Damac positive amid tough market

The developer reported a net profit of Dh880.4 million for the three months to March 31, down from Dh1.05 billion in the same period last year.

Above, a billboard advertises the Damac Hajar project in Dubai. Antonie Robertson / The National

Damac Properties yesterday reported a 16 per cent fall in first-quarter net profit, missing analysts’ forecasts, because of lower property development revenue and a sharp drop in income from the cancellation of units.

The Dubai-based developer of Damac Hills and Aykon City posted a net income of Dh880 million, compared with Dh1.1 billion in the same period last year.

Profits came in well below a forecast of Dh1.1bn made by NBAD Securities.

“Despite the challenging market conditions, our medium- to long-term outlook remains positive, as we remain dynamic and continue providing the right products that suit the changing market needs,” said Hussain Sajwani, Damac’s chairman, in a statement.

Although Damac’s revenue rose by 20 per cent to Dh1.19bn for the quarter, property development revenue slipped by 18.5 per cent to Dh1.08bn. Income from the cancellation of units declined by 72 per cent to Dh86m for the period.

Booked sales reached Dh2.2bn for the quarter, up by 10 per cent from Dh2bn for the same period last year and up by 30 per cent from Dh1.6bn for the fourth quarter of last year.

The company said that such figures were consistent with earlier guidance of Dh7bn booked sales for 2017.

“2016 was a year of market stabilisation and the start of 2017 has been promising and we will continue to innovate on our products to meet the demands of a wider audience of customers,” said Mr Sajwani.

The developer announced plans last month for a five-tower hotel made up of 2,000 rooms overlooking its planned Trump-branded golf course at Akoya Oxygen.

Analysts remain optimistic on Damac, despite uncertainty over the prospects for Dubai’s real estate market in 2017.

“We reiterate our hold recommendation and Dh2.84 target price,” said NBAD Securities in an analyst note. “The property market is showing signs of recovery, as evidenced by higher sales volume. Our ratings revision will hinge upon further evidence of sustained recovery in the property market during the coming quarters.”

Mohamed Alabbar, Emaar Properties’ chairman, noted an increase in property sales during the first quarter, contributing to a 15 per cent rise in first-quarter profit.

But the broker Cluttons said in its Spring Market Outlook that Dubai property prices are still 7.8 per cent lower than a year ago and transaction volumes in the market for completed homes is 18.4 per cent lower.

Damac shares ended the day unchanged at Dh2.72.

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