Emaar Properties upgraded to ‘BBB+' on strong business performance; outlook stable
S&P Global on Monday raised the ratings of Emaar Properties, Dubai's largest listed developer, to 'BBB+', with a stable outlook.
'The upgrade reflects the significant growth Emaar experienced in Dubai residential real estate, along with the steady performance of malls, hospitality, and entertainment that lends resilience to the cyclical development business,' the ratings agency said in a report.
Emaar's revenue backlog hit a record-high Dh110 billion on Dec. 31, 2024, spurred by the solid performance of its domestic residential real estate development. Emaar's credit ratios remained strong as revenue grew 33 per cent and earnings before interest, taxes, depreciation and amortisation (Ebitda) 12 per cent in 2024. The company was in a net cash position with no leverage, with Dh19.1 billion of discretionary cash flow (DCF).
'We expect strong operating cash flow in 2025-2026, supported by healthy demand and a strong balance sheet despite growing capital expenditure (capex), dividend payments, and the cyclical nature of real estate development in Dubai, which is experiencing peak cycle conditions,' the report, co-authored by analysts Sapna Jagtiani, Fares Shweiky and Pierre Gautier, said.
S&P expects strong revenue growth to continue in 2025-2026 with adjusted Ebitda margins of 42 per cent-45 per cent, which will support Emaar's financial metrics despite rising capex and dividends.
The ratings agency noted that Emaar benefits from positive real estate trends in Dubai, where it is by far the largest developer. It successfully capitalises on its solid reputation, having delivered over 74,400 units over its history. With 42,003 units under development (including in joint ventures) which are already 93 per cent presold, the company is expected sustain its strong market position and capture the bulk of interest from international buyers in Dubai's real estate thanks to its well-established brand and good asset quality, sustaining better pricing power than other players.
The high level of backlog provides increasing visibility of revenue recognition for the next two years. 'We understand prominent and well-established developers can collect full cash during the construction phase (that is, no post-handover payments) and on handover for recent projects. Cash collection now happens faster, with 70 per cent-80 per cent collected during the construction phase and the rest on handover. We think this allows developers to de-risk construction much faster and alleviates working capital pressure, reducing funding requirements. Such features should structurally support the group's resilience during future down cycles and played an important role in our decision to upgrade, as we acknowledge we are now in a supportive stage of the real-estate cycle in Dubai,' the analysts wrote.
Dubai residential real estate market has experienced strong growth, led by continued demand from residents and international investors. S&P expects Dubai's economy to remain supportive, with GDP growth staying near 3 per cent on average over 2024-2027. The city's population — not including workers commuting to Dubai — increased to 3.7 million at year-end 2023, according to the Dubai Statistics Centre. S&P expects property prices will remain stable over the next 18 months, then possibly normalise due to increasing supply. 'We think Dubai remains an attractive business and residential destination, given that it offers low taxation despite the introduction of a 9 per cent corporate tax starting June 2023, has adopted a series of more liberal social laws, and enjoys the reputation as a safe haven in the region,' the report said.
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