Analyst says increase in dividends should support the stock on the near term, maintains a buy recommendation
Shares in Aldar Properties surged on Thursday as the company announced a rise in fourth quarter (Q4) 2018 earnings and higher dividends for 2018.
Aldar’s Q4 2018 earnings amounted to 318.8 million UAE dirhams ($86.8 million),a 125.5 percent year-on-year (y-o-y) increase on the 141.4 million UAE dirhams profit made in Q4 2017.
The company proposed a cash dividend of 14 fils per share for 2018, subject to the approval of its general assembly meeting, compared to a cash dividend of 12 fils per share for 2017 - a 16.6 percent increase.
Ayub Ansari, senior analyst at SICO, said in a note that the “dividend payout (adjusting for revaluation losses) also improved from 36 percent in 2017 to 44 percent in 2018”.
“The higher payout reflects stable cash flows from (Aldar's) asset management portfolio as well as improvement in cash generation from the property development segment on increased project handovers in 2018,” Ansari added.
Aldar’s full year 2018 net profit attributable to shareholders amounted to 1.86 billion UAE dirhams, compared to 2 billion UAE dirhams for the full year 2017, a 7 percent drop.
The company’s stock rose 11.49 percent on Thursday to close at 1.65 UAE dirhams, and was the second-best performer on the exchange (behind Fujairah Building Industries), pushing Abu Dhabi’s index to close 0.19 percent higher. Since the start of 2019, Aldar’s shares have gained in value by 3.13 percent.
SICO’s Ansari said that “the increase in 2018 dividends is positive and could be (a) near term trigger for the stock.”
SICO maintains a 'buy' rating on Aldar, with a target price of 2 dirhams per share. Ansari said the stock is only trading at around half of its price-to-book value ratio and at a dividend yield of 10.1 percent.
The company’s property development and sales segment recorded a loss of 16 percent year-on-year in Q4 2018, SICO’s calculations showed, while the investment property portfolio segment recorded a 9 percent loss, but the hospitality and leisure segment recorded a 19 percent profit.
Ansari said that the property development segment performance was broadly in line with expectations, but the investment properties segment’s revenue (6 percent y-o-y drop) and gross profit were lower than forecast, and the hospitality segment’s revenue (31 percent y-o-y increase) was ahead of SICO’s forecast.
According to data from Eikon, four analysts have a 'strong buy' rating on Aldar’s stock, while five analysts have a ‘buy’ rating, one analyst has a ‘hold’ rating and one analyst recommended a ‘sell’.
Elsewhere in the region, Dubai’s index rose 1.65 percent on Thursday, Saudi Arabia’s index edged 0.11 percent higher, Qatar’s index dropped 2.35 percent, Kuwait’s premier market index dropped 0.89 percent while Oman’s index edged 0.13 percent lower and Bahrain’s index edged 0.15 percent lower.
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