning the incoming Greek government that it expects Alexis Tsipras to meet the country’s commitments and pay off any outstanding debts, as well as to carry on its much criticised austerity programme. The incoming Syriza Party has completely opposite ideas – to renegotiate the US$ 270 billion debt and to scrap austerity measures. No wonder the bureaucrats are worried – with the euro hitting 11-year lows and stock markets (particularly banks) falling – as the eurozone, and the euro, face collapse. The two extreme outcomes are that Germany will back down – and sanctions a debt write-off with the ensuing contagion moving to other precarious economies such as Italy and Portugal – or they do not and then it will see Greece depart the euro…. but not Forever and Ever.

Posted in Finance | Tagged Arabtec, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, Greece, HH Sheikh Mohammed bin Rashid Al Maktoum, Masdar, Nakheel, UAE | Leave a comment

Don’t Give Up On Us Now

Posted on January 24, 2015 by howesdubai

A report by Phidar Advisory has indicated that Dubai residential sales headed south in Q4, with apartments falling 3.6% and villa sales by 1.7%; although apartment rentals showed a marginal 0.4% increase, villas fell by 3.1%. Office lease rates remained relatively unscathed with a 0.5% drop. Another report, this time by JLL, forecast a subdued 2015 market as the estimated 25k new units coming on line will be more than enough to meet demand.Union

The final two of six towers in Emaar’s Dubai Creek Residences will go on sale – in Dubai, Abu Dhabi and London – this Saturday. Located in Dubai Creek Harbour at The Lagoons, the 30- and 35-storey buildings will have a selling price of between US$ 381 and US$ 504 per sq ft. The whole project – a JV between Emaar and Dubai Holdings – will be three times the size of Downtown and will eventually have 39k residential units, 3.7k offices, 22 hotels and 8 million sq ft of retail space.

Meydan’s US$ 817 million freehold Millennium Square development of luxury semi-detached villas is slated for completion by 2017. Prices for the 3.5k sq ft properties, developed by G&Co, start at US$ 1.2 million.

CBD has provided US$ 56 million funding to R Hotels for the development of its sixth UAE property, due to open on Palm Jumeirah by the end of next year. The US$ 136 million hotel will be R Holdings’ fourth in Dubai, with the other two located in Ajman.

In line with other local developers, Union Properties is to expand into the burgeoning hospitality sector, with plans to build a 4-star property in Dubai Investment Park. The development will include a 150-key hotel and 50 serviced apartments. UP has two other sites designated – Motor City and Dubailand – and expects to be managing at least 1k rooms by 2020.

Dubai-based Gulf Marketing Group, established in 1978, is on a major expansion drive, with plans to open a further 47 outlets this year, following on the 42 new shops that were opened in 2014. The Baker family company operates all over the GCC and has Sun & Sand Sports and Supercare Pharmacy in its extensive portfolio.

The Can-Pack Group, a leading manufacturer of aluminium cans, has opened its new US$ 55 million plant in Dubai Investment Park. The 150k sq mt facility will see current production increase by 285%, to 5 million cans a day, and will also encompass a warehouse and distribution centre.

As UAE’s chocolate confectionary market is expected to jump 10.2% this year to US$ 319 million, one of the oldest players, Patchi is planning a new factory in DIC, with a 10k kg daily capacity. The Lebanese chocolatier’s old Al Quoz plant was damaged by fire in 2013 and the company currently uses temporary facilities to produce 3k kg of chocolate daily.

It does appear that UK and Chinese companies are doing well from the Dubai construction sector. Kier Group is the preferred bidder for a US$ 152 million mixed-use development and has recently won contracts worth US$ 132 million (a JV with Mercury for a local bank’s data centre), US$ 71 million (Dubai Parks) and US$ 39 million (Dubai University).

Following recent conflicting reports, it now seems that Dubai construction company, Middle East Developments, will begin work in Q2 on the Al Noor Tower in Casablanca. The 540 mt tower, costing US$ 1 billion, will become Africa’s tallest building, easily dwarfing the current holder, the 233 mt Carlton Tower in Johannesburg.

Saudi healthcare company, Dr Soliman Fakeeh Hospital, is spending US$ 272 million on a hospital / university in Dubai Silicon Oasis. Phase 1 of the facility, a 150-bed smart hospital, is due for completion in 2017 whilst phase 2, including an additional 150 beds and the opening of the university, will be completed two years later. It is expected that by 2020, the emirate will host 500k medical tourists, contributing US$ 708 million to the economy.

According to a leading Boeing official, the UAE will require a further 55k pilots and 62k technicians by 2020 to meet the growing demands of the aviation sector. By that time, 750k people will be employed in the industry – a major boost to the local economy.

As the number of passengers using Dubai International is set to rise from its 2014 total of 71 million to 100 million by 2020, the government has invested a further US$ 27 million in enhancing the Smart Gates facility.

The world’s largest covered cruise facility, the Hamdan bin Mohammed Cruise Terminal hosted five cruise ships, all at the same time, this week at Mina Rashid. Over 25k passengers and crew of the Aida Diva, Amadea, Costa Riviera, Costa Serena and MSC Orchestra disembarked in Dubai >later this month, the Queen Mary’s 4.5k passengers will berth here.

Notwithstanding the turmoil and apparent oversupply in the oil market, UAE pumped an additional 153k barrels per day in December to bring its daily output to 2.9 million barrels. During the period, OPEC members pumped 30.2 million barrels. Brent crude was trading higher on Thursday at US$ 50.45

Two other state owned companies are arranging financing facilities. The Investment Corporation of Dubai’s ENOC (Emirates National Oil Company) is set to seal a US$ 1.5 billion long-term loan; the last time it went to the market was in 2008, when it secured US$ 500 million funding. The company operates services stations in the emirate, as well as a 120k barrel a day refinery in Jebel Ali, fuel terminals and oil tankers.

This week, Dubai Holdings’ TECOM Investments, which has 4.5k companies in its various business parks, finalised a US$ 1.1 billion syndicated loan facility, with the funds being used for new projects. Details of the terms were not made available.

Meanwhile, Limitless now has the backing of 85% of its creditors and obtained a 3-month reprieve on a US$ 1.2 billion repayment due on 31 December 2014.

Despite a worrying 24.7% fall in 2014 revenue to US$ 1.91 billion, Nakheel still managed to pull a rabbit from the hat by declaring a 43.2% surge in profit to US$ 1.0 billion. During the year there was a US$ 125 million write back against a Palm Jumeirah project and this, along with tighter cost control and higher margins, brought about the impressive bottom line figure. At the end of the year, the developer had 17k leasable residential units, expected to grow by a further 76% to 30k over the next three years. This year, Nakheel expects to award construction contracts totalling US$ 1.9 billion – this is on top of the US$ 6.5 billion awarded over the past four years.

Dubai Chamber of Commerce now boasts 169k members – up 10.6% on the previous year. The chamber’s latest report also shows a 1.8% rise in members’ non-oil trade exports and reexports to US$ 79 billion.

December’s inflation rate hit 3.1% as Q4 reached 3.0% – up from Q3’s 2.6%. The main driver was housing and utilities, up 5.4% year on year, but this could see a fall in 2015, as the sector begins to level off. The other bête-noir was education which showed a 4.0% rise over the year, with no signs of any slowdown in 2015.

The year-end reporting season has begun in earnest with three Dubai banks publishing satisfying annual results. Emirates NBD had a 22% hike in revenue to US$ 3.92 billion, as its bottom line surged 58% to US$ 1.39 billion. Its much smaller offshoot, Emirates Islamic, owned by ENBD, returned with a massive 164% leap in net profit to US$ 99 million, on a 28% hike in net income to US$ 531 million. Dubai’s third biggest bank, Mashreq reported a 20.8% jump in total operating income to US$ 1.58 billion, as net profit went up 33.0% to US$ 654 million. (The Al Ghurair-owned family bank has also expressed interest in acquiring Citigroup’s Egyptian retail business and is also planning a U$ 500 million Tier 2 capital-boosting bond).

Emaar Malls Group saw Q4 profits up 4.6% to US$ 112 million whilst annual profits rose at a higher rate – 22.7% – to US$ 368 million. Its share value at Thursday’s close was US$ 0.77 – slightly down on the US$ 0.79 when it first listed on the DFMI four months ago.

On its last day of trading on the London Stock Exchange, DP World shares rose 4.6% to US$ 17.38. The move back to trade solely on Nasdaq Dubai follows Damac who did likewise earlier in the month.

The DFMI started the week trading on Sunday at 3843 and bucked its recent downward trend to close on 3883 – 1.0% higher on Thursday. Bellwether stocks, Emaar Properties and Arabtec, were trading at US$ 2.04 and US$ 0.82 – down 2.9% and 3.5%, in turn, on the week.

Despite Amazon claiming that it does not receive special tax treatment in Luxembourg, it seems that the EC thinks differently with the view that the country’s tax arrangements constitute “state aid”. The findings will prove embarrassing for Jean-Claude Juncker, the recently appointed EC Chief, as during his 18-year reign as Luxembourg’s prime minister, he oversaw some 340 similar tax avoidance deals with international companies.

Moody’s has cut the Russian credit rating to just one notch above junk status, to Baa3, voicing concern about the country’s economic problems, arising from the low oil prices and the effect of international trade sanctions. The agency is worried that there will be a 5.5% contraction this year, with only a marginal improvement in 2016, and that Russia’s foreign reserves could drop another US$ 125 billion – the same amount as in 2014.

The fallout from last Thursday’s surprise Swiss central bank move to scrap its 3-year 1.20 cap to the euro has resulted in major financial problems for some international companies. In the UK, Alpari, sponsors of West Ham FC, is now insolvent, as its clients have been saddled with heavy losses. The US-listed FXCM saw its shares fall by 90%, as the forex trading group’s clients lost US$ 225 million. Meanwhile New Zealand’s Global Brokers incurred heavy losses and has had to close operations. The major losers, however, will be the Swiss, as their exports could become prohibitively high.

What this has shown is that Switzerland has taken upcoming deflation as a fait accompli. With most of the world seeing lower growth, and some already edging into a deflationary spiral, this has negative connotations. The end result is that consumer and capital spending are curtailed and debt repayment becomes that much more difficult. The world’s economy needs more political input to try and avoid such an occurrence but the Swiss have given up before the battle has really started.

To nobody’s surprise – but to Angela Merkel’s chagrin – the ECB has announced its QE plans of buying the equivalent of US$ 56.8 billion of sovereign debt, as well as US$ 11.4 billion of other banks assets, every month until at least September 2016. The unprecedented US$ 1.25 trillion rescue package is a belated attempt – probably three years too late – to avoid the bloc going into a downward deflationary spiral. The aim behind this strategy is to expand liquidity by central banks buying bonds, which will see a further reduction in borrowing costs, thus encouraging the private sector – businesses and individuals – to borrow more which, in turn will stimulate demand and restore inflation. There is a reason for the German Bundesbank’s opposition to this bond-buying scheme – with every chance of the inevitable sovereign bailouts occurring, it does not want to be the first port of call. Time will tell if QE will work in the eurozone but there is no doubt that much more radical reforms are needed, including structural changes, less bureaucracy and a tighter monetary union. But the message to the Germans from the 17 other eurozone members is Don’t Give Up On Us Now!

Posted in Finance | Tagged Alpari, Arabtec, Boeing, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emaar Malls, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE, Union Properties, West Ham | Leave a comment