Union Properties weighed down by profit slide

Union Properties — with a maturing development portfolio and new additions still some distance away — recorded a steep decline in first quarter profits to total Dh28.14 million from last year’s tally of Dh179.79 million. Total income for the period had dipped to Dh258.47 million from Dh404.38 million a year ago.

The developer’s share price reacted violently to the details, dropping 9.7 per cent to Dh1.21, on heavy volumes of 88. 63 million shares. The volatility looks set to continue on the counter, with the share already down 47.67 per cent over a 12-month period.

“Compared with other leading master-developers in Dubai, UP’s land bank is seen as relatively underweight, more so as most of its existing locations are already at a mature phase of development,” said one analyst. “This creates pressure when it comes to creating additional revenues. It’s also why UP, more than any other developer here, needs to acquire additional land bank, either in the UAE or outside. Again, the best option would be to do so through joint ventures, with the partner either bringing in the land or the cash to the deal.”

The developer is working towards that. At the recent annual general meeting, a top official had confirmed plans to get into one of the other emirates. A proposal for an entry into Saudi Arabia is before the board of directors and could be signed off shortly.

If one were to strip off the Dh103.3 million generated as ‘other income’ in the first three months of 2014, the current year’s set of numbers would not have paled in comparison. In Q1-15, other income only made up Dh4.34 million. There was also a drop in gain from sale of investment properties, to Dh68.01 million from the Dh77.79 million a year ago. Contracting and other operating activities fetched Dh142.82 million, from Dh197.37 million.

On the plus side, property management and sales revenues totalled Dh18.84 million, up from Dh15.72 million. It was also bolstered by a Dh16.54 million gain in property valuations.

According to some market sources, Union Properties’ best chance for a medium-term recovery would be to develop new projects in Dubai itself. This is where its track record of developing some of the best rated “liveable” communities such as Green Community, Uptown Mirdif and Motor City can come in handy.

“UP should consider strategic tie-ups to rebuild its revenue stream rather than focus exclusively on long-gestation period projects in Saudi Arabia or smaller ones in the other emirates,” the source said.



Source: Manoj Nair, Associate Editor, gulfnews.com


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