Red Red Wine

Posted on June 4, 2014 by howesdubai

alex-fergusonTo be connected to the mainland by a 300 mt bridge, developer, Meraas Holding, has announced that Bulgari will manage its new 100-room luxury island hotel and twenty residential villas. The development, along with a marina, is located off Jumeirah 1 andis slated for opening late next year.

Union Properties aims to fill a huge gap in the hospitality sector by targeting the budget traveller. The developer is to build four hotels, bringing an extra 1k rooms into this segment of the market. Currently, it is estimated that 42% of the existing room inventory is taken up by 5-star hotels, with this percentage set to grow to almost 50% over the next three years.

Following previous sales of 111 properties of the Anantara Residences on Jumeirah Palm, Seven Tides released its third phase of a further 47 apartments, ranging in price from US$ 1.2 million to US$ 3.0 million.

Local firms, United Engineering Construction and Acto General Trading have been awarded the US$ 327 million contract to build Nakheel Mall on Palm Jumeirah. Covering an area of 418k sq mt, with five floors of retail space and three levels for parking, it will be constructed by New Mall Limited on a BOT (Buy, Operate and Transfer) structure and will be managed by Nakheel until the transfer date.

Emaar is selling another raft of properties – 55 villas overlooking the golf course – in the Arabian Ranches. No doubt, there will be crowds congregating at the Emaar Pavilion on Saturday morning for these off plan residences.

Repair works at Dubai International are ahead of schedule with the southern runway opened four days ahead of schedule; nevertheless capacity has been reduced by more than a quarter over the 80-day maintenance programme. Consequently, the growth levels seen in April – 6.1 million passengers, up 13.7% year on year – will be pared back over the next two months.

It is not only Dubai International breaking records with RTA announcing a massive 22.8% surge in April Metro passenger numbers to 13.9 million. (Despite this increase, there does not appear to be any reduction in vehicle traffic).

Dubai contractor, Habtoor Leighton Group, has won a big chunk of the US$ 817 million work to be carried out on the Jewel of the Creek development.  The latest contract is valued at US$ 395 million for five mixed use tower blocks of between 15 -19 storeys.

It has been a good year to date for Drake & Scull International with news of yet another successful bid for MEP services. The US$ 30.0 million contract is for work on the Plaza View in Abu Dhabi which has proved to be a valuable market for the Dubai-based company which has total projects of over US$ 1 billion.

Dubai Aerospace Enterprise (DAE) has leased two Airbus A319s to Libyan Wings – a new airline based in Tripoli. The Dubai–based company signed a long term deal for delivery this year.

Imdaad is planning to spend US$ 27 million on a material recovery unit in Dubai’s TechnoPark. The facility will be able to recover up to 1k tonnes of recyclable waste daily which will more than double its current capacity.

Ducab is expanding and building its sixth plant in the country in KIZAD (Khalifa Industrial Zone Abu Dhabi). Due to be in operation by the end of next year, and producing mainly aluminium rods and conductors, the plant will cost US$ 60 million.

DEWA seem to be having some success in reducing utility usage with news that, on a per capita basis, demand for both electricity and water has declined over the past three years, with the former down 4.2% to 15,346 kW and the latter by 8.6% to 40.8k gallons. There is still some way to go to reach the target of a 30% reduction by 2030, per the Dubai Integrated Energy Strategy.

Dubai entities are making best use of the favourable environment in the global debt capital market as interest rates remain at historical low levels and Dubai’s credibility heads northwards. Investment Corporation of Dubai’s 10 year 3.51% US$ 700 million sukuk, along with a conventional 4.63% US$ 300 million bond, were three times oversubscribed. Another to make use of the current situation is Emaar Properties that has taken up a US$ 1.5 billion, seven-year sharia-compliant loan facility to restructure its debt portfolio. The current rate of 175 basis points above Libor is a lot better than its original of plus 350 bps. Over the past twelve months, Dubai Duty Free and the RTA have managed to refinance on better terms.

Having lost 6.12% in value the previous week, the DFM opened on Sunday at 4864 points and recovered most of these losses climbing 4.58% to close Thursday on 5087. (On Tuesday, Arabtec accounted for 61.5% of the total daily trade of US$ 708 million; opening the day, the stock fell 2.8% to US$ 1.63 before rallying 11.8% to US$ 1.83, all within the first three hours of trading).

There was bad news for two of Africa’s larger economies. South Africa saw a 0.6% contraction in Q1 following a 3.8% growth in the previous quarter. As the slump in the mining industry deteriorated even further, with activity dropping an annualised 25%, not surprisingly the rand took a beating. Manufacturing also fell – by 4.4% – whilst unemployment levels continued around the worrying 25% level.

Meanwhile, the incoming Egyptian president, Abdul Fattah al Sisi, takes over a depressing economy and a turbulent political climate. One of his main targets would be to reenergise the faltering tourism industry which has seen numbers drop by 35.4% to 9.5 million – and revenue by 53.6% to US$ 5.8 billion – over the past three years alone.

It seems that it is not only many of its customers who are critical of the banks but also Christine Lagarde, head of the IMF. She has reiterated that one of the major threats to the global economy is banks that are considered “too big to fail”. The banks appear reluctant to tighter supervision and stronger regulations and, with implied European government subsidies of US$ 175 billion, there is an urgent need for such institutions to be reined in. However, as the feisty French lady noted that the bonus-motivated industry still prizes short term profit over long-term prudence.

The former Manchester United boss managed to raise US$ 3.8 million when selling some of his wine collection at a Hong Kong auction with one bottle, a 1997 methuselah going for US$ 155k. Because of his fame and popularity – and the fact that some bottles carried his signature – sale prices were between 30% – 50% higher than expected. Sir Alex Ferguson goes well with Red Red Wine

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Desert Rose

Posted on May 28, 2014 by howesdubai

desert-roseThe Ruler launched the World Free Zones Organisation, attended by representatives from fourteen global free zones. The new body, with Dr Mohammed Al Zarooni as its first chairperson, will have its HQ in Dubai and will be open to any member nation of the UN.

According to a recent study by Frost & Sullivan, the UAE logistics sector accounts for almost 6% of the country’s GDP, with the market expected to expand from US$ 23.4 billion to almost U$ 27.0 billion over the next year.

Another sector expected to grow in the coming years is the often-maligned timeshare market. From an almost zero base now, the sector could well mushroom, as Dubai continues to establish itself as a world class business and tourist destination.

Currently the country has nearly 16.8k hotel rooms under construction, with roughly the same amount forecast to be completed by 2018. Most of the building is scheduled to be Dubai-based with the likes of the 863-room Westin Habtoor Palace, Damac Towers by Paramount (753 rooms) and Sheraton SZR (474 rooms), due to open within the next two years.

Dubai’s hospitality market is still strong with latest Q1 figures indicating 88%+ occupancy rates, along with rises of 7.5% to US$ 285 in ADR (Average Daily Rate) and 6.7% to US$ 251 in RevPAR (Revenue per Available Room). The results are even more impressive when comparing these with the region’s Occupancy – 75.1%, ADR – US$ 220 and RevPAR – US$ 165 as this was the best performing in the world.

Having recently announced its first foray into the hospitality sector with The Atria – a hotel and residential development in Business Bay – Deyaar has bought a 70k sq ft plot of land in Dubai Maritime City. The local developer will build a beachside project in the Marina District – an area designated for leisure and entertainment.

Meanwhile Standards and Poor’s has surprised nobody with news that the current property prices are almost in sync with 2008 levels. However, some may disagree with the rating agency’s finding of no major correction expected in the short term.

Marnum Dairy Farm, part of Dubai Investments, released plans for its expansion into the GCC market and subsequent doubling of its turnover over the next five years. The thirty year old company has seen a 133% growth over the past decade and  now manufactures not only milk but also yoghurt and juices,  with a 100 hectare facility on the Al Ain Road, housing over 3.5k Holstein cows.

It is reported that the former Chief Executive of GFH Capital Limited, David Haigh, has been arrested by Dubai Police for allegedly embezzling US$ 6.5 million. The company gained sporting fame with its December 2012 purchase of Leeds Football Club; not much later it sold 75% of the club to the flamboyant Italian businessman, Massimo Cellino, who subsequently fired Haigh, after he had resigned from GFHC.

Emirates REIT has paid US$ 32 million for Le Grande community mall in Dubai Marina. This comes a month after the sharia-based investment trust’s IPO which saw its valuation jump to US$ 354 million.

Etisalat has given up on plans to buy further shares in Maroc Telecom, only weeks after paying Vivendi US$ 5.7 billion for a 53% share in the Moroccan company. Interestingly, the company has listed its US$ 7 billion Global Medium Term Note on the Irish Stock Exchange with a Fitch stable rating of A+.

Two leading local property developers are considering listing on the Dubai Financial Market. Emaar is planning a listing of 25% of its highly successful malls business which will be worth in the region of US$ 2.5 billion. There are reports that Damac may well follow suit with a separate listing for its malls’ units.  Although this is good news for the local bourse, it may be an indication that international investors are still coy, when it comes to the local realty sector.

Last week, the DFM reported that foreign investors owned shares in the bourse totalling US$ 30.3 billion, with weekly purchases and sales running almost in tandem at around US$ 1.5 billion. The market itself had a roller coaster ride with shares up and down more than 5% on three separate days. The DFM opened on Sunday at 5181 points, finally falling 6.12% to close Thursday on 4864. Despite this correction, the exchange is still 47.48% up in 2014.

It was a difficult week for eBay as it suffered a major cyber-attack that affected 145 million of its users in February but only released details on Wednesday. Consequently the company will be facing the wrath of authorities on both sides of the Atlantic.

Barclays Bank is in the news again for all the wrong reasons. This time, one of its former traders, Daniel Plunkett, has been fined US$ 160k by the UK’s Financial Conduct Authority (FCA) and the bank US$ 43 million for trying to fix the price of gold. Incredibly, because they both settled their fines early, they were given a 30% discount! The trader booked a US$ 1.75 million profit for the bank by creating fake orders that saw the 28 June price of gold drop below US$ 1,558.96 thereby saving the financial institution from paying out US$ 3.9 million to a customer. One wonders if this was the only time the bank had carried out such fraudulent practice. (Barclays is one of four banks – along with HSBC, Scotiabank and Société Générale – that is involved in fixing the price of gold on a daily basis).

It seems that the Chinese are getting serious about fraud with this week’s death sentence on the ex-head of Sichuan Hanlong Group, Liu Han. Furthermore, US$ 14 billion of his family assets were seized by the court. The fact that he had  close links to Zhou Yongkang, China’s former security chief, could signal a wider and more serious crackdown by the authorities. Only last month, two leading party members from Sichuan were being investigated for corruption.

One of the biggest trade deals in history was signed this week between Russia and China – a 30 year, US$ 400 billion contract by which China will receive 38 billion cu mt of natural gas. Both countries will benefit from this arrangement – one by finding a new customer after their recent troubles in the Ukraine and the other by replacing its coal power stations with a much cleaner alternative. Any improvement in Sino-Russian dealings will have the opposite effect for both countries’ relationships with the West. That can only be bad news for the global economy as the balance of power shifts inexorably east.

Short-term, the political crises in Ukraine and Thailand will ensure that the global markets remain jittery. Economists will also be keeping a close eye on the new Indian administration of Narendra Modi and how the polls turn out in the European elections – both with the potential to have a negative economic impact on the world economy.

A week after endorsing the US$ 545 million Creekside development, HH Sheikh Mohammed bin Rashid Al Maktoum approved plans for Desert Rose – a sustainable city shaped like the flower it is named after. The smart residential city will be connected with the Dubai Metro by an electronic train and will have air conditioned pathways.  Two years after appearing at Meydan, Sting’s lyrics come to mind “I dream of rain, I dream of gardens in the desert sand” – Desert Rose.

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Blue Moon

Posted on May 19, 2014 by howesdubai

mancity-cakeThe Dubai Ruler has approved a US$ 545 million Creekside development by Meraas Holding, along a 1.8km stretch in the Al Fahidi area. The exciting project will take two years to complete and will include art galleries, a floating market, local handicrafts and restaurants. There is no doubt that this will become a cultural hub for the artisan community and will go some way towards Dubai’s target of becoming the most visited city in the world.

HH Sheikh Mohammed bin Rashid Al Maktoum has also sanctioned a US$ 2.18 billion, three-year expansion plan for the hospitality unit of Dubai Holding, Jumeirah Group. The hotel management company, already operating 22 hotels in eleven countries, expects to see a further 4.3k rooms  added to its portfolio before 2017, with a particular focus on GCC, Chinese and other Asian markets.

Jumeirah was also in the news when it was announced that the hotelier will manage the new 5-star 206-room hotel in Oman’s upcoming US$ 600 million tourist complex, Saraya Bandar Jissah. Another Dubai company, Leighton Middle East Contracting, will build the US$ 78 million hotel.

As part of its 28k sq mt Ibn Batuta expansion plan, which will add a further 150 outlets to the mall, Nakheel is building a 372-room hotel to be managed by the UK-based Premier Inn. The hotel will open within two years and will be linked by a pedestrian bridge to the Metro. The developer is also planning to build a further nine hotels in Dubai over the next five years.

Nakheel reported a 79.5% hike in Q1 profits to US$ 210 million, as revenue almost doubled to US$ 436 million. This year alone, it expects to deliver in excess of 4k units into the Dubai residential market.

It was announced earlier in the week that China State Corporation had won a US$ 105 million contract to build phase 2 of the Dubai Water Canal Project which will include two bridges over Al Wasl Rd and Beach Rd; these should be completed by the end of 2016. Work has already started on phase 1 which will see a sixteen lane bridge over SZR.

There is every possibility that Emaar and Dubai Municipality will develop a 53-hectare beachfront site in Al Mamzar – if a detailed feasibility study proves that the project would be viable. The development will be mixed use with residences, hotels, retail and restaurants built around water-based attractions.

Dubai Properties has launched the sale of 200 apartments in its Dubailand Remraam project, which ranges from studios to 3-bedroom units.

The same week it declared a 27.1% decline in Q1 net profit to US$ 12.5 million, Dubai-based Drake & Scull International has won a US$ 600 million Egyptian contract for construction and civil work on the US$ 5.0 billion Tahir Petroleum Corporation project, located at the Suez Canal entrance. On completion, the country’s first naphtha cracker will have the capacity to produce 1.4 million tonnes per annum of polyethylene and 0.9 million tonnes of propylene.

US equity firm, Clayton Dubilier & Rice has finally agreed terms with Dubai International Capital for the purchase of the German packaging company, Mauser, for US$ 1.7 billion. If the deal goes through, it will be one of the largest disposals by a government-related entity in recent times.

Investment Corporation of Dubai is again planning to make use of a favourable debt market by raising a further US$ 1 billion by way of a US$ 700 million sukuk and US$ 300 million 10-year conventional bond. In April, ICD raised US$ 750 million.

If the figures from Nissan are anything to go by, the local auto business is in rude health. The company claims that it has a 16% market share in the UAE and that its annual sales for the year ending 31 March were up 20% to 60k units. Based on these estimates, this puts total auto sales at 375k, beating the best ever year of 2008, when sales peaked at 350k.

Late Wednesday, the UAE was officially reclassified, by the MSCI, as an Emerging Market, from its former category of Frontier Market. In the global MSCI Emerging Markets Index, UAE accounts for 0.85% of its total which is expected to increase local market liquidity by over US$ 1 billion. In the MSCI UAE Index, Emaar Properties has a weighting of 20.08% with Aldar (16.02%) and DP World (13.84%), the other big players.

Prior to this news, the DFM had a flat week closing Wednesday on 5319 points having opened on Sunday on 5302. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.97 and 2.02 respectively. So far this year, the best performing global stock market has skyrocketed 57.83% from its January opening of 3370.

It seems that China may be facing the same problem that is causing concern in the eurozone – deflation. The country’s annual inflation rate dropped alarmingly in April from a March figure of 2.4% to 1.8% – much lower than the government target of 3.5%. The possible danger to the economy is that growth will slow as consumers tend to save rather than spend and companies pull back on future investment decisions.

There appears to be a banking crisis looming in Iran as reports indicate that the bad debt level in the banking system is 15.6% – or the equivalent of some US$ 33 billion. Most of the problems seem to have arisen during the eight years that Mahmoud Ahmadinejad was in power as the bad debt level in 2005 was less than US$ 3 billion. The incumbent president, Hassan Rouhani, has been left to clear up the mess.

The lucky country, that had survived the GFC better than most, appears to have run out of luck as the Australian government finally wakes up to some modicum of reality. This week’s budget plans to cut the public deficit by US$ 19 billion to US$ 28 billion by upping taxes and slashing spending, including inevitable job losses in an already bloated public sector. However, US$ 10.7 billion have been allocated to major infrastructure projects and almost US$ 20 billion will be spent in medical research funding.

Despite protestations to the contrary, it seems that the expected growth level in the US has yet to gain traction. The latest disappointing data sees April retail sales grow by only 0.1%, compared to 1.5% in March. This is an important indicator as nearly 70% of economic activity emanates from consumer spending.

This week saw the blue half of Manchester partying as the club, owned by HH Sheikh Mansour bin Zayed Al Nayahan won the EPL for the second time in three years. It was interesting to note that the Manchester City team were wearing bibs, before the game with West Ham, highlighting Dubai’s Expo 2020. And the celebration continued in Abu Dhabi with the pre-cabinet meeting photo of the three sheikhs – HH Sheikh Mohammed bin Rashid Al Maktoum, HH Sheikh Mohammed bin Zayed Al Nayahan and Sheikh Mansour – cutting the football cake.  Blue Moon.

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Flying High Again

Posted on May 10, 2014 by howesdubai

emirates-planeEmirates’ annual revenue grew by 13.0% to US$ 22.5 billion, as the airline saw its profits jump 42.5% to US$ 887 million, forming a large part of the Group’s overall profit of US$ 1.1 billion. With a 13.0% increase in passenger numbers to 44.5 million, its major cost continued to be fuel, which accounted for US$ 8.4 billion. According to IATA data, the Dubai-based carrier will make over 40% of the total profits of  US$ 2.2 billion emanating from the ME aviation industry. Parent company, Investment Corporation of Dubai, received a dividend of US$ 272 million.

The annual Arabian Travel Mart is expected to have had a record 2,500 exhibitors, and over 22k visitors, when it closes on Thursday; of this total, 17k are expected from overseas which should prove another profitable period for Dubai’s hospitality sector.  As usual, a raft of announcements has come out from ATM.

Marriott International already has links with Emirates providing crew accommodation on a global scale as well as managing the tallest hotel in the world, JW Marriott Marquis, plus the Marriott Harbour Suites in JBR. RDK Tourism will manage its  312-room  Renaissance Dubai Downtown, due to open next year, which will be followed by two more – Dubai Marriott Hotel Citywalk and Marriott Executive Apartments Dubai City Walk.

Emaar Hospitality currently has twelve hotels under its banner encompassing three brands – The Address, Vida and Dubai Inn (in a JV with Meraas Holding). The first of five Dubai Inns – which will add a further 1.75k rooms – will be built in Zabeel and is scheduled for opening next year. It has announced that Manzil will become its fourth flagship brand and will be at the luxury end of the market, having a noticeable Arabic influence. The first hotel is to be known as Manzil Downtown Dubai (formerly Al Manzil).

As the Hilton Garden Inn brand gains Dubai traction, MAF Properties has signed a management agreement for the hotelier to manage its new 370-room hotel in Mall of the Emirates. Hilton expects two other establishments – in Al Mina and Al Muraqabat – to open by the end of next year.

Damac has launched its latest project, Constella serviced hotel apartments, claimed to be the first Sharia compliant of its kind in Dubai; this will entail separate swimming pools and gym facilities for men and women with dedicated floors and dining facilities for females. The luxury tower will be built in Jumeirah Village and will be financed by an Islamic bank.

With 90% + occupancy rates in Q1, the four Dubai properties managed by Hospitality Management Holdings recorded a 10.0% rise in Revenue per available room (RevPAR) and a 7.2% increase in average room rates (ARR). HMH was the first local chain to be alcohol free.

The Taj Group reported that the 296-room Taj Dubai, located in Downtown, will open by year end.

So as to encourage the construction of more three and four-star hotels, Dubai Holdings has announced attractive incentives to potential investors. The government-owned entity, currently hosting 14 properties, has listed forty potential plots, located in areas managed by Tecom and Dubai Properties Group. It is hoped that, if fully taken up, this will add a further 8.5k hotel rooms in time for Expo 2020. (A recent report has indicated that the UAE will have an additional 120 new hotels, with a portfolio of 32k rooms, over the next five years).

Even with two years to prepare, it is disappointing to note that only one of the country’s forty six banks has found the time to finalise their clients’ two-year credit history to assist with the setting up of Al Etihad Credit Bureau. When established, it will prove a boon for the UAE economy, as valid credit ratings and other financial information will reduce the potential for bad consumer loan debts and could well bring down the cost of borrowing. Currently, banks cannot access data from other financial institutions so are unable to obtain complete credit data on individuals or companies who have accounts with other banks.

This week Emirates NBD issued a five-year AUD 400 million fixed 5.75% rate note, with a Fitch rating of A+. 2006 was the only other time, Dubai’s largest bank has been involved with an Australian dollar bond.

They say the Brits are the biggest whingers and, if that is the case, the Lufthansa senior management must be running them a close second. Now that the airline’s former CEO, Christoph Franz, has left, his replacement, Carsten Spohr, has continued claiming that Emirates, along with other Gulf airlines, operates at an unfair advantage. The German carrier wants to limit the expansion plans claiming that imbalanced subsidies are being made to Gulf carriers, in finance deals, which reduce their overall costs. Maybe they should spend more time on improving their efficiency and quality levels to Emirates’ standards.

It seems highly likely that the fifty-year old Dubai Refreshments Company will merge with its Abu Dhabi counterpart. Both companies distribute Pepsi Cola drinks and would appear that a merger would reduce costs and improve operational efficiencies.

Assuming that Etisalat’s recent purchase of Vivendi’s 53% in Maroc Telecom goes through, the UAE telecom provider will sell its operations, in several W African countries, to the Moroccan company for a reported US$ 650 million.

Dubai Investments recorded a 25.6% jump in Q1 profit to US$ 72 million and, at the same time, indicated that it would soon be divesting itself of some of its assets which would boost future profits.

As widely expected, Arabtec reported Q1 results with a 39.0% hike in revenue to US$ 586 million which generated a 115.9% growth in net profit to US$ 37.6 million. With all the hype surrounding the company, this does not seem to be such a high return.

Union Properties seems to have recovered from its dark days, following the GFC, with Q1 profits up from US$ 6.0 million to US$ 49.0 million, year on year; this follows on the trend from its 2013 results, where the annual profits showed similar upward movement from US$ 47.9 million to US$ 430.5 million.

It is reported that the proposed UAE rail network, Etihad Rail, is planning four stations in Dubai – Jebel Ali Port, Dubai World Central, Meydan and Dubailand. Phase 1 of the US$ 11 billion project covers freight and will be open within the year whilst the second 620km stage will link Mussafah and Jebel Ali and could be operational by 2017.

The IMF has once again issued a warning about Dubai’s real estate sector, indicating that more needs to be done to curb increased speculation that could lead to the formation of an asset bubble. In some locations, property prices have jumped more than 40% over the past twelve months.

The latest IIF forecast sees the Dubai economy growing at an impressive 5.6% this year with the three ‘Ts’ – trade, travel and tourism – being the main drivers. At the same time, it forecasts a jump in inflation rates from its current 2.0% level to 3.6% by this December.

The gold industry is another sector that is set to grow in Dubai with news that Kaloti Precious Metals is planning to build a US$ 60 million refinery in the emirate. Although a major player in gold trading, Dubai lags behind the West when it comes to refining. For example, the UAE refines about 800 tonnes of the precious metal every year, compared to say Switzerland’s 3k tonnes. The new refinery will have a capacity of 1.4k tonnes and will help Dubai move up the refinery ladder.

The DFM recovered from its 0.2% fall the previous week and surged 4.41% from its Sunday opening of 5078 points to close on Thursday at 5302. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.76 and 1.84 respectively. So far this year, the best performing global stock market has skyrocketed 57.32% from its January opening of 3370.

Despite the likes of Tesco and Ikea persevering in the regulated Indian market, it seems likely that the world’s second largest retailer, Carrefour, is planning to move out. It seems that the next government will not permit foreign direct investment in the multi brand retail sector. Undoubtedly, the traditional family-owned shops still hold sway in the world’s third largest economy.

Pakistan will receive a further five-year 2% US$ 14 billion loan from the World Bank which is expected to be spent on the four ‘Es’ – economy, education, energy and extremism. Struggling to collect taxation receipts, the government has had to borrow more money than expected to pay the costs of the public sector. (In its latest report, Transparency International, ranked Pakistan 127 out of 171 countries in its listing of corrupt countries – how much of this money will be used for the benefit of the populace remains to be seen).

Sony Corp has warned that operating profits will be slashed as it revised its forecast down from US$ 783 million to US$ 255 million. Its electronics revenue is haemorrhaging badly and its DVD and CD-ROM will take a US$ 245 million impairment hit because of disastrous sales in Europe. Now looking at a US$ 1.3 billion overall loss, there is little good news on the horizon for the former electronics conglomerate whose once iconic TVs have now managed to lose over US$ 7.8 billion in the last decade. It is very odd to note that the Sony stock was up 90% in 2013 and has lost only 1% this year!

This loss pales into insignificance compared to Tokyo Electric Power Co’s US$ 15 billion – the single biggest loss recorded by a non-financial company in Japan. The power company is still recovering from the fallout from the Fukishima nuclear plant disaster.

The EC issued its latest forecast indicating that the 18-bloc eurozone will see a 1.2% growth this year, whilst the 28-country EU will perform slightly better at 1.6%. However the likes of Italy, France and Spain continue to lag behind with expected growth rates of 0.6%, 1.0% and 1.1% respectively. However, a low inflation rate (0.8%), high unemployment levels (11.8%) and continuing public deficits (Spain 5.6%, France 3.4% and Italy 2.6%) are potential risk factors that could continue to hold back economic progress.

Dubai’s economic indicators are all heading northwards; for example, over the past year, the local bourse is up 151%, property prices have risen up to 40%, Dubai tops the HSBC global trade confidence index at 141, corporate earnings are showing massive increases and inbound tourism is at an all-time high. Then with the latest results from Emirates, there is no doubt that Dubai is Flying High Again!

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From Russia With Love

Posted on May 3, 2014 by howesdubai

dubai-police-museumOn Thursday, Dubai International started 80 days’ runway maintenance that will see services curtailed, cancelled or moved to Dubai World Central. (Emirates have announced that it will cut 5.4k flights over this period).  Consequently, it is unlikely that passenger traffic will reach the March numbers of 6.3 million – up 7.5% on the previous year. Q1 traffic – at 18.4 million – shows an 11.4% increase on the same quarter of 2013. Despite sluggish global trade, cargo traffic was up 6.7% in March, to 228k tonnes, and 5.0% in Q1 to 614k tonnes.

DP World announced a 9.2% increase in consolidated container traffic to 7.76 million TEUs (20 ft equivalent units). The world’s third biggest port operator handled a further 7.54 million TEUs in other locations in which they operate but not actually own.

As the emirate is steeped in maritime industry, it is perhaps not surprising to learn that this ever-expanding sector now contributes 4.6%, or almost US$ 4 billion, to Dubai’s GDP. As Dubai Maritime City matures, this influence will surely play an important role in Dubai’s economic progress.

Emirates NBD recorded a 25% surge in Q1 profits to US$ 284 million, despite having to provide US$ 346 million for bad loans. The impressive results from Dubai’s biggest lender, 55.6% owned by the Investment Corporation of Dubai, is yet another indicator that the local economy is progressing well. Loans and advances rose by 9%, to US$ 65.3 billion, whilst deposits were up 13% to US$ 68.5 billion.

Dubai’s third biggest bank, Mashreq, recorded a 35% rise in Q1 net profit to US$ 157 million. Significantly, its loans and advances rose by 5.8% to US$ 14.5 billion whilst its total assets stood at US$ 25.6 billion.

Deyaar is another developer benefiting from the local property boom as it announces a 268% hike in Q1 profits to US$ 14.2 million, on a 55% increase in revenue. The Dubai-based company had total assets of US$ 1.75 billion at 31 March 2014.

Dubai Aerospace Enterprises, whose shareholders include Investment Corporation of Dubai, Dubai International Capital and Emaar Properties, recorded a fourteen-fold increase in annual profit to US$ 112 million, as revenue rose 8.3% to US$ 2.11 billion. The company has two divisions, Capital – involved in aircraft leasing – and Engineering, dealing with repair and maintenance.

Etisalat has taken up a US$ 4.84 billion loan to pay for its purchase of the 53% shareholding in Maroc Telecom from Vivendi. This comes the same time as it announced an 11% hike in Q1 net profit to US$ 545 million on revenue of US$ 2.7 billion.

UK company, ISG, has won a US$ 35 million contract to refurbish the Kempinski Mall of The Emirates hotel. The fit-out company will be responsible for interior work, including all 393 rooms, as well the external façade of the hotel.

Plans are well advanced on the composition of the huge 438 hectare Expo site in Jebel Ali. Covering almost a third of this area, the focus will be the actual gated Expo site which will be surrounded by residential, logistics and hospitality areas – all will be linked by new roads and an extension to the Metro’s Red Line.

Despite empirical evidence indicating that there are more empty villas now than say six months ago, Standard and Poor’s is confident that the increasing supply of new units will be easily absorbed by new residents and a short-term over supply will not occur.  Because of their positive outlook, it has given local developer Damac a BB credit rating.

It is expected that Emaar Properties will offer up to 25% of its shopping malls unit on the Dubai Financial Market – and not on Nasdaq Dubai, as originally expected. The listing – expected to raise US$ 2.5 billion – will probably take place later in the year and will provide a huge boost for the local bourse.

Dubai-based retailer Lulu Group is planning to open a further fourteen stores in Dubai and Northern Emirates over the next two years. The company operates 110 stores in the region with 31.5k employees, and is now expanding into Malaysia.

The world’s third largest supermarket chain, Tesco, has signed a partnership agreement with Choithrams to sell their branded goods in 31 Dubai supermarkets. It is hoped that Tesco has better luck here than its recent overseas forays in China, Japan and the US. Despite recent profit falls, the UK supermarket chain still managed a pretax bottom line of US$ 5.1 billion and has a market cap of US$ 38.2 billion.

Meydan will soon have the largest man-made park of its kind in the world, covering 25k sq ft. No costs have been revealed but WL Hospitality Group has indicated  that the Wire World Adventure Park will include a bike park and an adventure rope and zip wire obstacle course.

Tecom is making the best of the booming economy and has announced that it will develop projects valued at US$ 273 million over the next two years. The Butterfly is a two tower office building, covering 255k sq ft, to be located between DMC and DIC whilst the new DuBiotech HQ will cater for both retail and commercial. The nine-storey Publishing Pavilion and the four tower-Makateb will prove useful additions for the rapidly expanding media sector.

Dubai Police expect to commission a state of the art, US$ 100 million forensic science and criminology laboratory by the end of the year. The four-storey building, encompassing 420 sq mt, will house six departments and nine laboratories along with training and conference facilities. In addition, it has plans to build its own museum; not only will it be shaped like a policeman’s hat but, being Dubai, it will become the biggest hat in the world.

Leisurecorp has sold Turnberry golf resort to Donald Trump. The Dubai government unit, which paid a reported US$ 93 million for the Scottish complex in 2008, disclosed no details of the sales price but is probably less than what was paid for in those halcyon days. Maybe members of the upcoming Trump Akoya golf club in Dubai will get reciprocal rights to play on the iconic Open golf course.

Two bond issues occurred this week. The Dubai government placed a 15-year sukuk on the DFM which brings the total value of sukuks listed locally to US$ 20.4 billion. Majid Al Futtaim has issued a ten-year US$ 500 million bond, which has been heavily oversubscribed, priced at around 195 basis points.

Because of a supposed accessibility risk to international investors, MSCI is reportedly planning to cut the weightings of four stocks on the DFM. This comes ahead of their formal transfer of the UAE bourses from frontier market to emerging markets status later in the month. Consequently an adjustment factor will be placed on Emaar, Arabtec, Dana Gas and Dubai Islamic Bank. Nevertheless it is estimated that up to US$ 2 billion could flood into the local market as overseas investment increases.

The DFM fell back 0.2% from its Sunday opening of 5088 points to close on Thursday at 5078. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.69 – down US$ 0.25 on the week – and up US$ 0.08 at US$ 2.47 respectively. During April, the bourse moved northwards 13.6% from 4451 points to close the month on 5059. So far this year, the best performing global stock market has skyrocketed over 50% from its January opening of 3370.

Outsourcing company Serco has hit bad times since being found out last year that it was defrauding the UK exchequer. The scandal cost the firm US$ 113 million, a loss of consumer confidence and a ban on further government contracts. Now to replenish its dwindling finances, it plans to raise US$ 280 million in a placement of 9.9% of its stock. It is a wonder then that its market valuation has only halved in the past twelve months.

The UK economy is now growing at its fastest rate in seven years as Q1 growth figures reached 0.8% with the good news spread among all sectors including manufacturing at 1.3%. In comparison, the likes of Germany, France, Italy and Spain are faring a lot worse so much so that ECB president, Mario Draghi, has indicated that he may have to start a radical quantitative easing program.

Meanwhile in Washington, the Fed will continue to cut back a further US$ 10 billion to US$ 45 billion on its QE policy, despite US Q1 growth figures coming in at a miserly 0.1%.

Also this week, the US Treasury found out that it had lost US$ 11.2 billion on its US$ 49.5 billion 2008 bailout of General Motors.  Maybe Treasury spokesman, Adam Hodge, could have done better than his quote that the goal of Treasury’s investment in GM was never to make a profit! Since the Treasury sold its last remaining shares, in December, the company’s market cap has fallen 16% over the past four months as it has had to recall 2.6 million cars, with potentially faulty ignition switches, which could be linked  to at least thirteen deaths.

With Russia still calling all the shots in the Crimea, the IMF has approved a US$ 17 billion bail-out fund for Ukraine, with 20% immediately available and the balance paid out over the next two years. In return, Kiev will have to implement stringent and unpopular reforms which will see both oil prices and taxes increased. A further US$ 15 billion will become available from other sources including the World Bank and the EU.

It seems that the West is giving Vladimir Putin carte blanche to do as he wishes in the region as pro-Russian forces continue to take over many government buildings in Eastern Ukraine, with tens of thousands of troops stationed menacingly on the border. The only riposte seems to be minor economic sanctions on several Russian officials and a pledge to recover the billions of dollars allegedly stolen by the country’s ex-president Yanukovych. From Russia with Love.

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Fire and Rain

Posted on May 1, 2014 by howesdubai

dubai-expo-siteEmaar Properties showed a US$ 235 million Q1 profit, up 55.2% year on year, on a 7% hike in revenue to US$ 615 million. Furthermore sales at US$ 1.61 billion were a massive 94% higher than the corresponding period in 2013. The company is still expected to raise up to US$ 2.5 billion in a secondary offering of shares in its Malls Group later in the year. The company has also signed a Memorandum of Understanding with Dubai World Central to develop a staggering 13.6 million sq mt residential estate adjacent to the Expo site.

The proposed Expo site at Jebel Ali, will be the largest ever and will cost in the region of US$ 3 billion. There will be a further US$ 7 billion earmarked for infrastructure, including US$ 1.4 billion to be spent on expanding the Metro’s Red Line.

A further project in Dubailand was announced by Dubai Properties. Condor Building Contracting won a tender to build a 20k sq mt retail and community centre in its Mudon location, due to open late next year.

It is reported that Dubai’s National Petroleum Services will be sold to a Gulf-based syndicate for up to US$ 700 million. The oilfield service company, which operates in the MENA region as well as Malaysia and Brunei, will have the likes of Arab Petroleum Investment Corporation and Fajr Capital among its new owners.

Dragon Oil, 51% owned by ENOC, is set to spend US$ 1.5 billion in surveying an Afghan oil concession, covering an area of almost 1.3k km.

It seems likely that the Dubai government will once again test the sukuk market with a US$ 500 million, 15-year, 5% Islamic bond. The last sovereign bond, issued in January 2013, was for US$ 1.25 billion and was 12 times over-subscribed. With the buoyant state of the local economy, more of the same is expected this time.

This week saw HH Sheikh Mohammed bin Rashid Al Maktoum on an official visit to Latin America with his seven-day whirlwind tour taking in Mexico, Chile, Argentine and Brazil. It is no surprise to see that these four countries were chosen as 2013 figures indicate a 25.4% annual leap in trade to US$ 4.71 billion. Mexico (US$ 2.2 billion) and Brazil (US$ 2.0 billion) were by far the largest trading partners.

The DFM had a massive week up 6.85% from its Sunday opening of 4762 points to close on Thursday at 5088. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.94 and US$ 2.38 respectively. No wonder the market is currently the best performing bourse in the world already 50.98% up this year from its 01 January opening of 3370 points. Traditionally, the market cools once the outside temperature rises and this could be welcome news.

UK bonus payments are back in the news with Barclays leading the pack. Despite a 32% fall in profits, the investment bank has actually increased its bonus pool by 10% to almost US$ 4 billion – almost three times the dividend pay-out to shareholders! Meanwhile retiring chairman of the gas conglomerate, BG Group, has walked away with a compensation package in excess of US$ 37 million. Despite dismal results and falling sales, Morrison’s chief executive, Dalton Philips, is in line for a US$ 3.8 million share bonus. These examples beg the question – who’s in charge?

One of the major success stories of modern times is Airbnb which started in 2008 and is now valued at US$ 10 billion. To date, the company, founded by Brian Chesky, Nathan Blecharczyk and Joe Gebbia, has facilitated accommodation for over 11 million customers in nearly 200 countries. Its main source of revenue is a 3% charge on all rentals made. Certainly a good role model for any of the local SMEs to follow.

There is no doubt that the Chinese economy is slowing and, with it, a marked escalation in their banks’ tapering and tightening of credit facilities to both local and international consumers. Allied with the fact that many international banks are becoming reluctant to lend money – and even closing clients’ accounts – this can only spell bad news for the global economy.

What is the world coming to when there is every possibility that the ECB may well cut central banks’ deposit rates to below the current zero level? This would mean that customers would have to pay banks for looking after their cash; if this were to happen, mattress sales would surely surge.

There is disturbing news from the Australian Bureau of Meteorology which has forecast that El Niño may start within the next three months. This weather pattern could have a disastrous effect on economies especially in those countries bordering the Pacific Ocean with a knock effect on trade and travel throughout the world.  As better financial news is beginning to filter through, this is not the best time for Fire and Rain.

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Livin’ On The Edge

Posted on April 27, 2014 by howesdubai

Palm-Jumeirah-BoardwalkNakheel has announced a tender for the design and construction of a 6 mt wide, 11 km long boardwalk on the outer side of the Palm Jumeirah crescent. It will also include two 100 mt long piers which will encompass dining and leisure facilities.

The developer has also appointed AE7 Associates to design and supervise the master planning of its 15.3 sq km development on Deira Island in a US$ 7.6 million contract. Like Palm Jumeirah, there will be a boardwalk included on the 4.5 million sq mt south island, as well as a shopping mall, ampitheatre and marina.

The Kuwaiti developer, Al Mazaya Holdings, is set to launch the second phase of its Q-Point residential development located in Dubailand. Q-1 is now almost 80% complete with hand-over slated within the next twelve months.

The Kuwait subsidiary of Dubai-based Drake & Scull has won two contracts totalling US$ 34.9 million for engineering work in that country.

Emaar Properties launched the latest phase of its Mir Oasis development in Arabian Ranches. Sales of the 480 townhouses will take place this Saturday at three locations – Dubai, Abu Dhabi and Karachi – and  strong investor demand is expected as Dubai’s property continues to boom.

At next week’s AGM, it is expected that Emaar will announce a cash dividend of US$ 0.041 per share together with a 10% bonus share issue. This follows a highly successful 2013 when the property developer announced profits of US$ 700 million on revenue of US$ 2.81 billion.

With the 80-day refurbishment of the runways at Dubai International due to start on 01 May, and the subsequent curtailing of some flights, Emirates has announced that it could lose up to US$ 272 million in revenue as it reduces flights to over forty destinations.

A useful indicator of the flourishing MICE sector is the increased activity recorded by Dubai World Trade Centre. In 2013, the number of both trade delegates – over 2.2 million – and the 373 exhibitions showed double digit growth. Nearly 900k of trade visitors came from overseas which has significantly helped growth in the hospitality sector.

April and May are expected to be bumper months for Dubai hotels. Still reeling from the influx of 19.5k Chinese visitors from one company Nu Skin, the industry is gearing up for Easter, the IPL and ATM – all expected to fill the current inventory of 85k rooms. It is estimated that both months will see over 1 million hotel visitors.

Inflation figures for both the UAE and Dubai continue to edge northwards which many expect to reach 3% by the end of the year, compared to 1.1% last year. Even then, the figures will be on the low side as home rents and education fees escalate at a much higher level.

Latest figures from Dubai Exports show that the fragrance, beauty and fashion-related industry is now worth in excess of US$ 56.1 billion – up over 8.0% on the year. By far the largest contributor was fashion which accounted for US$ 52.6 billion in 2013. Both the fragrance and cosmetics sectors showed double digit growth to US$ 1.50 billion and US$ 2.00 billion respectively. This week two new industry bodies – Fashion Group Arabia and Cosmetics Foundation Arabia – have been established.

The DFM had a relatively quiet week up only 0.04% from its Sunday opening of 4744 points to close on Thursday at 4762. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.79 and US$ 1.90 respectively. No wonder the market is currently the best performing bourse in the world already 41.31% up this year from its 01 January opening of 3370 points. More good news is imminent as the DFM is set to be reclassified to emerging market status in May which will result in extra liquidity entering the local market.

Certain European countries are facing difficulties in meeting their financial obligations. Portugal received a US$ 1.17 billion IMF / EU /ECB bailout payment this week which brings the total of the rescue package to US$ 25.7 billion over the past three years. The programme should have terminated in May but has been extended.

Meanwhile Italy has requested a further year to reach budget targets set as a condition for earlier funds. The country continues to struggle as its 2014 fiscal deficit is expected to reach 2.6% of GDP and its public debt is a massive US$ 2.9 trillion or the equivalent of 134.9% of GDP. The past three prime ministers, Berlusconi, Monti and Renzi promised balanced budgets by 2013, 2015 and 2016 respectively; 2020 is a more realistic assumption.

Greece’s unemployment rate continues at around the 28% level whilst its debt stands at 175% of GDP. There cannot be any sort of recovery there until steady economic growth returns to the country.

There is no doubt that things will have to get better not only for these three countries but most others in the eurozone. For too long now, they have been Livin’ On The Edge.

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On The Road Again

Posted on April 20, 2014 by howesdubai

willienelson2The importance of the gold trade to the local economy was reinforced with news that almost 40% of the global market in the precious metal was carried out in Dubai. It is amazing to consider that only ten years ago, the local trade accounted for about US$ 6 billion – latest figures indicate that it is now worth US$ 75 billion! To ensure that the highest standards are applicable, the Dubai Multi Commodities Centre is planning to tighten policies and procedures to ensure that they are in line with international best practice.

Equally impressive is the growth in the local diamond market with business growing from an almost zero base at the beginning of the millennium to over US$ 40 billion. Dubai is now considered one of the global leaders in both the gold and diamond trade; with first class infrastructure and its unique location, things can only get better.

There was confirmation from Shaikh Holdings that it would be handing over 97 villas in its Sanctuary Falls development in the Jumeirah Golf Estates by the end of the year. It is reported that Bollywood celebrities and other high profile individuals have bought villas.

Majid Al Futtaim and Starwood Hotels & Resorts Worldwide have signed an agreement to launch two new hotels in Bahrain – the Westin and Le Méridien. The Dubai-based conglomerate currently has 11 regional hotels in its portfolio.

Ducab, jointly owned by the Investment Corporation of Dubai and Senaat from Abu Dhabi, recorded a 22% jump in 2013 revenue to US$ 1.36 billion. Cable sales accounted for 58% of the business with rods and wires making up the balance.

Q1 Nakheel profits showed an impressive 28.1% hike to US$ 171.4 million on revenue of US$ 373 million – a reflection of the buoyancy in the economy. Despite increased profits, and that it expects to hand over 1,200 residential units this year, the developer still has very high borrowings that will have to be eventually paid off.

Now managed by Nakheel, the troubled developer, Limitless has apparently requested a moratorium on the first instalment of a US$ 1.2 billion debt. Due for repayment this December, the developer has requested a further one year’s grace but has offered a payment of US$ 55 million towards the US$ 400 million due. The company currently has developments in Jebel Ali, Russia, Saudi Arabia and Vietnam.

With business confidence in the local market growing by the day, Emirates NBD is planning to reverse a US$ 123 million non-performing loan provision. This relates to a 5% charge made on a US$ 2.45 billion loan made to Dubai World and, if carried out, would probably add 50% to the bank’s quarterly bottom line.

While no figures have been revealed, Dnata, which did own 100% of Mercator, has divested some of its shares to make Warburg Pincus a majority shareholder. The New York private investment company has a current portfolio of around 130 companies managing more than US$ 37 billion in assets.

Already managing US$ 650 million in assets, Dubai-based Al Masah Capital expects a further 33% expansion in 2014. Its investments include 19 educational facilities, 18 healthcare studios and 9 food outlets.

Although still subject to Central Bank approval, it seems that Barclays has sold its retail banking division, with a 110k client base, to Abu Dhabi Islamic Bank for a reported US$ 177 million.

The banking authority has also introduced the Interim Marginal Lending Facility as from next week. This will allow financial institutions to engage in overnight borrowing and will be a boost to banks managing their liquidity.

Despite reports to the contrary, the DFM continues to deny that it is not in merger discussions with the Abu Dhabi Stock Exchange.

The DFM had another great week jumping 4.7% from its Sunday opening of 4618 points to close on Thursday at 4839. Bellwether stockThe market is already 55% up this year and 10% up in the first ten days of April and earlier had a Q1 gain of 32.08% from its 01 January opening of 3370 points to 4451.

Another indicator on the slowdown in the Chinese economy came with the release of March trade figures indicating year on year falls of 6.6% in exports (after a 11.3%) drop in February) and 11.3% in imports. Latest forecasts from the World Bank have seen a reduction in 2014 growth to 7.5% – slightly down on last year. There is no doubt that the weakening Chinese economy, together with the on-going crisis in the Ukraine and the possibility of eurozone deflation, are three major flashpoints that could derail future global growth.

According to the latest IMF forecast, Dubai’s 2014  growth is expected to be 4.4%, noting that the rapid expansion in the realty sector and the knock-on effect of Expo 2020 have boosted the local economy. More worrying is the predicted rise in inflation from 1.1% to 2.2% which, even at that figure, looks very much on the low side.

The CEO of Dubai Trade, Mahmoud Al Bastaki, has predicted that Dubai’s foreign trade, currently standing at US$ 379 billion, could reach the US$ 1.09 trillion mark by 2020. Already contributing almost 30% to the local economy, this will grow to nearer 35% over the next six years.

A Dubai delegation, led by the chief executive of Investment Corporation of Dubai, Mohammed Al Shaibani, is currently on a road show in London to drum up business and is impressing international financiers with what is on offer. Despite having a medium term debt overhang of some US$ 78 billion, the emirate is expanding with a GDP currently at US$ 97 billion, set to grow by 11.3% within the next two years to US$ 108 billion – almost three times the figure it was in 2005. There is no doubt that the emirate is a success story and it is edifying to see that Dubai Is On The Road Again!

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Catch Us If You Can

Posted on April 7, 2014 by howesdubai

dubai-terminal3Following its September 2013 off plan sale, when 262 townhouses were sold in a day, Nakheel has finally awarded Ginco General Contracting a US$ 191 million contract for the construction of 936 units in its Warsan Village development. The project will also include a shopping centre with over 350 outlets.

Select Group has given details of its planned US$ 817 million, three- tower development in Dubai Marina, with sales slated to start later this month. The developer already has two other projects on the go in this location – West Avenue due for completion this quarter and a 320-room Intercontinental Hotel expected to open early next year.

A JV between Parsons and Halcrow has been appointed by the RTA to manage the US$ 545 million Dubai Water Canal development. This infrastructure includes the creation of a 2.8 km canal, a 1 km bridge on SZR and raising the 3 main affected roads – SZR, Al Wasl and Jumeirah Beach. This is a huge project when one considers that the SZR will have to be elevated by up to 8.5 mtr to allow marine traffic to pass through.

Damac was heavily oversubscribed as it went to the London market with a US$ 650 million sukuk sale to finance their growing order book, at a price of midswaps plus 310 points. Although this was the company’s first foray into Islamic finance, late last year it raised US$ 350 million in an IPO.

Meanwhile Emirates Reit’s IPO was heavily oversubscribed as 128.67 million shares were snapped up at a unit price of US$ 1.36. This offering brought in US$ 175 million in new funds which will be used to capitalise further on the fast growing real estate market in the emirate.

Two conglomerates reported their 2013 results. The government-owned Dubai Holdings Commercial Operations Group, which includes Jumeirah, Tecom and miscellaneous property in their portfolio, saw a threefold jump in net profits to US$ 900 million, on a 27% revenue rise of US$ 3.19 billion.

With growth of 14% in its properties division, allied with retail growing 6%, Majid Al Futtaim released 2013 results showing an 11% hike in profits to US$ 900 million. Its assets, including 56 Carrefour hypermarkets, 53 supermarkets, 16 Magic Planets and 92 VOX cinema screens, are valued at US$ 10.6 billion.

Dubai’s 4 and 5 star hotels continue their upward trend with February figures showing occupancy rates at 87.6% along with rises in all other key indicators – average room rates up 8.7% to US$ 367, revenue per available room 7.3% to US$ 322, total revenue per available room 5.8% to US$ 555 and gross operating profit per available room 8.6% to US$ 282.

The industry will receive a boost next week when the Chinese company, Nu Skin China, treats 19,500 staff to a 10-day holiday in the emirate. It is reported that it will take 77 flights to bring them here where they will stay in one of 39 nominated hotels.

Meanwhile about 100 equine personnel have left here for Chengdu to manage the first official racehorse meeting there at the new Meydan track. This is the first step to try and promote horse racing in China, along with other facets of the equine industry.

HH Sheikh Hamdan bin Rashid Al Maktoum announced the launch of a US$ 7.9 million Hatta Heritage Inn and Market project, to be completed within a year. Located on the Hatta / Oman highway, it will comprise 34 hotel rooms, along with 46 retails units and three restaurants.

With previous reports predicting up to 40% increases in Dubai property prices, the latest one from HSBC errs on the side of caution with a 10% – 15% guesstimate. Even as we enter Q2, the reality is that nobody really knows what is exactly going. It does seem that the ones with an interest in the market, including estate agents and financial institutions, are those who are talking up the market.  However, some sectors have seen little or no rises over the past six months which may indicate that prices have flattened.

The local financial institution, AE Exchange, estimates that in excess of US$ 14 billion is remitted annually from the UAE, with the four leading beneficiary countries being India, Bangladesh, Pakistan and Philippines. On a global scale, it is estimated by the World Bank that total remittances are over US$ 550 billion, of which 75% is bound for the developing world countries.

Having reported 2013 turnover of US$ 1.1 billion, Dubai Duty Free looks certain to reach new heights this year as its Q1 revenue increased 10% to US$ 477 million. Sales at Terminal 3, which accounts for 62% of all sales, rose by 11%.

Dubai is regarded as a global hub for many types of economic activity and now they can add tea to that ever growing list. Last year, trade in this beverage surged over 34% to US$ 463 million, with the Dubai Multi Commodities Centre reporting a doubling in volumes.

Since its 2010 US$ 25 billion debt restructuring programme, Dubai World has begun settling part of the debt and indeed has paid back US$ 285 million, ahead of schedule. However, with massive repayments of US$ 4.4 billion, due next year, and a further US$ 10 billion three years later, the company has sought advice from the US investment bank, Blackstone.

Investment Corporation of Dubai expanded their interest in Kerzner International Holdings this week by purchasing a reported 46% of the hotel management company’s shares from the founder, Sol Kerzner. Dubai’s sovereign wealth fund now owns 71% of KIHL.

The DFM had another great week jumping 5.41% from its Sunday opening of 4381 points to close on Thursday at 4618. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.75 and US$ 1.68 respectively. The market is already 39.25% up this year and earlier had a Q1 gain of 32.08% from its 01 January opening of 3370 points to 4451.

Christine Lagarde, head of the IMF, has painted a bleak picture of the global economy. Three of the critical factors that she has highlighted are the worrying low inflation in the eurozone (currently at 0.5%), the continuing market volatility and the on-going crisis in the Ukraine. She is also rightly concerned about the negative impact of the Fed’s tapering of its monthly monetary stimulus, which has been cut by US$ 30 billion to US$ 55 billion from the beginning of the year. This has resulted in massive amounts of monies being withdrawn from emerging markets back to the US.

Another potential fraud is being investigated by the FBI, involving what is known as high frequency trading. Although not unlawful, and is used in about half of all business on New York exchanges, the practice involves super-fast computer systems carrying out trades in fractions of a second. The worry is that they are being exploited, in an illegal manner, to manipulate the market including what is known as spoofing the market, phantom trading and insider trading.

February finally saw Heathrow losing its crown as the world’s busiest international airport, being superseded by Dubai.  This is a reflection of the local economy which is brimming with consumer confidence and growing at double the rate of most other countries. On behalf of the emirate, the message from Dubai International Airport to the rest of the world is Catch Us If You Can!

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On Top Of The World

Posted on March 29, 2014 by howesdubai

meydanFebruary proved another lucrative month for Dubai’s hospitality sector with impressive rises in occupancy, 0.7% to 88.6%, ADR (average daily rate), 10.7% to US$ 300, and RevPAR (revenue per available room), 11.5% to US$ 266. Increases in demand at 7.1% continue to outstrip the 6.3% rise in supply of units but is fast approaching equilibrium.

Currently building two shopping malls on Palm Jumeirah and Deira Islands, Nakheel is planning two more. The one at Jumeirah Village Triangle, at 1 million sq ft, will be twice the size of the other at Jumeirah Village Circle.

At long last, there seems to be some action from Nakheel’s Deira Islands with 94 of 500 plots, ranging from 50k sq ft to 670k sq ft, being released in phase 1. To be located on two of the four main islands, it will be mainly for hotel and resort projects. When completed, this development will have 23k hotel rooms and 31k apartments.

Dubai-based Habtoor Leighton Group, in a JV with Al Jaber Engineering, secured a major US$ 1.7 billion contract in Qatar. The project covers the design and construction of 56 km of the country’s New Orbital Highway and Truck Route, including five main interchanges.

Dubai’s Wasl Properties have completed a three-tower development in Deira, two of which house 217 apartments and the third being a 210-room 4 star hotel.

February was another bumper month for Dubai International with impressive growth in both passenger traffic and cargo. Compared to the same month in 2013, numbers were up 11.7% to almost 5.7 million and freight by 3.4% to 188.7k tonnes.

The troubled Gulf Navigation suffered another blow when it was forced to restate its 2013 results, after it had lost an arbitration case. Having already announced a US$ 190 million loss, it had to add a further US$ 62 million to its bottom line to report a loss of US$ 252 million.

Bahraini asset leasing company, Hanco, has paid US$ 164 million to buy Byrne Investments Limited, including Byrne Equipment Rental and Spacemaker. The long-established Dubai company, formed by Seamus Byrne, is the region’s largest rental company, employing 450 staff.

As part of its cash flow strategy, Dubai International Capital, part of Dubai Holding, is reportedly divesting itself of one of its major assets to raise funds to help with its debt repayment programme. It seems that of the four potential suitors, Clayton, Dubilier & Rice, a private equity firm, is favoured to purchase German-based packaging group Mauser for around US$ 1.5 billion.

Meanwhile, another arm of Dubai Holding, Tecom added another 233 companies in 2013 to bring the total number to over 2,000. It is estimated that an additional 622k sq ft of space was brought on line in Dubai Media City, Studio City and International Media Production Zone, to cope with this expansion.

Ithmar Capital, founded in 2005, expects to expand its portfolio by up to 33% this year. Currently, the Dubai-based private equity firm manages investments of around US$ 800 million and expects new deals to originate mainly from the education and health-care sectors.

One sector of the Dubai travel industry, that is set to expand over the next three years, is medical tourism. Health bosses estimate that revenue generated from this segment could grow from US$ 178 million to US$ 300 million, as numbers increase from today’s 107k to 170k.

A recent study by MasterCard seems to indicate that the UAE has the largest percentage of online shoppers in the region. Some estimate that within five years this sector will generate more than US$ 10 billion with the likes of souq.com and Cobone leading the way. PayPal estimate GCC on-line sales to top US$ 15 billion in 2015 – a 66.7% surge from 2012’s US$ 9 billion.

Apparently with little else to do, the IMF has again flagged the region as prone to a boom / bust cycle. Reiterating its October 2013 report, it considers that the realty sector could become a bubble, if not managed properly, and suggested that regulators, including the Central Bank, take further steps to ameliorate any future problems.

In May, the UAE bourses will be upgraded by MSCI Inc, a US-based provider of equity, fixed income and hedge fund indices. This important reclassification sees the country being moved from Frontier Markets status to Emerging Markets and could result in more than US$ 1 billion being invested locally. The significance of this upgrade is that international investors will be able to trade directly in the local markets.

Next month, Emirates Reit is going public on Nasdaq Dubai with an issue price of between US$ 1.36 and US$ 1.56, valuing the company at between US$ 356 million and US$ 408 million. The Dubai-based real estate investment trust is partly owned by Dubai Islamic Bank (30.9%) and Dubai Holding (27.1%).

Nearly six years after having its shares suspended on the DFM, Amlak is hoping to start trading again later in the year. The outlook for Dubai’s real estate sector is a lot rosier now than it was in November 2008 when villa prices tanked, by as much as 60%, whilst available credit was just an illusion

After a massive 8.2% surge last week, the bourse rose by 1.7% from its Sunday opening of 4306 points to close on Thursday at 4381. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.68 and US$ 1.62 respectively. The market is already 31.87% up this year.

China’s shadow banking segment is still a major problem for the economy as it continues to expand because of the tight regulations, high interest rates and lending restrictions in the official banking sector. In January, a wealth management fund nearly defaulted which did little to foster consumer confidence. A banking crisis is imminent and collateral damage across the globe is inevitable.

The Crimean squabble between Russia and the West will have a negative effect especially on the European economies. As the political stalemate continues, both sides have upped the rhetoric and imposed sanctions with no apparent appeasement on the agenda. Furthermore the UN Security Council has little or no influence since Russia has the right of veto. The World Bank has estimated that the Russian economy could shrink by 1.8% this year if there is the impasse continues. The cost to the eurozone could be infinitely higher.

With World Earth Day occurring this Saturday, Dubai is using an increasing amount of both electricity and water. The former used saw a 3.3% annual increase to 6,857 MW whilst there was a 3.85% jump in average daily water usage to 296 million gallons. DEWA announced that it will spend US$ 5.45 billion over the next six years on three major projects to ensure that future demand will be met. One of these will be a clean coal plant, costing US$ 3.54 billion with a 1,200 MW capacity.

Coinciding with World Earth Day is the Dubai World Cup, the world’s richest horse race. With 70k spectators filling Meydan to the rafters, and millions watching on global TV, this event adds millions of dollars to the local economy as well as prize pool on the night of US$ 30 million to the winning connections. Watch out for a Dubai winner, either African Story or Mukhadram, or the Irish interloper, Ruler of the World. Whoever wins will be On Top Of The World!

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