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Economical Analysis for Emaar Properties

Project Report 2009 19 Pages

Business economics - Miscellaneous

Excerpt

INDEX

1. Executive Summary

2. Introduction
2.1 Mission
2.2 Vision

3. Business Activity
3.1 Dubai’s Property Market

4. Financial Performance Analysis
4.1 Emaar’s Revenue Analysis
4.1.1 Factors Affecting Emaar’s Revenue
4.2 Emaar’s Net Profit Analysis
4.2.1 Factors Affecting Emaar’s Net Profit

5. Price Analysis
5.1 Factors affecting Price
5.1.1 Demand
5.1.2 Return on Investment
5.1.3 Supply
5.1.4 Tax Free Income
5.1.5 Increasing Population with increasing Traffic
5.1.6 Rising Building Costs

6. Situational Analysis and Future Forecast
6.1 Global Financial Crisis
6.2 Visa Rules
6.3 Stock Market Downfall

7. Future Forecast
7.1 Impact on Emaar

8. Conclusion

9. References
9.1 Web References
9.2 Books References
9.3 Journal References

1. Executive Summary

The report sets out economic analysis of Emaar properties one of the largest property developers in the world on the basis of supply / demand principles affecting prices that affects subsequently the entire performance of the firm.

Document covers Emaar’s outstanding financial results over the last three years in the property market and reasons behind its success. It also states the current downfall situation with factors causing the change towards the decline and the forecast for the future based on the likely trends and the market conditions.

It also explains the factors of the impacts in each section with justification on the assumptions made to derive them.

2. Introduction

Emaar Properties real estate developer based in Dubai was incepted in 1997 with par to city’s growth by an objective to capitalize over the tremendous housing demand in UAE market. Emaar offerings of supplying high quantity of apartment provided homebuyers' full range of options to cater their needs.

With its accomplishments over the years, Emaar Properties (PJSC) is now become one of the leading real estate companies in the world. It is listed on the Dubai Financial Market as a Public Joint Stock Company and also a part of Dow Jones Arabia Titans Index. The growth of the company reflects the strong demand of residential properties in Dubai, and the resultant increase in associated prices. Emaar has also managed to diversify its development activities by building hospitals, shopping malls, education centres, and financial institutions. (Emaar Properties, 2008)

2.1 Mission

Emaar has a mission “to transform into a one-stop, global solution provider for lifestyle, including homes, work, play, leisure, retail, health, education, finance, industry and more.” (Emaar Properties, 2008)

Starting from UAE the company expanded its operations in the following 16 countries to cover the global property market demand.

In 2004, Emaar had split its share's value from AED 10 to AED 1 per share to improve and shield the shareholders interests towards the company. By July 2005, Emaar equity capital got doubled as the shares were affordable to the investors at a nominal price. (Emaar Properties, 2008)

2.2 Vision

Its vision is “to transform into one of the most valuable lifestyle developers in the world beyond real estate development.” (Emaar Properties, 2008)

3. Business Activity

Emaar primary business activity is to purchase land attain all the required Government approvals, design and develop that land in to freehold development real estate apartments in the market.

Emaar was one of the initial developers who started the property sale on freehold to expats in Dubai. Emaar’s total estimated share of land in Dubai itself is c235m Square metres. Government of Dubai owns 32% of Emaar real estate developers.

3.1 Dubai’s Property Market

Emaar’s focus and its base has been Dubai market, Dubai being a global hub has a lot of demand for property. It is considered to be fastest growing city than any other globally both in percentage and fixed terms. There is an estimation of about 50,000 visitors transiting in Dubai every week. Due to the high need for rental properties the demand has been inelastic. Every year there is average increase of 25-40% in the rents.

As published in Gulf News “Dubai government has capped the annual rent increase at a maximum of seven per cent on all properties” (Ashfaq, 2007). Even after the rent cap, residents are still facing issues as the landlords resist in renewal of existing contracts as they get the new tenants for almost 50 to 60% higher rents.

Higher rents tend to make property investment attractive which in turn is boost the demand for freehold apartment. Residents in rental apartments usually get fed up and are attracted towards buying options which has been an additional advantage to Emaar over the years.

Another important factor is the foreign inflow investments. UAE being a tax free country the investor’s capital are not taxed and the expats were given a 99 years of residency on every purchase of free hold which was a factor of huge investments in the property market initially and high returns to Emaar.

4. Financial Performance Analysis

Below table demonstrate the highlight of Emaar’s financial performance over past three years.

Abbildung in dieser Leseprobe nicht enthalten

Source: SUMMARY ANNUAL REPORT of Emaar Properties

As the table indicates Emaar has been performing substantially well in terms of financials from the last 3 years. Following are further analysis on each item with the factors influencing them.

4.1 Emaar’s Revenue Analysis

Abbildung in dieser Leseprobe nicht enthalten

Source: SUMMARY ANNUAL REPORT of Emaar Properties

As per the above graph Emaar has grown tremendously in terms of revenue over the last three years. In 2005 the revenue of the company was $ 2,276 Million which rose to $3,813 Million in 2006 and in 2007 it was $4,782 Million. This corresponds to almost a growth rate of 48% in three years in terms of revenue.

4.1.1 Factors Affecting Emaar’s Revenue

Following are some factors which were the reasons for Emaar’s growth in terms of revenue.

International expansion: Emaar’s expansions globally have contributed to the increment in the total revenue for the company. Emaar has a presence in a total of 16 countries across the globe which adds up to the company’s revenue. Emaar by its expansion has increased its total supply which in turn has given positive results in the total revenue.

Abbildung in dieser Leseprobe nicht enthalten

Source: SHUAA Capital, Equity Research Article

Business Diversification: Emaar has diversified its development activities in building malls, hospitals, financial institutions and education centres increasing the total amount of projects catered in the past three years. Due to increase in business activates with diversification, Emaar has been able to generate the increase in the total revenue in the last three years.

Favorable Market Conditions: The demand for housing supply has favored Emaar in its revenue. Increasing rent and attractive options from Emaar for property ownership has pulled the buyers attention impacting positively in their revenues. With its consistent growth in the region, Emaar has been able to maintain its brand image further impacting it revenues over the past three years. Dubai Government own 32% of Emaar equity due to which it has all the strategic location in its huge increasing land bank as shown below.

Details

Pages
19
Year
2009
ISBN (Book)
9783640271429
File size
865 KB
Language
English
Catalog Number
v121964
Institution / College
University of Wales, Newport, – Thinc College
Grade
71
Tags
Emmar aamir dawawala economic analysis dubai UAE emmar research

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Title: Economical Analysis for Emaar Properties