The UAE’s listed real estate businesses are back in the spotlight. The fact that Damac is private is the big news and at this point it is worth looking at the company and the UAE real estate sector. At Dh1.3 per share, the deal does not seem fair. Damac will be taken privately at a valuation of Dh7.86 billion, but after considering the cash, the effective price will be Dh5.80 billion. And at the price, it’s incredibly cheap, and the promoter gets a lot for this show. Much to the promoter does not mean good value to others. It must therefore be seen whether other investors agree. It can not go wrong if long-term investors think they are short-changed. The investors who have suffered the worst slump in real estate should offer a relatively cheap offer just when the sector and the world economy are starting to look up. So what other factors could have led the management of Damac to make it private? The share price lagged behind peers this year, and it could have frustrated the promoters. But markets also can’t go wrong, as in the first quarter, Damac saw a 48 percent drop in year-on-year and a 37 percent drop in profit. It is not surprising that Damac shares have fallen 1.54 percent to date.
Win at both points
The top profits in the fixed sector are Emaar Development (35.64 percent), RAK Properties (23.33 percent), Aldar (20.95 percent), Emaar Properties (15.01 percent) and Emaar Malls (8.74 percent) . And these are the best performers, because they did well with their numbers. RAK Properties increased its turnover by 223 percent and profit by 433 percent in the first quarter. Emaar Development achieved an increase of 26 percent and 20 percent in the top line and the bottom line. Aldar (16 percent revenue growth, 81 percent profit growth) and Emaar Properties (12 percent revenue growth and 8 percent profit growth) also performed well. The Dubai real estate market appears to be showing signs of turning around, with investors rewarding shares of Emaar Properties with a 15 per cent rise this year. The merger with Emaar Malls is also a positive credit development, as Emaar Malls will benefit from the normalization of the economy.
Globally, the enormous amount of liquidity pumped into the system has brought interest rates to a low record, yielding risk assets. Vaccination rates are rising rapidly, which could help normalize economies by the end of the year. The UAE will be a primary beneficiary. The real estate sector could suffer a strong setback. So Damac is not the only game in town. RAK Properties and Aldar, along with Emaar Properties, should be on the watch list of investors who want to play the UAE real estate. Vijay Valecha The author is chief investment officer at Century Financial.