howesdubai.com

Up, Up and Away

Posted on February 25, 2014 by howesdubai

Emaar released their 2013 results this week with a 21.3% jump in profits to US$ 698 million on a 25.2% rise in revenue to US$ 2.81 billion, of which its retail and hospitality sector accounted for 46%. The developer sold property at more than US$ 3.27 billion – three times higher than in the previous year.

Majid Al Futtaim will add another floor to its Mall of the Emirates, thereby upping its current retail space by a further 25k sq mt. This forms part of its scheduled US$ 273 million development plan for a 25% increase in retail space by the end of next year.

Nakheel has received six tenders – the cheapest of which comes in at US$ 323 million – for its US$ 681 million Nakheel Mall. Situated on Jumeirah Palm, and covering 418k sq mt, the complex, which will include 200 shops and twelve restaurants, should be completed by 2016, with the nominated contractor being announced within three months.

EFECO, a subsidiary of Arabtec Holding, has won a US$ 272 million contract for MEP work in Kazakhstan. This is part of a US$ 1.1 billion Aldar Abu Dhabi Plaza development in the capital Astana.

Emaar has signed a Memorandum of Understanding with Abdul Latif Jameel for future real estate projects in Saudi Arabia. The JV will be known as Emaar Jameel.

The company also released their 2013 results with a 21.3% jump in profits to US$ 698 million on a 25.2% rise in revenue to US$ 2.81 billion, of which its retail and hospitality sector accounted for 46%. The developer sold property at more than US$ 3.27 billion – three times higher than in the previous year.

Deyaar is set to increase the percentage of its shares that can be bought by foreign investors with a proviso that 51% must be in the hands of Emiratis; of the 49% balance, 24% must be held by GCC nationals. Other companies are looking at loosening the ownership restrictions before the local bourses join the MSCI Emerging Markets Index in May.

As reported earlier, Dubai hotels had a bumper 2013 with three major indicators all moving upwards: GOPPAR (gross operating profit per available room, ARR (average room rates) and RevPAR (revenue per available room) were up 10.3% (US$ 206), 6.5% (US$ 324) and 7.6%. Furthermore official figures also reflect the growth with Dubai International recording a 15.2% surge in passenger traffic to 66.4 million as well as hotels showing a 10% rise to 7.9 million for the first nine months of 2013, with spending up 17% at US$ 4.2 billion.

The Dubai-based district cooling company, Empower, is finalising a US$ 600 million six-year loan which is largely being used for its recent US$ 500 million acquisition of Palm Utilities, formerly part of Dubai World.

DEWA has started work on a 400kv main substation which will provide power to the massive US$ 8.2 billion Mohammed bin Rashid City. The unit, scheduled for completion in 2017, will provide electricity for the exciting development that will encompass 54 million sq ft.

Dubai Investments joins a host of developers who have recently announced major projects as the emirate’s real estate sector gains traction. The company will soon be relaunching its US$ 817 million Mirdiff Hills development along with phase 3 of its Green Community. The latter will have 250 units and will cost US$ 136 million.

The RTA has approved US$ 28 million funding for the construction of the Muhaisna 2 Internal Roads project. This is part of a US$ 271 million plan for the paving of internal roads in several residential communities.

Despite a 9.7% hike in its 2013 revenues to US$ 2.94 billion, du’s profit, after royalties, remained flat at US$ 542 million. The Dubai-based telecom operator had to pay an additional US$ 50 million royalty fee in 2013, bringing this total annual payment to US$ 278 million.

Shuua Capital had an eventful 2013 and managed to turn a US$ 16.1 loss into a US$ 0.8 million profit – significant in that it is Dubai’s oldest investment bank’s first annual profit since the start of the GFC in 2008. Revenues were up by 44% to US$ 534 million.

A recent US study indicates that the country will double its spend on domestic security to over US$ 10 billion over the next decade. Security at the local airports is set to tighten even further with up to US$ 60 million being expended over the coming twelve months.

Five years after borrowing US% $ 510 billion from the UAE Central Bank, Dubai has rolled over the debt on more favourable terms. Although the initial debt maturity is in March, the terms of the revised loan is unknown.

The Dubai General Market Index opened the week at 4099 points and rose 2.05% when closing on Thursday, to 4183 and is already up 24.1% on its January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.44 and US$ 1.32 respectively.

Gold has managed to break out of its recent moribund trading pattern and had reached the US$ 1,323 mark by the end of the week. However, there are some who think that there could be some sort of manipulation going on between the five banks – Bank of Nova Scotia, Barclays, Deutsche Bank, HSBC and Société Générale – who are known as the London gold fixers for a reason.

January saw US factory production fall 0.8% – its largest decline in almost five years. This was the latest indicator – following declines in employment and retail sales figures – that seems to indicate the fragility of US growth forecasts.

Along with the likes of a booming stock market, surging property prices, rising education fees and increasing living expenses, two other news items this week are sure fire indicators that the balloon is on its way up. Emaar go out and spend a reported several million dollars on a 150 million year old dinosaur for permanent display in its Dubai Mall. Meanwhile, Jumeirah Zabeel Saray have introduced the ultimate Friday brunch in what is the brunch capital of the world. Their Royale Brunch will have personal butlers serving the best of the best and priced at US$ 685. Hopefully the balloon has some way to go before It’s Up, Up and Away!

Posted in Finance | Tagged Arabtec, DEWA, Deyaar, DFM, Dubai, Dubai Financial Market, EFECO, Emaar, Emirates, emirates airline, Emirates NBD, Empower, HH Sheikh Mohammed bin Rashid Al Maktoum, Majid Al Futtaim, Nakheel, Shuua Capital, UAE | Leave a comment

Do You Wanna Know A Secret?

Posted on February 18, 2014 by howesdubai

You cannot keep Arabtec out of the news! The Dubai-based builder, with strong Abu Dhabi-backing, is planning to establish five new subsidiaries, four of which will concentrate on new infrastructure and utility projects within the region and further afield whilst the fifth, Arabtec Capital, will provide financial services.

Meanwhile a subsidiary of Arabtec, Emirates Falcon Electomechanical Company, was part of a JV that has just been awarded a US$ 240 million contract for MEP work at the new Abu Dhabi airport.

Passavant-Roediger, a German division of Drake & Scull, won three European contracts worth US$ 45 million: the three locations are in Bosnia, Romania and Turkey.

Following their La Pointe announcement last week, Nakheel reported initial work on three new projects, totalling US$ 11 million, in their Warsan Village and Al Furjan master communities.

The third online property sale, via e-Mart, has seen five commercial and residential properties go under the virtual hammer, raising US$ 51.8 million. Expect to see more of the same in months to come as this portal becomes more popular with end-users.

Yet another indicator of foreign interest in realty is that RP Group from India is planning to spend US$ 1.1 billion on four new projects in Dubai. These will include two hotels, a serviced apartment project and a 3 million sq ft development on SZR.

Dubai-based property group, Orion Holdings, will start work on five new projects, valued at US$ 136 million this year, as it continues with its strategy of acquiring luxury properties in the emirate.

Dubai Investments estimates that it has US$ 2.3 billion tied up in local real estate and plans further projects in Mirdiff, Meydan and Jumeirah Village, in line with further strong growth forecasts for this sector.

Drake & Scull announced a 61% rise in 2013 profit to US$ 50.4 million, on a 47% jump in revenue to US$ 1.48 billion. At the end of the year, the Dubai contractor had an order backlog in excess of US$ 3.3 billion.

The French/Italian manufacturer, ATR, secured a near US$ 1 billion order from Dubai Aerospace Enterprise for twenty 72-600 turboprop aircraft. This, with an option for another twenty planes, will maintain DAE’s position as the region’s largest leasing company.

dnata – part of the Emirates Group – has paid US$ 74 million to Thomas Cook for its Gold Medal Travel Group, including Netflights.com and Pure Luxury which deals in luxury travel packages.

JAFZA reported a 273% upturn in 2013 profit to US$ 188 million on revenue of US$ 417 million. Despite an outstanding loan balance of US$ 705 million and a US$ 650 million sukuk, due for repayment in 2019, its balance sheet is looking stronger with investment property valued at US$ 1.67 billion.

The RTA has approved its 2014 budget which has expenditure of US$ 1.91 billion, of which 55.4% (or US$ 1.06 billion) is for new capital expenditure and the balance for operating costs. Although revenue is expected to climb 17% to US$ 1.36 billion, there will be a cash deficit this year.

There is no respite for the Dubai-based Gulf Navigation as it announced a near-fivefold increase in 2013 losses from US$ 40 million to US$ 190 million on a 32% fall in operating income to US$ 37 million. It was no surprise to see the company’s assets fall by over 30% to US$ 417 million. It is estimated that nearly 90% of the loss was attributable to non-recurring expenses, including a goodwill write off and added provisions.

2013 once again saw the country as the US’s number one trading partner from the MENA region, as bilateral trade jumped 8.5% to US$ 26.9 billion. Exports were static at US$ 2.3 billion whilst imports rose by 9.1% to a record high of US$ 24.6 billion; as expected, transportation equipment accounted for 38.2%, or US$ 9.4 billion, of this total.

Despite 2013 load factors declining slightly by 0.1% to 77.3%, along with increasing capacity of 12.8% being greater than increased traffic of 12.1% (down from 2012’s 15.4%), Middle East airlines led the aviation world in growth. On a global scale, IATA reported that load factors were up 0.4% to 79.5% whilst demand and capacity were both up 5.2% and 4.8% respectively. The US and Europe had the slowest growth rates at 2.3% and 3.8%.

Non-UAE nationals were responsible for purchasing shares totalling US$ 1.05 billion in the first week of this month – this represented 38.3% of all shares bought. Total foreign ownership during this period amounted to US$ 7.8 billion.

The Dubai General Market Index opened the week at 3931 points and, just as last week, surged a further 4.3% to 4099 points, at Thursday’s close; YTD it is 21.6% up on its 01 January opening of 3370.

Toyota became the latest – and last – vehicle producer to pull the pin in Australia, resulting in a loss of 4k production jobs in Victoria. This comes after similar moves by Ford and GM and despite protestations by Prime Minister, Tony Abbott. Because of the recent high dollar and a regulated labour market, costs escalated by so much that it was cheaper for production to take place in Indonesia, Thailand and even Japan. This could act as a wakeup call for the Lucky Country that was cushioned from much of the blow out from the 2008 GFC.

Most people associate quantitative easing with the US but it was Japan which first introduced this unconventional monetary policy back in 2001. The aim is to stimulate a country’s economy by purchasing banks’ financial assets which by increasing its monetary base will lower their yield return. But what is basically a money-printing exercise has seen Japan’s per capita QE spending at twice the US QE3 rate of that introduced by Ben Bernanke. Now the country is in the throes of economic turmoil. Hopefully the US economy, which has spent US$ 1.3 trillion on QE3 alone, since its September 2012 introduction, will not slide down the same slippery slope.

Just when banks thought 2014 could not be worse than last year, consider the following:

· The taxpayer-payer bank Lloyds is trying to push through increased incentive payments in the region of US$ 650 million or 11% higher than the previous year.

· Barclays, with 2013 profits down 33% to US$ 8.5 million and planning to cut staff numbers by 12,000, want a 10% increase in bonus payments to US$ 3.9 billion.

· JP Morgan Chase had their November US$ 13 billion fraud settlement (for selling bonds backed by dubious mortgages) blocked pending further judicial review and could find that they will have to shell out even more money. The bank is also involved in paying out over US$ 1.6 billion relating to their shady dealings with the Bernie Madoff Ponzi scheme.

· The probe by Danish prosecutors into bond price manipulation may expand beyond the lender and six of its employees.

Scarcely a week goes by without some high profile corruption news and this week is no exception with Mathew Martome, a former manager of SAC Capital, being found guilty of a securities fraud that made the company US$ 275 million. The company had already paid US$ 1.8 billion in fines last year but to date its founder, Steven Cohen, has not been charged in what has been described by New York prosecutors as the most lucrative trading scheme in history.

Political figures continue to have their nose in the trough. The former Italian Prime Minister, Silvio Berlusconi, is again in court – this time for allegedly paying US$ 4.1 million to a senator to help destabilise the then government. Ray Nagin, ex-mayor of New Orleans, has been found guilty of corruption by accepting bribes for his favoured treatment to contractors following Hurricane Katrina. Tommy Suharto, son of the former Indonesian president, has been implicated in a scandal involving Rolls Royce; he allegedly received US$ 20 million and a blue Rolls Royce for favouring RR Trent 700 engines for the national airline, Garuda. (This could be part of the reason why shares in the UK engine maker lost 13.6%, or US$ 6.4 billion, on Wednesday).

Some sources indicate that corruption is widespread in Spanish business and public anger has boiled over with a case involving the husband of the younger daughter of King Juan Carlos, Princess Cristina. Inaki Urdangarin has been accused of using his royal connections and of embezzling US$ 8.2 million of public money.

A recent EU report has again highlighted the scale of corruption among the 28-country bloc and has put a figure of at least US$ 164 billion. What the Brussels technocrats are going to do about it remains to be seen but it is hoped that they put their own house in order first.

India is awash with corruption. Over recent years, high profile cases include:

· SP Tyagi, former head of the Indian Air Force and his shady role in the purchase of Italian helicopters

· the 2010 New Delhi Commonwealth Games mired by corruption and inefficiency

· Ashok Chavan and his part in selling war veterans’ Mumbai apartments to cronies

· bribery claims relating to a recent US / Indian nuclear pact

· the telecommunication licences sold to favoured companies at below market rates and estimated to have cost the government coffers US$ 37 billion

· the granting of lucrative coal deals, without any bidding, could have lost government revenue of an estimated US$ 35 billion

This week, it is reported from Oslo that whistleblower, Edward Snowden, could be a potential winner of the Nobel Peace prize. It is said that less than 1% of his files have been released and that some of the information therein is explosive. It can only be hoped that the true links between the trinity of governments, big business and banks can be exposed and that corruption is brought to centre stage. And in these circumstances, Do You Wanna Know A Secret? Yes.

Posted in Finance | Tagged Alabbar, Arabtec, DFM, Drake & Scull, Dubai, Dubai Financial Market, Edward Snowden, Emaar, Emirates, emirates airline, Emirates NBD, Gulf Navigation, HH Sheikh Mohammed bin Rashid Al Maktoum, JAFZA, Nakheel, Silvio Berlusconi, UAE | Leave a comment

Here We Go Again!

Posted on February 10, 2014 by howesdubai

The big news story of the week came from Arabtec as it announced that the Abu Dhabi state fund Aabar (a 22% shareholder in the Dubai-based builder) had awarded the company a massive US$ 6.1 billion contract for 28 buildings in the capital and nine in Dubai. Three of the six hotels will be located in Business Bay, with the other three, plus three serviced apartments, being in nearby Al Jaddaf. Aabar plans to spend an additional US$ 13.9 billion on construction and all work will be routed through Arabtec. Even before this news, their shares had almost doubled over the past six months and a further 12% jump this week saw the stock reach US$ 1.37.

The Al Fahim Group received a US$ 1.85 billion boost with the Hong Kong-based Chow Tai Fook buying into the Dubai Pearl project. The estimated US$ 6 billion project, financed by a consortium headed by AFG, will include seven hotels, 1,490 serviced apartments, a theatre and over 60 restaurants. On completion, it will be home to 9k and a workplace for a further 12k.

As part of a US$ 273 million redevelopment of Majid Al Futtaim’s Mall of the Emirates, Drake & Scull International have been awarded a US$ 30 million MEP contract. DSI’s shares hit a record high (US$ 0.47) on Wednesday as it revealed that it had also won a US$ 88 million contract for a project for King Saud University in Riyadh. More good news for the company came with Nakheel awarding a US$ 102 million contract to its subsidiary, Gulf Technical Construction Company, to build The Pointe on Palm Jumeirah.

Dubai-based MAG Group and Dubai Healthcare City have signed a US$ 218 million JV to develop a 1 million sq ft project that will include two hospitals, a clinic, a hotel and apartments. It should be completed within two years.

Asteco has reported that average sales in prime residential areas surged by more than 60% last year – with rental increases following roughly in tandem. By far the largest upsurge came in Q4 which witnessed a 23% price rise in villas and apartments. The feel good factor has had a positive impact but it seems that different studies come out with different figures, with the only point of agreement being that property prices are going up. By how much, nobody really knows.

There has been a strong recovery in the commercial real estate sector. The Royal Institute of Chartered Surveyors has indicated that the UAE and Japanese markets are leading the way in this recovery with the UAE’s Occupier Sentiment Index at 46 – its highest level for six years. RICS indicate that commercial rents will rise as demand continues to be greater than supply available.

In December, the hospitality sector continued to improve its profitability levels. Despite a 4.5% drop in occupancy rates to 79.5%, all other indicator headed north – ARR (average room rate), RevPar (revenue per available room) and GOPPAR (gross operating profit per available room) by 9.1% to US$ 368.22, 3.2% to US$ 292.70 and 3.9% to US$ 260.00 respectively. The annual figures also rose by 6.5%, 7.6% and 10.3%.

There was a 13% upturn in the number of visitors to Burj Khalifa in 2013, with the 1.87 million total split evenly between overseas and domestic traffic. Surprisingly, German tourists accounted for 23% of all overseas visitors followed by UK (15%), Russia (11%) and India (11%).

It is reported that a “Tourism Dirham” charge will be levied on all hotel rooms as from 01 April 2014. The levy will vary between US$ 1.90 to US$ 5.45 per room per night and the monies raised will go towards Dubai’s international marketing budget.

wasl hospitality has added to its Dubai portfolio of seven hotels (three under the Hyatt flag and four under Starwood management) by announcing that Hilton Worldwide will introduce its midscale brand, Hilton Garden Inn, to the emirate. Both hotels, totalling 365 rooms, are slated for a 2015 completion.

It has long been reported that services at Dubai International will be curtailed between 01 May and 20 July because of scheduled runway repairs and maintenance. It now seems that 25% of flights could be affected and this will necessitate either cancellations or moving flights to the newly opened Al Maktoum International during the 80-day hiatus. To date, only flydubai, Royal Brunei and FedEx have confirmed that they will move selected flights.

There will be plenty of capacity at the new facility. Since its October opening for passenger traffic, there have only been 65k passengers, whilst 2013 air freight figures showed a slight decline to 209k tonnes.

The RTA has announced that the Dubai Metro will be extended. The Green Line will see a doubling of its track to 41 km, with a further 11 stations, bringing its total to 31. The original Red Line will be extended at either end of the track with an additional 10 stations. (Rail journey numbers continue to rise with 330 million recorded in 2013).

Deyaar reported a massive hike in 2013 profits from US$ 10.5 million to US$ 42.1 million. Almost 44% of the profit (US$ 18.4 million) for the Dubai developer was attributable to Q4 trading – a sign of increased positivity in the real estate sector.

Aramex reported a 16% increase in its profit to US$ 20.8 million. There is no doubt that the Dubai-based logistics company will be spending big on regional acquisitions in the coming year.

Having had its problems following the GFC, Union Properties seem to have put all troubles behind them when announcing an almost nine-fold 2013 profit increase from US$ 48 million to US$ 430 million.

It seems increasingly likely that the Dubai and Abu Dhabi stock exchanges will merge in the not too distant future. It is reported that due diligence has already been carried out and that the deal just needs rubber stamping by the two emirates’ governments.

The Dubai General Market Index opened the week at 3770 points and once again defied gravity by jumping 4.3% to 3931 points, when closing on Thursday; YTD it is 16.7% up on its 01 January opening of 3370. Bellwether stock, Emaar received a boost with its credit rating raised to investment grade by Standard and Poor’s and was trading at a 65 month high of US$ 2.29 – still some way off its 2005 peak of US$ 7.50 but well above its 2009 nadir of US$ 0.46.

Although still concerned about a potential property bubble, the IMF has again upgraded UAE’s 2014 growth prospect to 4.5% – well up on their last announcement in October when the rate was 4.0%. The main driver in growth would be the launch of numerous mega projects ahead of the 2020 Expo, with a limited increase expected from oil because of the increasing global supply available. It also noted that Dubai’s GREs (government related enterprises) have debts of US$ 78 billion maturing over the next four years, including US$ 20 billion to its neighbour, Abu Dhabi.

The manufacturing slowdown in China was confirmed with a decline in the monthly PMI which dropped yet again in January to 50.5. The main reasons for this fall have been put down to a decrease in domestic consumption and a reduction in export orders. A much bigger problem faces the world’s second largest economy – its US$ 24 trillion credit system is spiralling out of control with much of it wasted through corruption and unnecessary mega projects. It can only be a matter of time before the fan is hit.

Deflation fears indicate that the eurozone countries are becoming increasingly reluctant to spend money as evidenced by abysmal retail sales figures in December – down 1.6% on November and 1% compared to December 2012. Worryingly, Germany saw a 2.4% slump compared to a year earlier.

But despite this, the ECB head, Mario Draghi, still maintains that deflation is not a threat to the 17-member bloc even as the January inflation rate slowed to 0.7%, compared to 0.8% in December. The bank kept its benchmark interest rate at 0.25%.

Some disappointing economic news greeted the new Fed Chief, Janet Yellen. For the second month in a row, weak job numbers are a cause for some concern and a potential pointer that the recovery may be running out of steam. The 113k January figure was well down on expectations. This was allied with unexpectedly weak manufacturing data – another possible indicator that the recovery is not as strong as it was three months ago.

According to Jack Lew, Treasury Secretary, the US economy may see a further default by the end of the month if the US$ 16.7 trillion debt ceiling is not raised. Despite being in receipt of US$ 7 billion daily, it would only be a matter of time before the world’s largest economy falls into bitter bipartisan infighting that will eventually impact the global stage. Unfortunately, Here We Go Again!

Posted in Finance | Tagged Al Fahim Group, Alabbar, Arabtec, Aramex, Asteco, DFM, Drake & Scull, Dubai, Dubai Financial Market, Dubai Metro, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, MAG Group, Nakheel, RTA, Tourism Dirham, UAE | Leave a comment

Don’t Cry For Me Argentina

Posted on February 2, 2014 by howesdubai

Reporting season is in full flow with four major Dubai banks announcing their 2013 results. The emirate’s largest lender, Emirates NBD, witnessed a 27% jump in profits to US$ 888 million along with loans up 9% to US$ 64.9 billion whilst a 12% rise saw deposits at US$ 65.2 billion. However, the bank, 55.6% owned by the Investment Corporation of Dubai, had profits dragged down by an 18% increase in impairment write-offs of US$ 1.28 billion. Dubai Islamic did well with a 42.1% surge in 2013 net profit to US$ 469 million whilst its total assets rose by 36.6% to US$ 32.9 billion. Meanwhile Mashreq reported an impressive 32.1% spike in 2013 profits to US$ 493 million. Emirates Islamic announced a massive 72.0% leap in net profit to US$ 38 million, with bank assets up 6.7% at US$ 10.8 billion.

Dubai Investments’ 2013 profits more than doubled to US$ 224 million on a 21.7% rise in revenue to US$ 763 million. Sovereign wealth fund, Investment Corporation of Dubai, owns 11.5% of the company.

The region’s largest shopping mall developer, Majid Al Futtaim, is set to splash out US$ 817 million over the next five years on developments in Dubai. These will include two new hotels, four new Carrefour supermarkets and the renovation of both the Mall of the Emirates and Deira City Centre. The family-owned unlisted company reported a 12% profit rise to US$ 900 million on revenue up 10% to US$ 6.3 billion. The group also bought a one million sq ft plot from Tecom, a unit of the Ruler’s Dubai Holding group, to build a shopping mall in the International Media Production Zone.

There is no doubt that Emaar’s Dubai Mall is the biggest and best in the world as they announce that 2013 footfall rose by more than 15% to 75 million visitors – streets ahead of the competition with Mall of America and Birmingham’s Bullring, both with 40 million. Sales in the 1,200 outlets increased by more than 26%.

Dubai Land Department has recorded total 2013 real estate transactions of US$ 64.3 billion, of which 48.3% – or US$ 31.1 billion – were from foreign investors. Five countries accounted for 27.8% of the sales – UAE (US$ 6.5 billion), India (US$ 4.9 billion), UK (US$ 2.9 billion), Pakistan (US$ 2.4 billion) and Saudi Arabia (US$ 1.2 billion).

It seems that the recent introduction of both the 4% property transfer fee and new mortgage cap rules have had some effect on the market. A recent Knight Frank report indicates a marked slowdown with growth levels of 15% in Q4 – down on the 21% reported for the preceding four quarters.

The US$ 89 million final phase 8 of Dubai Investment Park is scheduled to open in March. The park, owned by Dubai Investments, has nearly 3.5k tenants and covers an area of 2.4k hectares.

Dubai-based investment company, Skai Holdings has arranged a US$ 200 million finance package with the Industrial and Commercial Bank of China to help develop their US$ 1 billion Viceroy Palm Jumeirah development.

Emirates’ love affair with sport continues with the announcement of further rugby sponsorship. The world’s leading airline has signed an agreement with Rugby World Cup Limited for the next two world cups – England (2015) and Japan (2019). At the same time, it extended its branding of match officials’ kit to 2019.

Dubai International is fast catching up on London’s Heathrow to become the busiest international airport in the world. With a 2013 15.2% increase in passenger numbers to 66.4 million, it expects to overtake the ailing London airport this year despite the fact that May and June will see a partial closure as major maintenance is carried out on its two runways.

It was almost impossible to find an empty hotel room in Dubai as the four-day Arab Health Exhibition and Congress got under way. With a captive audience, and an inequilibrium in supply and demand, some hoteliers took advantage of the situation and pushed up room rates. The region’s largest healthcare convention has seen a 10% increase in exhibiting companies to 3.9k and expects around 85k visitors.

Hotel management company, HMH (Hospitality Management Holdings) have signed a contract with Mohammed Tayyeb Khoory & Sons to operate a new 228-room hotel in Barsha, due to open within two years. This will be the third Dubai property that HMH manage for MTK.

Two district cooling providers have been in the news. Empower has signed a six-year US$ 600 million loan facility with four banks including Mashreq and Emirates NBD. National Central Cooling Company reported a 15.3% hike in profits to US$ 74 million, with chilled water revenue up 3.5% to US$ 280 million.

It was a busy week for the Dubai Ruler. HH Sheikh Mohammed bin Rashid Al Maktoum opened the US$ 850 million remote controlled container terminal that has a capacity of four million TEUs. This expands the port’s capacity to nineteen million units.

He was also on hand to launch District One – the first phase of the US$ 8.2 billion Mohammed bin Rashid City. When completed in 2019, the new urban area will cover 54 million sq ft including 7 km of lagoons and 14 km of beaches.

HH Sheikh Mohammed issued a decree to establish the Dubai Investment Development Agency with one of its main aims to attract overseas investment into the emirate. Another decree saw the creation of the Dubai Corporation for Tourism and Commerce, with a dual purpose of attracting both tourists and commercial activity.

Dubai Healthcare City and Dubai-based MAG Group have formed a US$ 218 million joint venture. The project will comprise two hospitals along with apartments and retail outlets.

The highly successful Aster DM Healthcare is expected to go to market this year with a share sale in the region of US$ 100 million. The Moopen family is the largest shareholder in the healthcare company that operates throughout the Gulf and India.

The Dubai General Market Index opened the week at 3809 points and dropped 1.03% when closing on Thursday at 3770; despite this not unexpected fall, it is still up 11.87% on its 01 January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.18 and US$ 1.17 respectively.

Banks are once again in the news with RBS, the UK bank 80% owned by the taxpayer, announcing that it has provided US$ 5 billion for upcoming legal claims. These include US$ 3.1 billion for iffy US mortgage backed investments, US$ 830 million for misselling rate swaps to SMEs and US$ 772 million for misselling payment protection insurance to its UK customers.

The apparent cosy relationship between big business and government once again reared its ugly head as the US Justice Department settled with HSBC for alleged money laundering. For dealing in billions of dollars from Mexican and Columbian drug cartels, and breaking other serious laws, the bank was not prosecuted but received a penalty of US$ 1.9 billion!

2013 has not been a good year for Francois Hollande with the latest bad news being French unemployment levels hitting record highs of 3.3 million registered out of work. This represents 11.1% of the work force and comes despite the French President’s earlier promise that joblessness would fall by the end of 2013: this year he has promised to put the economy back into shape. (What shape remains to be seen).

Another person who could end up red-faced is the European Central Bank head, Mario Draghi. Speaking at Davos, he indicated that there had been a dramatic improvement in the eurozone economy over the past two years and was confident that, despite the current inflation level of 0.8%, the 2.0% target would be met in the medium term.

Japanese prime minister, Shinzi Abe has finally realised that a coin has two sides as a weak currency does indeed makes exports cheaper but it also results in more expensive imports. The end result for Abenomics is the country’s worst ever annual trade deficit of US$ 111 billion, compared to US$ 66.7 billion in 2012 and US$ 25.1 billion in 2011 – and this for a country that had recorded surpluses for all thirty years to 2010.

As widely expected, the US Federal Reserve continued to cut back on QE and reduced its monthly bond purchases by a further US$ 10 billion to US$ 65 billion. It indicated that it had seen an improvement in both economic activity and employment levels. Whilst QE was going at full whack, interest rates remained low and this resulted in investors looking for higher returns in emerging economies. Now tapering has begun in earnest, monies are flowing back into the US market along with the increasing likelihood of global interest rate hikes.

In recent weeks, the Argentine peso has plummeted to new depths not seen since the 2002 economic disaster. The main causes for this debacle include economic mismanagement, a massive current account deficit, sinking foreign reserves and rising domestic inflation. The country has become an epitome of the economic malaise which seems to be mounting across developing countries, including the Fragile Five; emerging markets are in for a rough ride! President Fernandez de Kirchner is no Eva Peron but she for one can disregard Tim Rice’s Don’t Cry For Me Argentina.

Posted in Finance | Tagged Arabtec, DFM, Dubai, Dubai Financial Market, Dubai Mall, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, MAG Group, Majid Al Futtaim, Nakheel, Skai Holdings, UAE | Leave a comment

Bring It On!

Posted on January 26, 2014 by howesdubai

Some analysts speak of a glut in the residential market but with the current major population influx, it is difficult to agree when only 9.7k units came on stream in 2013 and an estimated 28k coming to the market this year.

Dubai Land Department’s 2013 real estate transactions showed a healthy 53.2% surge to top US$ 64 billion, including US$ 45.2 billion of land sales and US$ 16.9 billion of housing units. It is interesting to note that of the estimated US$ 8.4 billion in 2013 residential sales, only 41.3% were via mortgage lending – an indicator that perhaps the banks could do more in this sector. There is no doubt that last year was extraordinary and such growth is unlikely to continue in 2014, although both major property developers remain bullish.

Saturday sees the launch of Emaar’s latest development – the 63-storey Boulevard Point in Downtown. Comprising 297 one to three bedroom luxury apartments, it will have its own dedicated bridge link with Dubai Mall. (There are reports that Emaar’s new Group Chief Executive is Abdulla Lahej, having replaced Singaporean Low Ping late last year).

Nakheel’s chairman, Ali Rashid Lootah, has indicated that he expects the government-owned developer to launch projects to the value of US$ 2.2 billion this year alone. In 2013, Nakheel delivered 3,150 units – a lot more than the 1,600 planned for this year. In addition to its already announced 2 million sq ft shopping mall, the company is expected to build nine hotels, some of which will be located on its Deira Island (aka Palm Deira), as it seems to be emulating a similar strategy that saw Emaar’s successful foray into the hospitality sector.

As the company recovers from its huge debt overhang as a result of the GFC, the chairman is confident that he is getting his house in order, having already settled with 80% of purchasers of previously stalled projects.

Nakheel’s 2008 development, The World – with its 300 man-made islands – is seeing more projects starting with news that the Kleindienst Group has commenced compaction work on six of the islands that represent the heart of Europe. Work is slated for completion within three years and the islands will reflect the architecture and ambience of different European countries.

A subsidiary of National Bonds, National Properties, is planning a major development in Motor City which will include over 150 luxury villas and 58 apartments. Work is expected to get under way in Q2 and be complete by the end of 2015.

Istithmar World has sold Palm Utilities, that includes Palm District Cooling, to Empwer for an undisclosed amount.

Arabtec has won yet another huge contract – this time for the construction of a resort in Jordan. Located in Aqaba, the US$ 1.55 billion project will include four hotels, a Star Trek themed park and a man-made lagoon with an opening by the end of 2017.

Abraaj is planning its seventh investment in Turkey – this time to buy a majority shareholding in dairy company Yorsan for an undisclosed sum. Late last year, the Dubai-based company spent US$ 300 million for African Fan Milk International – West Africa’s biggest frozen dairy producer.

Majid Al Futtaim’s Chief Executive, Iyad Malas, has indicated that the Dubai-based conglomerate is planning to spend a further US$ 2.3 billion in Egypt. This is in addition to its US$ 460 million Mall of Egypt project, ready for completion next year.

It seems that the government owned utility company, Dubai Electricity and Water Authority, will not be tapping the markets for funds this year. With a US$ 1 billion bond, due for an April 2015 repayment, DEWA has enough reserves to cover their 2014 capital and operating requirements. (Incidentally, Energy Minister HE Suhail bin Mohamed Al Mazrouei has hinted of increased energy prices as a way to cut back on very high consumption rates in the country).

Dubai Group has finally managed to restructure its US$ 10 billion debt with US$ 4 billion soon to be repaid to creditors. The balance is being restructured, with payments extended to 2016 for secured debt and to 2024 for unsecured facilities.

The Dubai General Market Index opened the week at 3609 points and gained a massive 5.54% when closing on Thursday at 3809 and is already up 13.02% on its 01 January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.19 and US$ 1.13 respectively. Such surges cannot continue indefinitely!

As China tries to move from an investment fuelled growth strategy to a consumer driven one, it will have to pull out all stops to shore up its banking system. Latest figures show that official non-performing loans, lodged with financial institutions, reached over US$ 88 billion, or almost 1% of all outstanding balances. This is at a time when the Chinese economy is expanding at its slowest rate this century as the country’s bureaucrats attempt difficult but necessary reforms to revamp its financial structures. A reduced 2013 growth of 7.7% will be followed by even smaller levels of 7.5% and 7.3% over the next two years.

Even the US banks are facing problems with their three largest – JP Morgan Chase, Wells Fargo and Bank of America – reporting double digit declines in their mortgage business, with more of the same expected in 2014. Furthermore, mortgage rates have begun to edge up and now average around the 4.5% level, reducing the number of future mortgages as potential clients get priced out of the market.

The IMF has revamped its global growth forecasts, mostly upwards, but with a caveat that deflation could easily reverse any upcoming growth. Overall global growth for the next two years will be 3.7% and 3.9% respectively. However the eurozone and the ‘fragile five’ will continue having problems. The former has too much debt and many of its member countries are reluctant to introduce long-needed economic reform. The latter will not be helped by the scaling back of quantitative easing in the US with a potential outflow of funds not helping already inflated current accounts.

The rumour mill is working overtime with unsubstantiated reports that the 35 km of the SZR – from Jebel Ali to the Creek – will become a double decker highway. Bring It On!

Posted in Finance | Tagged Arabtec, DFM, Dubai, Dubai Financial Market, Dubai Group, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, JP Morgan Chase, Majid Al Futtaim, Nakheel, National Properties, UAE | Leave a comment

Isn’t It Ironic, Don’t You Think?

Posted on January 20, 2014 by howesdubai

With Jaguar Land Rover, Volkswagen and Rolls Royce announcing impressive regional 2013 growth of 46%, 30% and 17% respectively, there is no doubt that the Dubai motor trade is progressing well. Although final figures for last year have yet to be collated, Business Monitor International forecast that year on year sales will be 16.7% up at 362k units, with further growth expected in 2014.

Dubai Taxi Corporation has just signed a contract with Al Futtaim Motors to supply 1,638 taxis or over 90% of DTC’s latest tender. With this order, over 85% of the company’s taxis will be Toyota Camry or Innova vehicles.

It may surprise some to note that the UAE-based Gulf Craft has been listed as one of the leading superyacht building yards in the world with fifteen craft currently being built. Less surprising is that the UAE makes the top ten global superyacht countries.

Following last year’s sale of 170 apartments in the Anantara The Palm Resort and Spa, Dubai-based developer, Seven Tides, is now gearing up to sell units in the adjacent Anantara The Palm Residence.

Damac has announced that Waitrose will open an anchor store in its upcoming Akoya project. Located in the 95k sq ft Damac Retail Centre, the store will be the UK company’s eighth shop in the UAE.

It seems that scarcely a week goes by without Arabtec announcing a new project. This time the Dubai builder has won a US$ 705 million construction tender on Reem Island which will include a hotel and residential tower in one of Abu Dhabi’s prime locations. Slated for completion by 2017, this development has extended the company’s backlog to US$ 9.0 billion.

From a 2012 loss of US$ 16.1 million, Shuaa Capital managed to eke out a US$ 763k profit last year in a major turnaround in their fortunes, with a 153% jump in Q4 revenue figures to US$ 17.2 million, giving rise to a quarterly US$ 1 million profit.

Deyaar Development has sold its 50% share in Alarko Gayrimenkul Gelistirme to its Turkish JV partner for an undisclosed amount. It appears that the Dubai-based company wants to focus more on local business interests in the future.

Drydocks World has announced it won a US$ 730 million contract to build the North Sea’s largest ever oil rig, known as CJ-80. The order from Drill One Capital may prove even more lucrative for the Dubai company with further potential work amounting to US$ 670 million in the pipeline. Its chairman, Khamis Juma Buamin is also bullish about the company’s operation in Iran if, and when, a political solution is reached.

Although bilateral trade with Iran has dipped by as much as 12.2% to US$ 2.94 billion, as at H1 2013, HH Sheikh Mohammed bin Rashid Al Maktoum sees a win win situation if sanctions are lifted. The UAE would see a major fillip in trade whilst Iran would be able to access US$ 4.2 billion in frozen assets, as well see almost normal trade resume.

Apart from an impressive BBC interview this week, Sheikh Mohammed also launched the country’s National Agenda programme for the next seven years. One of the aims was to grow the GDP by 65% over that period which would increase the figure from US$ 42k to just under US$ 70k.

In 2013, it is reported that Dubai’s financing costs were US$ 8.4 billion – equivalent to 8.9% of GDP. Over the next three years, certain loans will be maturing (including US$ 20 billion to Abu Dhabi) and some analysts expect Dubai to take advantage of favourable lending conditions and participate in a bond issue – maybe a long-term sukuk will be considered. Latest newspaper reports that Dubai Group may be finalising a long-standing US$ 10 billion restructuring deal with banks and its creditors.

The Dubai General Market Index opened the shortened week at 3505 points and rose 2.97% when closing on Thursday at 3609 and is already up 7.09% on its January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.16 and US$ 0.93 respectively.

Recent figures from the UK indicate the speed of expansion in online trading with a 19.2% year on year growth in December – compared to a 0.4% rise in traditional retail shopping. In fact, 18.2% of all non-food sales were carried out away from a retail outlet, with furniture at 32.4%, and clothing (21.2%) being the internet favourites.

If you believe some experts, the unthinkable will happen – the UK, with growth levels in excess of 3%, will be the best performing economy of the G7 nations. Despite some speculation of late, base rates have remained at 0.5% – unchanged since March 2009. Unemployment levels have dropped to 7.4% as the growth gains traction and may fall below the 7.0% mark, earlier than estimated by the Bank of England, and this could trigger a rethink on rates. The trade gap between the exports and imports of goods has fallen to US$ 15.3 billion – another indicator that the UK economy is on the upturn.

The UK Chancellor took a justified swipe at the EU saying that its treaties were “not fit for purpose” and would have to be rewritten to keep up with other global economies. His simple message to the 28-country bloc was reform or decline – and it seems that some of the major players, including France and Spain, prefer the latter strategy. Over the past six years as European economies have stalled, those of China and India have seen growth levels of 70% and 33% respectively.

The European Central Bank president, Mario Draghi, is less bullish on the continuing eurozone crisis indicating that he considers any recovery “weak, fragile and modest”. Latest quarterly figures show the bloc with a meagre 0.1% growth. The ECB has no option but to keep rates at 0.25% at least for most of 2014, but may be forced to take a more aggressive approach to bolster the weak growth levels. Another area of concern is the inflation rate dropping under 1% with the prospect of deflation rearing its ugly head.

Following several high profile legal cases and settlements, it was no surprise to see JP Morgan Chase announce a 16% dip in net profit to US$ 17.9 billion. The latest fine, totalling over US$ 2 billion, was for their alleged complicity with the disgraced Bernie Madoff and his Ponzi scheme. The bank has a US$ 23 billion provision to deal with future claims and legal costs.

It does seem rather strange that one of the country’s leading bankers is not blaming the financial institutions but their customers for over borrowing and racking up debt. Former CEO of the National Bank of Abu Dhabi, Michael Tomalin, has reportedly indicated that customers – and not banks – have been reckless! Isn’t it Ironic, Don’t You Think?

Posted in Finance | Tagged Arabtec, Deyaar, DFM, Dubai, Dubai Financial Market, Dubai Taxi Corporation, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, National Bank of Abu Dhabi, Seven Tides, UAE | Leave a comment

Only Fools Rush In

Posted on January 13, 2014 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum has issued a decree appointing his son, the Crown Prince, HH Sheikh Hamdan, to head up the committee to supervise preparations for Expo 2020. His great uncle, HH Sheikh Ahmed bin Saeed Al Maktoum, president of the Department of Civil Aviation and Chairman of Emirates Airline, will be the chairman.

Emirates Cargo had a record 2013, with an 8% increase in revenue to US$ 2.8 billion and an impressive 16% rise in tonnage to 2.1 million tonnes, in a moribund sector where global increases were less than 2%. Not surprisingly, the airline, which operates ten B777 Fs and two B747s, is the world’s biggest in scheduled Freight Tonnes flown. The carrier is expected to move to Dubai World Central as from this April.

Qantas is becoming a harbinger of bad news as Moody’s downgrades its credit rating to junk status following S&P’s similar earlier decision. The immediate impact is that financing costs will increase adding to the airline’s woes that indicated a US$ 267 million half year loss plus the axing of one thousand jobs. It seems that last year’s partnership agreement with Emirates has failed to lift the carrier out of the doldrums.

Dubai Land Department’s Sultan bin Mejren has reportedly indicated that property prices in the emirate may increase by as much as 40% in 2014. Measures will be put in place to avoid any undue speculation and may include new regulations concerning properties sold on before they have been built.

As Dubai has more than fifty hotels – with 16.6k rooms – currently being built, it is no surprise to note that Rotana is planning to double the number of its UAE hotels over the next five years to sixty properties and over 17k rooms. Already with a presence in Dubai, the Hong Kong-based Shangri-La group is expected to open further hotels here and in the GCC. In similar expansion mode is Accor which plans to increase its UAE room inventory by 45% to 8k over the next two years.

With the global digital signage business worth around US$ 15 billion, there was much interest in this week’s SGI Dubai (Sign and Graphic Imaging) exhibition. In its 17^th year, the 400-exhibitor show is expected to attract over 10k visitors from 75 countries.

Dubai Silicon Oasis announced the launch of the US$ 272 million University Hospital – a combined medical and learning facility to be developed by the Saudi Dr Soliman Fakeeh Hospital. Covering 150 sq mt, the facility will be built in two phases, with the 300-bed hospital ready by 2017 and the college two years later. This will prove a welcome boost for the local economy on two fronts – creating 4k jobs and complementing the medical tourism sector which is growing at an annual rate of 15%.

Emaar are adding to the burgeoning Arabian Ranches with a further 219 Lila villas which follows closely on recent successful releases there such as CASA, Palma and Rosa. No doubt the offering will be sold out on their release this Saturday.

According to its Chairman, Ali Rashid Lootah, government-owned Nakheel plans to repay US$ 1.09 billion of its bank debt this year – 12 months ahead of schedule. This sends a strong signal to the market that the formerly troubled developer is on the road to recovery following its US$ 15.5 billion bailout in 2011. It was also revealed that the company is planning to spend US$ 1.28 billion in 2014 on new retail and hospitality projects, including four hotels.

Another government entity performing well is Dubai Investments which expects a massive 150% surge in its 2013 profits to around US$ 220 million.

Meanwhile Emirates Extrusion Factory, part of Dubai Investments, is spending US$ 3.5 million to enlarge its aluminium extrusion plant. The facility, located in Techno Park, is looking at expanding its exports which currently account for almost 70% of its production. UAE accounts for 35% of the GCC’s current demand of 500 metric tonnes.

Shareholders in the troubled Gulf Navigation have finally agreed to a rescue package that includes writing off accumulated losses of US$ 300 million, a US$ 130 million convertible bond sale as well as agreeing to the sale of two VLCC (very large crude carriers). Shares in the listed crude shipper slipped 6.9% following the announcement.

Dubai Mercantile Exchange (DME), with over sixty active traders, had a record year in 2013. The region’s leading commodities and energy futures exchange saw its premier product, Oman Crude Oil Futures contracts, up over 36% in 2013,trading over 1.6 billion barrels.

With an Islamic population of an estimated 1.6 billion, it is no surprise to see that Dubai Municipality is planning to establish an international accreditation centre, specifically targeting Halal food. The aim of the centre would be to issue compliance certificates once products have been found to comply with Islamic law and be acceptable on a global scale.

The Egyptian investment bank, EFG-Hermes, has sold the 7^th floor of Index Tower to Emirates Reit, a US$ 327 million property investment trust, in return for a 4% stake in the trust fund. Last year, the company increased its capital base by a further 9%, with Emirates NBD taking 5%.

The Securities and Commodities Authority (SCA) is keen to tighten regulations in relation to unofficial lending to investors on the local bourses. It appears that over 75% of the forty-eight brokerages have no authority to offer margin trading which allows their clients to leverage their shareholdings. Initial fines will be up to US$ 27k.

Al Ansari Exchange estimate that last year, the 6.6 million UAE expatriates repatriated US$ 35.4 billion with India, Pakistan, Bangladesh and Philippines being the main beneficiaries. Saudi Arabia, home to some 9 million foreigners, saw over US$ 67 billion leave the kingdom. The other four countries of the GCC – Bahrain, Kuwait, Oman and Qatar – with almost 5 million expatriates saw remittances total almost US$ 28 billion.

Not before time, the UAE is set to launch the Al Etihad Credit Bureau which will allow consumer creditworthiness to be checked by financial institutions. The idea behind the scheme is that all banks will be able to access a database to verify online whether potential borrowers present a risk prior to extending any loan / credit card type facility.

After profit taking earlier in the week, the Dubai Financial Market General Index bounced back to close on 3505 points – 2.4% up from its Sunday opening. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.13 and US$ 0.79 respectively.

It has been a torrid twelve months for JP Morgan Chase. Having already paid US$ 18 billion in government penalties for various misdemeanours, it is set to settle with US authorities regarding its nefarious role in its dealings with Bernie Madoff. The reported US$ 1.7 billion fine will help the US’s biggest bank by assets avoid further government action. (Madoff ran a so-called Ponzi scheme and when he was busted in 2008, it was found that he had claimed that his company had US$ 65 billion in client assets whereas the true figure was closer to US$ 300 million).

Although unemployment remains the biggest problem facing the eurozone, as one in eight of the working population (or 19.24 million) remain without a job, another dilemma is the danger of deflation. December inflation rate fell to 0.8% which is worryingly low when compared to the target 2.0% rate. On the positive side, the 17-country bloc saw a 1.4% jump in retail sales – the fastest monthly increase in twelve years. Any revival in the economy this year will be at best muted and a meaningful recovery can only take place when more people get back to the workplace.

In contrast, the US has witnessed a December job growth of a highly respectable 238k, following a revised 215k for November. Although most of the jobs were at the lower end of the scale, an economic recovery will be helped by reducing the jobless numbers.

The cronies running world football appear to be in some disagreement after FIFA’s Secretary General, Jerome Vaicke indicated that the 2022 Qatar World Cup would have to move to later in the year. With Sepp Blatter heading an apparent fiefdom of an organisation that seems to lack any transparency and corporate governance, two questions will have to be answered. How on earth did Qatar win the bid for a July event in the first place and why was the decision made four years earlier than normal? Only Fools Rush In!

Posted in Finance | Tagged Al Ansari Exchange, Arabtec, DFM, Dubai, Dubai Financial Market, Dubai Silicon Oasis, Emaar, Emirates, emirates airline, Emirates Cargo, Emirates NBD, FIFA, HH Sheikh Mohammed bin Rashid Al Maktoum, JP Morgan, Nakheel, Qantas, Sepp Blatter, UAE | Leave a comment

Rock The Boat

Posted on January 7, 2014 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum issued a decree allowing rental increase of up to 20% dependent on circumstances. Rent hikes can come into play, once the rent being charged is 11% below the official RERA guidelines, with incremental rises at predetermined levels. Between 11% – 20%, a 5% rise is permitted followed by 10%, 15% and 20% if the prices are between 10% – 20%, 20% – 30% and 30% – 40%. This comes on the back of an estimated 17.8% jump in 2013 residential rents.

At the same time, as property prices have surged more than 20% in 2013, Knight Frank’s Prime Global current year forecast is predicting that, although growth levels will weaken, Dubai will still lead the world with another annual double digit growth forecast of up to 15%, well ahead of Beijing, Shanghai, Paris and Sydney, with estimated rises of between 5 – 10%.

There have been moves afoot to curb too much real estate speculation by the UAE Central Bank doubling its stamp duty equivalent to 4%, banks discussing mortgage deposit increases to 25% and Emaar banning agents selling off plan inventory before completion.

Meanwhile commercial property is beginning to fight back with Dubai now the 23^rd most expensive city according to a CBRE report. At US$ 93 per sq ft, prime Dubai office space has still a long way to go to equal the most expensive location, London’s West End, at US$ 259 per sq ft, followed by Hong Kong (US$ 234) and Beijing (US$ 198).

With the groundwork now complete, Nakheel is expected to award the construction tender for its 136k sq mt The Pointe. The entertainment and retail complex, with over 800 outlets, will be located opposite Atlantis on Palm Jumeirah. The company has also recently sold 91 plots in its Al Furjan project for US$ 19.1 million and a further 45 in Jumeirah Village Triangle for US$ 17.9 million.

Reports indicate that local airlines are cashing in on next year’s FIFA World Cup by increasing prices to Brazil by as much as 70% in June (as compared to March). As an official “FIFA partner”, Emirates June economy fares are quoted at US$ 2.9k, whilst business class comes in at US$ 8.3k.

November saw yet another record month for Dubai International with a 9.5% year on year jump in passenger numbers to 5.34 million. With YTD figures of 60.4 million, 2013 should prove yet another record year, with numbers nudging 66 million by the end of December.

These numbers explain the surge in Dubai Duty Free results as the company announced an annual 11.4% increase in its 2013 sales to US$ 1.81 billion. 20 December saw the operator celebrate its 30th anniversary, with sales on the special day reaching over US$ 30 million, with some items being sold at a 30% discount.

There is no stopping the current on-going hospitality boom with the release of official November figures. These indicate hikes in RevPAR (revenue per available room), occupancy and ADR (average daily rate) by 11.5% to US$ 264, 1.7% to 87.5% and 9.8% to US$ 301 respectively. Supply was also up by 6.9% which was more than offset by an 8.8% jump in demand. It would be no surprise to see guest numbers test the 11 million level by the end of the year.

The 19th edition of Dubai Shopping Festival takes place from 02 January for a month, during which time it is expected to welcome over 4.4 million visitors. It is estimated that since its opening in 1996, it has attracted over 51 million visitors who have added over US$ 35 billion to the local economy.

Arabtec announced that it would set up a real estate development company in Dubai to take advantage of any local projects. The Dubai-based company has over US$ 8.1 billion in its order book. Among its investments to date is a 24% holding in Depa Limited, whose shares have shot up over 8% since Arabtec announced it was interested in more investments and acquisitions.

Majid Al Futtaim (MAF) is planning a US$ 467 million investment for a shopping centre in Muscat. The Mall of Oman will cover an area of 157k sq mt and host over 350 retail outlets. Meanwhile, Al Futtaim Group has just signed a JV – with Marjana Holding and Portugal’s Sonae Sierra – to develop Morocco’s largest shopping mall. 21.7% of the retail space of 126k sq mt will be taken up by Ikea. This is the Dubai-based conglomerate’s fourth shopping centre, with the others located in Oman, Qatar and Egypt

Dubai-based Drake & Scull has won a US$ 110 million contract for MEP work on the Mall of Qatar, due for completion within eighteen months. The company was also successful with a US$ 16 million contract for similar work on the four-tower New Culffe Project in Mumbai.

The Dubai Financial Market capped a boom year by closing at 3370 points – 21.96% up on Q4 and 107.7% for the year. On Thursday, the first day of trading in 2014, it showed a daily jump of 3.04% to close the week on 3472.The last time the local bourse had such a stellar year, the exact opposite happened the following year. History is unlikely to repeat itself but the market will definitely slow this year, with a possible correction on the cards.

Gold lost its glitter in 2013 with an annual fall of 28.9% from US$ 1,694 to US$ 1,204, bringing to an end a 12 year bull run. Gold is no longer considered a safe haven during troubled economic times. It is set for another difficult year and would do well to test the US$ 1,300 mark in coming months, especially if inflation takes hold on the back of global monetary policy and devaluing exchange rates, causing reductions in purchasing power.

All the so-called “fragile five” economies with widening current account deficits – Brazil, India, Indonesia, South Africa and Turkey – will face major problems in 2014, mainly as a result of the Fed’s cutting back on its QE policy of easy money. Turkey has been worst hit as the lira falls to record lows, not helped byan increase in political turmoil and its biggest ever corruption scandal involving sons of three cabinet ministers.

For the past three years, oil prices have remained static, averaging US$ 108. With an expected increased output and slowing demand, as the world economy continues to struggle, 2014 will be a volatile year and Brent prices should even out to around US$ 100 later in Q1.

There is no doubt that the global stock market rally seen in 2013 will run its course early in the new year, as the five-year US equity bull market, with record highs for both the S&P 500 and Dax, comes to the end of its cycle.

Two factors that will trouble the Chinese authorities are a marked slowdown in manufacturing, as a result of a weak demand for exports, and a massive surge in public debt, that has fuelled a real estate boom. A 2013 growth rate of 7.6% is the slowest in twenty three years and no improvement is expected in 2014.

Although the UK economy is set to strengthen even further in 2014, the same cannot be said for most of its European neighbours including France and Italy. President Francoise Hollande has had a torrid year with the country falling further behind under a “too heavy” tax burden as unemployment hovers at 10.9% and manufacturing output worsens. He would do well to still be in the job at the end of 2014. In a similar vein, Italy has much to do to reduce red tape and introduce much-needed economic reforms, so as to improve productivity.

Dubai will remain streets ahead of most other economies in 2014 and the only note of caution is that the emirate cannot expect extraordinary growth in the stock market, property and other sectors of the economy to continue at current levels. Furthermore if the Iranian entente cordiale were to come to fruition, it will be a huge boost for the region.

In the global arena, economies will be sluggish at best. What is not wanted is a catastrophic incident to occur that would derail any progress that has been made since the GFC. Fingers crossed that there are no problems with the Winter Olympics and the FIFA World Cup and that some major financial scandal does not Rock The Boat!

Posted in Finance | Tagged DFM, Drake & Scull, Dubai, Dubai Financial Market, dubai shopping festival, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Jumeirah Village Triangle, Nakheel, UAE | Leave a comment

It’s All Over Now

Posted on December 20, 2013 by howesdubai

Damac Properties were quick out of the blocks as they announced the launch of their 270-unit Tenora Tower, adjacent to the Expo site near to Dubai World Central. Prices will start from US$ 166k and should be completed within eighteen months.

Emaar is making great use of the current buoyancy in the property sector. At the beginning of the month, the first batch of 70 properties in its up-market Dubai Hills Project was sold out, within minutes, at prices ranging from US$ 7 million – US$ 10 million. The same sales mania occurred this week with its two-tower Vida Residence Project, comprising 136 units, at starting prices of US$ 790k, selling within minutes of release.

It is expected that Deyaar Development’s Fairview Residency will be complete by March next year. The 18-storey, 172-apartment building is located in Business Bay. The Dubai-based developer is fast recovering from its troubles, following the GFC and Dubai property collapse; the company’s shares surged the next day by 10% on this news.

Dubai’s latest five star hotel is set to open on Christmas Eve. The Al Habtoor Group announced that the Waldorf Astoria, located on Palm Jumeirah, will become the group’s seventh hotel, four of which are in Dubai. Three more are currently under construction on the Metropolitan site on SZR.

The RTA has announced the arrival of the first batch of eleven coaches for use on the upcoming Sufouh Tram System – with the official opening due late next year. 27k passengers are expected on a daily basis, with each coach having a capacity of three hundred users.

Designed to handle 7k passengers at any one time, Mina Rashid has been voted the best cruise port in the world for the sixth consecutive year. The DP World facility, covering an area of 24k sq mt, has recently been upgraded.

Majid Al Futtaim Group (MAF) has announced a US$ 5 billion investment programme as it launched a single branding for its numerous entities, including Mall of the Emirates, Carrefour, Ski Dubai and VOX cinemas. The conglomerate is planning to double its size within the next five years, to an asset size of US$ 20 billion. Part of the plan includes several ski slopes in the MENA region, similar to those of the eight-year old Ski Dubai, and Ski Egypt, which is due to open in 2016.

Following their 2010 release of a US$ 500 million convertible bond, Emaar Properties has issued 18.7 million new shares at a reduced price of US$ 1.29. This is because bondholders wanted to cash in with the share value having now reached a 5-year high of US$ 2.00.

Arabtec Holdings have refuted claims that it was considering purchasing Drake & Scull – this despite the two companies working together on several local projects, including the Louvre in Abu Dhabi.

It does seem surprising that the UAE is the 11^th largest importer of clothes with a value in excess of US$ 4 billion (or 0.89% of the global total). With the retail sector set to increase to US$ 41.1 billion by 2015, it seems inevitable that the clothing industry will continue to grow in tandem.

A sign that Dubai is getting more of a profile as a hub centre was news that Hino Motors Limited has opened its new parts facility in Dubai World Central. The bus and truck manufacturer will use the 5.4k sq mt facility to import directly from Japan to expedite deliveries with the GCC and surrounding region.

It has to be Dubai when a bra, costing US$ 10 million, goes on display in the Dubai Mall. Loaded with 4,200 gems, and a 52-carat ruby, the garment was designed by Mouawad, the Swiss-based jeweller.

The Dubai Investments subsidiary, Glass LLC, estimates that it has seen a marked improvement in business and has picked up at least US$ 38 million of new business in Q4.

There is no doubt that the local auto sector is thriving and set to hit record high sales by the end of the year. This expansion is set to continue into 2014 and, as a result, Arabian Automobiles, the Nissan, Infiniti and Renault exclusive dealer, has announced that it will be taking on an extra 250 staff to meet the increasing demand.

Thirteen years ago, fast food chain ChicKing did not exist. Now the Dubai-based fast food chain has 100 outlets in thirty countries and has plans to increase this number tenfold by 2020; it has just signed an MoU with Malaysia’s Dual Super Food to set up stores in that country and others in SE Asia.

Dubai Health Authority have indicated that all companies, with more than 1,000 employees, will have to introduce mandatory staff health insurance before October 2014 with smaller companies (100 – 999 employees) having to follow suit by July 2015, with another year’s grace given to entities below that size.

There was a welcome bonus this week for many in the Dubai public sector with salary increases of between 30% and 100%, paid retrospectively from June. It is reported that some doctors and financial controllers will see their pay packets double!

With his recent decree, HH Sheikh Mohammed bin Rashid Al Maktoum has laid down his three-year plan to make Dubai the centre of a potential US$ 6.7 trillion Islamic global economy. The Dubai Islamic Economy Development Centre will be set up with the specific aim of making this a reality.

The Dubai Financial Market General Index continues to flourish and is up 109.1% YTD. It started the week on 3158 points and moved 2.7% higher to close at 3243.

The Institute of International Finance have estimated that Expo 2020 will add an annual 1.5% to Dubai’s GDP for the next six years whilst official figures estimate a spend of US$ 24 billion which will inevitably add to the emirate’s debt. The end result seems to indicate an 18.7% jump in debt to US$ 168.5 billion. However with an estimated 5.5% annual growth, Dubai’s debt to GDP ratio will actually fall from its 106% level last year to 70% in 2020. Funding will be from a variety of sources including internal (profit and sale of assets), local (federal and Abu Dhabi assistance) and global capital markets.

It is reported that Istithmar World, Part of Dubai World, has sold its 50% share in the celebrated Fontainebleau Hotel in Miami which it acquired for US$ 375 in the halcyon days of 2008. (In 1976, Muhammad Ali stayed at the hotel, when filming ‘The Greatest’). The amount paid by the Florida property developer is unknown but should bring in a profit for the Dubai GRE.

European golf received a major boost with Emirates announcing that it would sponsor another nine tournaments, making nineteen in all, as well as becoming the tour’s official airline. The airline’s agreement is for the next four years, running until 2017.

Good news and bad news for Ireland as the country formally exited its 3-year US$ 115 billion bailout programme but it will still face several years of painful austerity programmes, as it battles an unemployment rate of 12.8% and depressed market conditions. Fellow eurozone strugglers – Cyprus, Greece and Portugal – are still under the control of the troika (IMF, EU and ECB) and will continue to have reduced input into their own finance policy.

In recession for six years, Greece has been relying on bailout funds for over three years and again this week, Prime Minister Antonis Samaras was requesting a further write-off of his country’s debt. This will be dependent on whether the troika consider that Greece has fulfilled the terms of its bailout deal.

There is no doubt that the Chinese economy is undergoing problems as growth levels, although still high on an international comparison, are expected to fall below a two-decade low of 7.5%. The world’s second largest market is set for a bumpy 2014 and this, in turn, will be depressing news for the global economy, with many countries still reeling from the effects of the GFC.

On the back of a slowing China, the Australian economy is going into a tailspin, as it faces a possible US$ 42 billion deficit this financial year, unless immediate action is taken. A major driver in this turnaround in fortunes is a softening in resource investment along with a weakening economy. The sorry state of the national airline, Qantas, increasing unemployment levels and a collapsing auto industry are further indicators that the lucky country is facing turbulent times.

As expected, the US Federal Reserve has announced the scaling back of its quantitative easing policy by US$ 10 billion a month, with the taper being equally split between mortgage-backed securities and treasury bonds which will both fall by US$ 5 billion in the first month to US$ 35 billion and US$ 40 billion respectively. As the markets have become addicted to so much cheap money (US$ 85 billion a month), it comes as a relief to some that the days of easy money have ended. It’s All Over Now.

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

Nobody Does It Better

Posted on December 16, 2013 by howesdubai

Early signs of the positive impact of Dubai Expo 2020 were evident this week. Marriott International announced plans to increase its number of rooms, over the next six years, to 10k from its current portfolio of 2.7k. Emaar Properties have signed an MoU with Dubai World Central to establish an urban and leisure destination at the centre of the proposed Expo location. Encompassing 13.6 million sq mt, there will also be a business park, along with the usual sporting and shopping centres. It is expected that this will be the forerunner of several similar world-class developments in Dubai’s new city.

Having issued US$ 4.5 billion worth of sukuks to date, Nakheel has just made a US$ 59.4 million profit payment. Since its last US$ 16 billion restructure in 2011, the government-owned developer has paid creditors US$ 354 million in interest and profit payments and US$ 3.0 billion to creditors. As its nine-month profit figure at the end of September was US$ 482 million, it seems there is a long way to go pay off all its debts.

Moody’s expects the UAE’s annual growth to average 4.8% over the next three years, as it maintained its country rating at a stable Aa2. It is becoming less dependent on hydrocarbons as its non-oil sectors continue to flourish with the economy being further helped by a low government debt ratio to GDP of 23%, excluding government-related enterprises (GREs). It is interesting to note that the debt level of Abu Dhabi’s GREs is greater than that of Dubai. Currently it is estimated that Dubai government’s direct debt is equivalent to 30% of its GDP whilst that of its GREs is 113%, making the outstanding debt at 143% of GDP.

The Director General of the Department of Economic Development, Sami Al Qamzi, is expecting tourist spend to reach US$ 9.0 billion over the next three years, as the current boom gains increasing traction. It is expected that retail sales will increase from US$ 27.2 billion to US$ 32.5 billion over the same period. These figures highlight the impact that the retail sector has on the local economy.

Two local hotel chains have announced overseas management contracts. Jumeirah Group has just signed a management agreement with Saraya Bandar Jissah to develop a two-hotel and residential complex on a 2.2 million sq mt site in Muscat. The resort, due to open in 2017, is a JV between the Dubai-based Saraya Holdings and Omran, part of Oman’s tourism ministry. Meanwhile, Jebel Ali Resorts and Hotels made their first foray away from Dubai as it signed to manage a luxury 10-villa beach resort in the Seychelles. The UAE is that country’s fifth biggest market which is set to grow at a faster rate than the current 10%, as both Emirates (twice daily) and Etihad (daily) fly into the capital, Mahe.

It was no surprise to see Habtoor Leighton Group being awarded a US$ 395 million contract to build the Residential Towers associated with the upcoming US$ 3 billion Habtoor City development on SZR.

With over 12.9 million contracts, Dubai Gold and Commodities Exchange (DGCX) has witnessed a credible 51% surge in YTD selling. Most of the bourse’s dealings are involved with the Indian rupee futures trade which accounts for over 40% of the total global trade in that currency.

The need for more spending on infrastructure was brought home by the 48.6% increase in DEWA’s 2014 budget to US$ 5.6 billion with projects accounting for US$ 1.92 billion. Its existing capacity of 9.6 megawatts (MW) easily meets its current requirements (with the peak load this year of 6.9 MW) whilst it produces 470 million imperial gallons of desalinated water daily.

For the first nine months of the year, there have been 9.9% increases in both trade, to US$ 272.4 billion, and tourism numbers to 7.9 million. Both these major drivers in Dubai’s economic growth should see even bigger rises as the emirate readies itself for 2020. India (21%), Turkey (13%) and Switzerland (7%) were Dubai’s main export partners. It is no surprise to see that the country’s private sector has seen faster growth than any of the BRICS nations – Brazil, Russia, India, China and South Africa.

The Dubai Financial Market General Index continues to set a blistering pace closing on Thursday 6.9% up on the week at 3158 points. So far this year, the market has risen by 103.57% with bellwether stocks, Emaar and Arabtec, closing strongly at US$ 2.01 and 0.75 respectively.

Blackstone management certainly know how to earn money as they have more than doubled their initial 2007 US$ 6.4 billion investment in Hilton, the world’s largest hotel operator. With this week’s IPO, the company’s 76.2% shareholding is now valued in the region of US$ 15 billion.

Latest UK reports indicate that the economy is steaming ahead with 2014 growth forecasts being upped from August’s 2.2% to 2.7%, following this year’s expected 1.3% expansion. Many analysts see this as a property-led growth with little movement in exports, manufacturing and business investment, whilst the finance and insurance sectors still struggle. Unemployment levels continue to fall with the BoE target of 7.0% expected within the next eighteen months at which time there will be inevitable rises in interest rates.

Another week equals more banking scandals. Despite there being sanctions in place, the behemoth that is RBS flaunted the law by dealing with the likes of Sudan, Myanmar and Iran by assisting with bank transfers of around US$ 34 million. This week the US regulators fined the troubled bank US$ 100 million. In comparison, Lloyds Bank got off lightly with a US$ 45 million fine for selling unnecessary financial products to the value of US$ 3.2 billion to some 700k customers.

Visa and MasterCard have been fined US$ 5.7 billion in the US for fixing credit and debit card fees charged to merchants. There will be more headaches for these two companies as individual lawsuits have been taken out by some merchants, which will lead to further penalties.

Although its cricket team is enjoying an Indian summer, the Australian economy is showing signs of weakness, with November unemployment rising to 5.8%, some major energy projects facing delays and cost overhangs as well as Holden planning to stop vehicle production in the country.In WA, Chevron’s LNG project has seen a further 3.8% leakage in cost overruns to US$ 54 billion and start up delayed four months to the middle of 2015. This comes after a cost overrun that saw the December 2012 expenditure rise from US$ 37 billion to US$ 52 billion!

With Ford already committed to shutting its Australian business and now GM confirming the closure of its Holden assembly operations in Adelaide and its Melbourne engineering facility, it may result in Toyota quitting as well. If that were to happen, not only direct jobs (2,900 because of the Holden decision) but some 45,000 in the supply and support industries would be forced to close as a result. Because of the relatively high currency, its crippling labour rates, small market and a cut-back in government subsidies, it now seems that cars can be made cheaper in Japan.

New Year’s celebrations will once again put Dubai in the record books with what should be the world’s biggest ever pyrotechnic display. The 6-minute spectacular will cover most of the emirate’s coast, The World and Burj Khalifa and will use 450k fireworks and feature a musical soundtrack. It is bound to usurp Sydney as the number one viewing destination at the turn of this year; yet again when it comes to Dubai, Nobody Does It Better!

Posted in Finance | Tagged Arabtec, DFM, Dubai, Dubai Expo 2020, Dubai Financial Market, Dubai World Central, Emaar, Emirates, emirates airline, Emirates NBD, Expo, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment