Emaar Malls: P&L exhibits growth in Q3
​Emaar Malls: P&L exhibits growth in Q3, but we see limitations to base rent growth in FY 17e+ as occupancy cost ratio in Dubai Mall reaches 17% in FY 16eÂ
- ​Q3 revenues are up 8% y/y on higher rent/GLA, but slightly down q/q (-1%), most likely on lower contributions from turnover rents. Margins are highest in MENA at 84% GPM, and positioned for more upside in-line with growth in rentsÂ
- But OCR’s are testing their upper bound limits at 17% in Dubai Mall (on FY 16e full rentals). We thus believe that a pick-up in retail spend in Dubai is crucial for the continuation of the ‘base rent’ growth formula (+7%/annum), but this is unlikely to occur in FY 17e, in our view
- Consumer spending will likely worsen in the coming 12 months (especially for Saudi and Chinese buyers), and this would drive OCR up to ~20%, which we find expensive for the region (compared to 14% in Europe, 18% Singapore)
- Dubai Mall expansion is delayed until Q4 17e, and is only 50% pre-leased to date.
Established in 2007, Arqaam Capital is a specialist emerging markets investment bank, bringing regional and international product offerings to the emerging markets. Arqaam Capital combines international best practice with expertise in the markets in which we operate. Our primary role is to provide financial intermediation and create investment opportunities for frontier and emerging markets investors looking to invest in their own markets and abroad, as well as international investors seeking opportunities in target frontier and emerging markets. Arqaam Capital is headquartered in the Dubai International Financial Centre (DIFC), with additional offices in Libya, Lebanon, Egypt, and South Africa.
Arqaam Capital's research platform provides the largest coverage footprint of MENA equities and one of the largest on the African continent with a total of 300 stocks under coverage. Arqaam Capital is ranked as one of the leading research providers in the region - a reflection of its broad coverage universe, its in-depth and high quality research, as well the compelling investment ideas that the team generates. The analysts closely analyze their sectors and issue in-depth company and sector research while the strategy team connects the micro with the macro, focusing on index analysis, macroeconomics and strategy research.
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