        Contracted sales – AED301mn (-50.2% Y-o-Y, -19% Q-o-Q)
        Revenue – AED1,512mn (+8.5% Y-o-Y, -1.0% Q-o-Q, +3.5% vs. EFGe)
        EBIT – AED448mn (-7.0% Y-o-Y, -14.1% Q-o-Q, +0.3% vs. EFGe)
        Net income – AED421mn (-29.6% Y-o-Y, -5.7% Q-o-Q, -8.8% vs. EFGe)
 
Aldar Properties (Aldar) reported its financial and operating results for 3Q18. Contracted sales were down 50% Y-o-Y and 19% Q-o-Q due to soft market conditions, with the company selling 103 units during the quarter. Occupancy levels were stable across the investment portfolio, but fell to an average of 70% in 9M18 on the hospitality portfolio (74% in 1H18) and 88% for the residential portfolio (91% in 1H18). On the reporting side, revenues came roughly in line with our estimates, yet blended GPM was pressured by contracting margins from sales & development as well as slim margins from the hospitality business. Net income came slightly below our estimate (-c9%) and was down c30% Y-o-Y and 6% Q-o-Q, weighed by the margin contraction and a revaluation loss on investment properties. 
 
Highlights: 
        Contracted sales fell 50% Y-o-Y and 19% Q-o-Q to AED301mn, bringing 9M18 sales to AED1.3bn, and AED1.5bn up until October. Sales were driven by developments under construction, including Jahawer (AED44mn across six units), West Yas (AED85mn across 19 units), Yas Acres (AED40mn across 11 units) and Al Ghadeer (AED32mn across 67 units). Development sales revenue backlog came in at AED3.6bn in Sep 2018 with 77% of units launched being sold. The company launched 900 units for sale YTD.
 
        Stable occupancy rates, except for residential and hospitality portfolio. Residential occupancy was stable at an average of 88% in 9M18 (91% in 1H18); office, including International Tower, at 93% (91% in 1H18); Yas Mall 89% (89% in 1H18); Hospitality 70% (74% in 1H18). The company’s asset management portfolio delivered net operating income of AED381mn in 3Q18 (+6% Y-o-Y, +1.1% Q-o-Q).
 
        Revenue in line with our estimate, at AED1,512mn (+8.5% Y-o-Y, -1.0% Q-o-Q); the Y-o-Y increase was driven by stronger revenues from the sales and development segment (+4% Y-o-Y) and the asset management (+13.2% Y-o-Y). This brings total revenue in 9M18 to AED4,478mn (+3.9% Y-o-Y), with revenues from sales & development up 14.5% Y-o-Y, hospitality up 16.3%, investment properties up 4.5% and adjacent business and development management down 6.6% and 52.6%, respectively.
 
        Blended GPM down 4.1pp Q-o-Q to 38.8% (3Q17: 42.6%), due to contracting margins from sales & development (38.8% vs. 41.7% in 3Q17 and 45.9% in 2Q18), as well as slim margins from the hospitality business (0.1% vs. 0.9% in 3Q17 and -7.4% in 2Q18), which was affected negatively by losses at newly acquired hospitality assets.
 
        EBIT came in at AED421mn (+29.6% Y-o-Y, -5.7% Q-o-Q), mainly pressured by GPM; selling and marketing expenses were up c3.0% Y-o-Y and down 5% Q-o-Q.
 
        Net income c9% below our estimate, at AED421mn (-30% Y-o-Y, -6% Q-o-Q), as the quarter saw the booking of a revaluation loss amounting to AED39.9mn (AED39.4mn in 3Q17 and AED189.9mn in 1Q18) and other income of AED99.7mn (AED137.0mn in 3Q17 and AED202mn in 2Q18). Net income in 9M18 totalled AED1,537mn (-17.4% Y-o-Y), also weighed by total revaluation losses of AED269.7mn, compared to AED118.3mn in 9M17. 

Mai Attia
 
Aldar Properties (AD): AED1.70 as of 15 Nov. 2018, Rating: Buy, TP: AED2.81/share, MCap: USD3,642mn, ALDAR UH/ALDR.AD