JP Morgan assigns overweight rating to Aldar

The investment bank JP Morgan has rated Aldar Properties as overweight and said the company is its top pick in its coverage of the UAE property sector. "Aldar Properties is Abu Dhabi's largest property developer with a diversified construction portfolio and 37 per cent sovereign ownership," Harm Meijer said in a MENA report dated today. "Despite the company's relatively high debt our preference for ADX-listed Aldar is premised on our expectation for rising contributions of recurring income to its top line from investment properties relative to its local peers."

Mr Meijer said he expects the company's income for 2009-2012 will form nearly 19 per cent of Aldar's bottom line, well above the averages of 10 per cent for Emaar and Sorouh. With strong sovereign backing, Aldar enjoys comfortable liquidity position despite the size of its ongoing projects, the report said. Dh15bn worth of financing was specifically made available for Yas Island phase 1, it noted.

"The company's recent international bond, the first corporate offering since the start of the financial downturn, was also well received by investors albeit at a high interest rate of 8.75 per cent," Mr Maijer said. "With this debt issue, Aldar managed to successfully tap the international market and raise US$1.25bn in debt with a 5-yr maturity." Aldar though has high exposure to external debt, where its Net/debt Equity ratio is likely to rise to 75 per cent by end 2009, according to JP Morgan's own estimates. But the team of analysts showed little concern given the company's strong government support.