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18 July 2024

Applause for EFG’s perfect timing

By Frank Kane


Congratulations to EFG-Hermes on a shrewd and well-timed bit of broker research with the publication on Monday of its latest note on property heavyweight Emaar, the Dubai developer run by Chairman Mohammad Ali Alabbar.

As EFG explains in its analysis, Emaar provided guidance for investors in a conference call on January 24, but the broker was the first to react in print with the release of the research, entitled “Lower Guidance for 2008”.

In a dry, stockbrokerish kind of way, that sounds rather vague and bland. But EFG quickly put some detail on the subject. In fact, it is a case of fine-tuning, rather than dramatic downward revision.

Revenue and net profit will be flat in 2008 compared with last year, Emaar told investors, but pre-operating expenses and in hotels and malls and higher marketing costs will drag down earnings.

There was good news too. The IPO of Emaar’s India venture MGF is still expected to take place next month, though maybe at the lower end of market valuations, perhaps at $15 billion (Dh55bn). And the EFH long-term recommendation still marks EFG a “buy”, even if short-term it is lowered to “accumulate”.

On the 2008 forecasts, the price-earnings ratio is 10.6 (or at least it was before yesterday’s fall), which is still pretty healthy for a global property company in the present economic climate. Many competitor companies in real estate are struggling with exposures from the sub-prime crisis, but so far Emaar has not been seriously affected by these problems.

EFG clients will be grateful for such speedy and accurate information on which to base their investment decisions. It is exactly the way such important and price-sensitive material should be handled in a professionally organised stock market.