Aldar Properties PJSC, the Abu Dhabi developer that was bailed out by the government last year, had its 2014 bonds rated buy at UBS AG on “marked improvement” in financial results and its proposed merger with a smaller rival.
“We believe the bonds do have room to tighten from here,” analysts Kathleen Middlemiss, Tatiana Boroditskaya and Emmy Al-Ghabra wrote in a note dated Aug. 10. “We also forecast continued deleveraging from the group and sustained cash flow which could also warrant an upgrade from the rating agencies.”
Aldar said last week second-quarter profit more than tripled to 418 million dirhams ($114 million) as revenue increased. The company, which received 36 billion dirhams in government support in 2011 after the emirate’s property market slumped, is exploring a merger with Sorouh Real Estate Co. Talks, supported by Abu Dhabi’s government, may take months, the companies said in June.
“The merged entity should benefit from improved credit profile as well as continued support from government,” UBS said. Aldar’s management at a call reiterated its development capital expenditure guidance at 5 billion dirhams to 6 billion dirhams for the next 18-24 months as well as its guidance for net recurring revenue at 1.1 billion dirhams to 1.2 billion dirhams by the 2014-2015 financial year, according to the research note.
The yield on Aldar’s 10.75 percent $1.25 billion bonds maturing in May 2014 has tightened 63 basis points this year to 5.18 percent on Aug. 10, according to data compiled by Bloomberg. The shares have surged 36 percent in 2012 compared with a 5.9 percent gain for the benchmark ADX General Index.