Renowned property developer in Dubai, DAMAC Properties reported a fall of 94% in the net profit of the 2019 first quarter on Wednesday last week. The company went public in 2015, and seems that it’s profit has been hurt by Dubai’s slumping property market.
Damac Hills is the only developer that owns and operates the Trump branded golf club in UAE and whole Middle East region. The company officially said that its net profit in the first quarter of the 2019 fell to 31.1 million dirhams from 483.9 million dirhams in first quarter of 2018.
Damac recorded a fall in both, revenues and net for the first quarter of 2019. The fall totals Dh896 million in revenues and Dh31 million in net profit. The figures can be compared with Dh1.9 billion loss in revenues and Dh484 million loss in net profit previous year.
After the official statement, DAMAC shares fell 2.2% in afternoon trade. The shares of the company fell 40% this year compared to a gain of 2.3% in Dubai index in the first quarter of previous year. Dubai property prices have fallen overall since mid of 2014 because of the fall in oil prices and muted sales.
Analysts expects that the downward trend will continue this whole year, with residential property prices expected to fall 5-10% more due to a continuous gap between supply and demand in the market. It is expected to get stable in 2020.
Experts warned DAMAC that it was likely to face challenges in the coming months with strong competition from other developers and emphasized on needs to conserve cash for debt repayments.
The company’s off plan Dubai 2019 sales for the properties which are not yet completed were also less than its primary rival ‘Emaar Development’ in the same quarter. DAMAC reportedly made sales of 1.2 billion dirhams in the first quarter which is a 26% fell from previous year.
However, it’s debt repayments in tough market conditions are still strong. DAMAC paid $272 million back in sukuk or Islamic bonds in April this year and $125 million in September last year, which shows a positive sign of the developer’s financial health.
Head of investor relations at DAMAC, Amr Aboushaban said, “In a period of six months, amid difficult market conditions, we paid back $400 million of debt …That is a strong statement,”. The company had around AED 1.8 billion in cash at the end of the first quarter.
An analyst at Arqaam Capital, Mohammad Haider said in a note “We see zero catalysts for DAMAC over the next 3 years, as the company will likely reserve all cash to repay its 2022/23 sukuk,”. He further stated, “We expect Damac not to pay dividends until all sukuks are repaid.”
At the end of the first quarter of 2019, the company had almost AED 4.3 billion in outstanding sukuk, while the bank debt stood at AED 693 million. Lets see how DAMAC turn the tables around in coming days.