Emaar Cancels Land-for-Shares Swap With Dubai State
Emaar Properties PJSC, the Middle East's biggest developer by market value, scrapped a land-for- shares swap worth about $7.6 billion with the Dubai government after its stock plunged because details weren't disclosed.
Emaar and state-owned Dubai Holding LLC will instead create a venture to develop property in the emirate, they said in an e- mailed statement today, without giving details. Shares of Emaar have slumped 13 percent since the swap deal was announcedMarch 18, compared with a 5.3 percent gain in the benchmark index.
``This removes uncertainty and will be good for the stock,'' Roy Cherry, a senior research analyst at Shuaa Capital PSC in Dubai, said by phone. ``Shareholders now know there won't be dilution, and that Emaar will work with the government on a project-by-project basis.''
Rising land and building material costs are eroding profit margins at developers in the United Arab Emirates, while a shortage of contractors is forcing builders to pay higher prices or delay projects. Emaar generates as much as 85 percent of its income in the U.A.E. and its costs more than doubled in the second quarter.
Dubai-based Emaar, which is building the world's biggest skyscraper in the emirate, had agreed to swap a 28 percent holding for land from Sheikh Mohammed bin Rashid al-Maktoum, giving Dubai's ruler a controlling 51 percent stake. The developer never disclosed the value or location of the land.
Emaar officials won't be available for comment today, the company's media advisers said. Dubai Holding Chairman Mohammad al- Gergawi didn't answer a call to his mobile phone.
Shareholders' Interest
The planned swap ``would not be in the interest of Emaar shareholders,'' Emaar said in today's statement. It had planned to issue convertible bonds to Dubai Holding backed by 2.364 billion new shares, worth $7.6 billion based on the closing share price of 11.8 dirhams before the announcement.
Emaar is the second-biggest publicly traded company in the U.A.E. and the largest traded on Dubai's stock exchange. Its shares jumped 5.6 percent on their last day of trading Aug. 23 to close at 10.3 dirhams, giving the company a market value of 62.6 billion dirhams ($17 billion).
Investors from outside the U.A.E. are allowed to own up to 49 percent of the shares.
``They're making the same mistake again, not telling investors exactly what's going on,'' Ahmed Badr, an analyst with Al-Futtaim HC Securities in Dubai, said by phone. ``We'll see some worried investors when the market reopens tomorrow.''
Badr has a ``strong buy'' recommendation on the shares. That rating, based on the outlook for Emaar's existing business, won't change after today's announcement, he said. Shuaa's Cherry has a ``buy'' rating on the stock that will also be maintaine
Land Bank
``Dubai Holding has a large land bank in prime locations in the emirate, and Emaar, with the right track record and experience in developing real estate projects, will have access to that attractive land bank,'' Emaar Chairman Mohamed Alabbar said in today's statement.
Details on the new venture with will be published next month, the statement said, without being more specific.
Dubai Holding owns developers including Dubai Properties, Tatweer and Sama Dubai as well as business parks dedicated to media, technology, healthcare and industry, according to its Web site. Its projects include a $54 billion strip of more than 50 theme hotels in the desert and the Dubailand theme park that's expected to be twice the size of Walt Disney World in Florida.
Building Boom
Emaar has spearheaded a building boom in Dubai since 2002, when Sheikh Mohammed allowed foreigners to own property in some parts of the emirate.
It's also building homes, shopping malls, schools and hospitals from Morocco to India. The Dubai skyscraper, known as Burj Dubai, will cost an estimated $20 billion.
The developer has 3.9 billion dirhams of loans and bonds outstanding, data compiled by Bloomberg show. Moody's last month rated its debt A3 while Standard & Poor's rated it A-, their seventh-highest investment grades.
``We'll have to ask now how the cancellation of the swap affects the government support level we factored into Emaar's rating,'' Dubai-based Moody's analyst Philipp Lotter said in a phone interview today.
``I'd say the government's holding remaining at 32 percent rather than rising to 51 percent is probably a technicality, though in light of Emaar's strategic importance to Dubai's economic expansion plans,'' Lotter said. Source
Emaar and state-owned Dubai Holding LLC will instead create a venture to develop property in the emirate, they said in an e- mailed statement today, without giving details. Shares of Emaar have slumped 13 percent since the swap deal was announcedMarch 18, compared with a 5.3 percent gain in the benchmark index.
``This removes uncertainty and will be good for the stock,'' Roy Cherry, a senior research analyst at Shuaa Capital PSC in Dubai, said by phone. ``Shareholders now know there won't be dilution, and that Emaar will work with the government on a project-by-project basis.''
Rising land and building material costs are eroding profit margins at developers in the United Arab Emirates, while a shortage of contractors is forcing builders to pay higher prices or delay projects. Emaar generates as much as 85 percent of its income in the U.A.E. and its costs more than doubled in the second quarter.
Dubai-based Emaar, which is building the world's biggest skyscraper in the emirate, had agreed to swap a 28 percent holding for land from Sheikh Mohammed bin Rashid al-Maktoum, giving Dubai's ruler a controlling 51 percent stake. The developer never disclosed the value or location of the land.
Emaar officials won't be available for comment today, the company's media advisers said. Dubai Holding Chairman Mohammad al- Gergawi didn't answer a call to his mobile phone.
Shareholders' Interest
The planned swap ``would not be in the interest of Emaar shareholders,'' Emaar said in today's statement. It had planned to issue convertible bonds to Dubai Holding backed by 2.364 billion new shares, worth $7.6 billion based on the closing share price of 11.8 dirhams before the announcement.
Emaar is the second-biggest publicly traded company in the U.A.E. and the largest traded on Dubai's stock exchange. Its shares jumped 5.6 percent on their last day of trading Aug. 23 to close at 10.3 dirhams, giving the company a market value of 62.6 billion dirhams ($17 billion).
Investors from outside the U.A.E. are allowed to own up to 49 percent of the shares.
``They're making the same mistake again, not telling investors exactly what's going on,'' Ahmed Badr, an analyst with Al-Futtaim HC Securities in Dubai, said by phone. ``We'll see some worried investors when the market reopens tomorrow.''
Badr has a ``strong buy'' recommendation on the shares. That rating, based on the outlook for Emaar's existing business, won't change after today's announcement, he said. Shuaa's Cherry has a ``buy'' rating on the stock that will also be maintaine
Land Bank
``Dubai Holding has a large land bank in prime locations in the emirate, and Emaar, with the right track record and experience in developing real estate projects, will have access to that attractive land bank,'' Emaar Chairman Mohamed Alabbar said in today's statement.
Details on the new venture with will be published next month, the statement said, without being more specific.
Dubai Holding owns developers including Dubai Properties, Tatweer and Sama Dubai as well as business parks dedicated to media, technology, healthcare and industry, according to its Web site. Its projects include a $54 billion strip of more than 50 theme hotels in the desert and the Dubailand theme park that's expected to be twice the size of Walt Disney World in Florida.
Building Boom
Emaar has spearheaded a building boom in Dubai since 2002, when Sheikh Mohammed allowed foreigners to own property in some parts of the emirate.
It's also building homes, shopping malls, schools and hospitals from Morocco to India. The Dubai skyscraper, known as Burj Dubai, will cost an estimated $20 billion.
The developer has 3.9 billion dirhams of loans and bonds outstanding, data compiled by Bloomberg show. Moody's last month rated its debt A3 while Standard & Poor's rated it A-, their seventh-highest investment grades.
``We'll have to ask now how the cancellation of the swap affects the government support level we factored into Emaar's rating,'' Dubai-based Moody's analyst Philipp Lotter said in a phone interview today.
``I'd say the government's holding remaining at 32 percent rather than rising to 51 percent is probably a technicality, though in light of Emaar's strategic importance to Dubai's economic expansion plans,'' Lotter said. Source
No comments:
Post a Comment