UAE's Leading real-estate developers, EMAAR Properties PJSC profile and investment prospects

1. Company Profile
By Imran Almaleh
CFA LII Candidate
BSBA Finance & Banking

2. EMAAR Properties PJSC
• Public Joint Stock Company (PJSC) listed on DFM, Established
in 1997 with a capital of AED 1 bn.
• Emaar Properties is currently the region's largest land and real
estate developer.
• In 2007, the government of Dubai, through the Investment
Corporation of Dubai, took a 32% equity stake in Emaar by
exchanging land for 28 billion AED worth of stock.
• Activities:
– property investment and development
– property management services
– education, healthcare, retail and hospitality sectors
– investing in financial service providers
2/24/2014 2EMAAR Profile - By Imran Almaleh

3. Real
estate ,
55.65%
Leasing
and
related
activities ,
30.36%
Hospitality
, 13.99%
Revenue Structure (as of 9 month ending Sep-2013)
Domestic
, 89%
International
, 11%
Total Revenue (‘000) AED 7,565,784
EMAAR Properties PJSC
2/24/2014 3EMAAR Profile - By Imran Almaleh

4. Financial Summery
2/24/2014 4EMAAR Profile - By Imran Almaleh
Key Financial Ratios 2013E
Total Debt 11,059.7 Total Debt/Capital 24.24%
Minority Interest 271.8 Total Debt/EBITDA 3.24
Equity 34,288.3 ROE 6.89%
Total Capitalization 45,619.8 Debt/Equity 32.25%
Standard P&L (AED mn) 2009 2010 2011 2012 2013E 2014E 2015E 2016E
Sales 8,413.3 12,150.3 8,112.3 8,239.9 8,252.4 10,420.5 12,429.7 15,519.7
%Growth 44.42% -33.23% 1.57% 0.15% 26.27% 19.28% 24.86%
EBITDA 3,190.3 4,048.1 3,290.9 3,336.0 3,416.2 3,979.2 4,756.6 5,584.0
%Growth 26.89% -18.70% 1.37% 2.41% 16.48% 19.53% 17.40%
%Margin 37.92% 33.32% 40.57% 40.49% 41.40% 38.19% 38.27% 35.98%
Depreciation (635.7) (804.6) (762.5) (767.2) (755.0) (753.2) (749.7) (872.0)
Operating income (EBIT) 2,554.6 3,243.5 2,528.5 2,568.7 2,661.2 3,226.0 4,006.9 4,712.0
%Growth 26.97% -22.05% 1.59% 3.60% 21.22% 24.21% 17.60%
%Margin 30.36% 26.69% 31.17% 31.17% 32.25% 30.96% 32.24% 30.36%
Net interest income/(expense) 139.0 (90.0) (169.9) (361.0) (379.0) (200.1) 51.6 226.8
Pre-tax profit 2,159.2 2,723.0 2,127.3 2,111.2 2,356.5 3,187.7 4,158.7 5,142.4
Effective tax rate 80.4% 0.1% (2.6%) 0.2% 0.3% 0.3% 0.3% 0.3%
Provision for income taxes (1,736.9) (1.6) 54.7 (4.2) (6.7) (8.8) (11.8) (14.4)
Minorities 37.9 (28.8) (124.0) 12.2 13.6 18.4 24.0 29.7
Net income (post-exceptionals) 2,089.2 2,448.2 1,793.9 2,119.1 2,363.5 3,197.2 4,170.8 5,157.6
%Growth 17.18% -26.72% 18.13% 11.53% 35.28% 30.45% 23.66%
%Margin 24.83% 20.15% 22.11% 25.72% 28.64% 30.68% 33.56% 33.23%
EPS (AED) 0.08 0.44 0.34 0.35 0.39 0.52 0.68 0.85

5. Stock Price 24-2-2014 8.77
Premium/(Discount) to 52 Week High 9.13 (3.9%)
52 Week Low 5.04 74.0%
52 Week Average 7.09 23.8%
Number of Shares Outstanding (mn) 6,317
Total Equity Value (mn) AED 55,400
Plus: Total Debt AED 12,055
Less: Cash (AED 7,770)
Total Enterprise Value AED 59,685
Total Enterprise Value as a Multiple of: Amount (AED, mn) Multiple
Net Revenue 2013E 8252.44 7.2X
2014F 10420.50 5.7X
2015F 12429.71 4.8X
EBITDA 2013E 3416.23 17.5X
2014F 3979.24 15.0X
2015F 4756.58 12.5X
EBIT 2013E 2661.21 22.4X
2014F 3226.00 18.5X
2015F 4006.88 14.9X
Current Share Price as a Multiple of:
EPS 2013E 0.39 22.6X
2014F 0.52 16.7X
2015F 0.68 12.8X
Current Trading Statistics
2/24/2014 5EMAAR Profile - By Imran Almaleh

6. Trade 937
Value 150,869,564
YTD Change % 14.79%
Price 8.77
Previous 8.85
Change % -0.90%
Volume 17,347,972
EMAAR Stock Performance
2/24/2014 6EMAAR Profile - By Imran Almaleh

7. 1 Year Relative Historical Performance
2/24/2014 7EMAAR Profile - By Imran Almaleh

8. 5 Years Relative Historical Performance
2/24/2014 EMAAR Profile - By Imran Almaleh 8

9. Analysis of Shares Traded (1 Year)
2/24/2014 EMAAR Profile - By Imran Almaleh 9
0.48%
55.82%
19.09%
14.84%
9.78%
<= 5.07 5.08 - 6.04 6.05 - 7.01 7.02 - 7.98 7.99 - 8.95
%TradedVolume
Price Range

10. Forward PE ratio
2/24/2014 EMAAR Profile - By Imran Almaleh 10
8.0X 8.7X 9.2X
22.6X
16.7X
12.8X
10.4X
12.7X
2010 2011 2012 2013E 2014E 2015E 2016E 2017E
PEEMAAR PE
Dubai Financial Market* PE ratio
Current P/E Ratio 89.63
Estimated P/E (12/2014) 52.29
* We used the DFM stock as an approximation for the market index

11. VALUATION CONSIDERATIONS

12. Summery of EMAAR Valuation
2/24/2014 EMAAR Profile - By Imran Almaleh 12
4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00 24.00 26.00 28.00
Analyst Estimate
DCF - EBITDA
Multiple
DCF - Perpetual
Growth
Revineu Multiple
EBITDA Multiple
EBIT Multiple
PE Multiple
52 weeks High - Low
Methodology
Current Stock Price
11.8 14.8
11.6 13.7
7.7 17.7
15.6 22.8
15.2 26.7
11.4 15.7
9.2
9.2
5
1612

13. Analysis of Selected Comparable firms
2/24/2014 EMAAR Profile - By Imran Almaleh 13
Enterprise Value as a Multiple of
Stock Price as a
Multiple of
Equity Enterprise Revenue EBITDA EBIT Earnings per Share
Company Value Value 2012A 2013E 2014P 2012A 2013E 2014P 2012A 2013E 2014P 2012A 2013E 2014P
Arabtec 15,132 20,346 3.6X 2.9X 2.1X 52.6X 32.6X 23.7X 188.4X 58.1X 38.0X 68.9X 43.8X 32.1X
Deyaar 7,685 9,741 17.6X 13.5X 12.8X 97.4X 34.1X 62.4X 103.7X 34.4X 64.1X N/A 44.3X 66.5X
Drake & Skull Industries 3,953 7,334 2.2X 1.5X 1.3X 37.0X 39.0X 18.9X 62.2X 39.0X 24.3X 43.3X 24.7X 19.2X
Union Properties 7,003 13,306 8.1X 3.0X 5.9X 113.7X 81.1X 71.5X 135.4X 88.7X 44.5X 41.6X 4.4X 52.0X
EMAAR 57,594 63,397 7.7X 6.1X 6.3X 20.7X 18.6X 17.7X 27.6X 23.4X 22.3X 26.0X 21.7X 22.2X
HIGH 17.6X 13.5X 12.8X 113.7X 81.1X 71.5X 188.4X 88.7X 64.1X 68.9X 44.3X 66.5X
AVERAGE 7.9X 5.2X 5.5X 75.2X 46.7X 44.1X 122.4X 55.1X 42.7X 51.2X 29.3X 42.5X
MEDIAN 5.8X 2.9X 4.0X 75.0X 36.5X 43.1X 119.6X 48.6X 41.2X 43.3X 34.3X 42.1X
LOW 2.2X 1.5X 1.3X 37.0X 32.6X 18.9X 62.2X 34.4X 24.3X 41.6X 4.4X 19.2X

14. Analysis of Selected Comparable firms
Shares Outstanding 6,317 Net Debt 5,803
Implied Enterprise Implied Equity Implied Price
Statistic Multiple Range Value Value Per Share
Revenue
LTM 8,240 7.0X 15.0X 57,679 123,599 51,876 117,796 8.21 18.65
2013 10,328 5.0X 12.5X 51,640 129,100 45,837 123,297 7.26 19.52
2014P 9,992 5.5X 10.0X 54,956 99,920 49,153 94,117 7.78 14.90
Range 7.75 17.69
EBITDA
LTM 3,061 40.0X 50.0X 122,440 153,050 116,637 147,247 18.46 23.31
2013 3,406 35.0X 45.0X 119,210 153,270 113,407 147,467 17.95 23.34
2014P 3,588 20.0X 40.0X 71,760 143,520 65,957 137,717 10.44 21.80
Range 15.62 22.82
EBIT
LTM 2,294 62.2X 119.6X 142,586 274,248 136,783 268,445 21.65 42.50
2013 2,709 34.4X 48.6X 93,249 131,584 87,446 125,780 13.84 19.91
2014P 2,841 24.3X 41.2X 69,036 117,049 63,233 111,246 10.01 17.61
Range 15.17 26.67
Earnings per
Share
LTM 0.35 40.0X 43.3X 5,803 94,241 88,438 95,734 14.00 15.16
2013 0.42 29.3X 34.3X 5,803 83,540 77,737 91,003 12.31 14.41
2014P 0.41 19.5X 42.5X 5,803 56,308 50,504 110,074 8.00 17.43
Range 11.43 15.66
2/24/2014 EMAAR Profile - By Imran Almaleh

15. Discounted Cash-flow Analysis
(AED '000,000, except per share data)
2013 2014 2015 2016 2017
EBITDA 3,406 5,467 7,745 11,355 17,210
EBIT 2,651 4,484 6,451 9,591 14,720
Less: Cash Taxes @ 1.02% (27) (46) (66) (98) (150)
Tax-effected EBIT
(NOPAT)
2,624 4,438 6,385 9,493 14,570
Plus: Depreciation 755 983 1,294 1,764 2,490
Less: Capital
expenditures
(717) (678) (678) (698) (690)
Less: Change in net
working capital
2,676 (136) 1,151 (4,447) (2,535)
Unlevered free cash flow
5,338 4,607 8,153 6,113 13,834
WACC @ 16.0%
NPV of Unlevered free cash flow @ 16.0% 23,189
EBITDA MULTIPLE METHOD
Terminal Value Undiscounted Discounted
Implied
Perpetual
Growth Rate
EBITDA Multiple Low 6.0x 103,259 56,962 1.69%
Hi 8.0x 137,679 75,949 4.93%
DCF Range (Implied Enterprise Value) 80,151 99,138
Equity Value 74,348 93,335
Implied Price per Share 11.77 14.78
PERPETUITY GROWTH METHOD
Terminal Value Undiscounted Discounted
Implied
EBITDA
Multiple
Perpetuity Growth
Rate
1.5% 101,746 56,127 5.9x
4.0% 125,909 69,456 7.3x
DCF Range (Implied Enterprise Value) 79,316 92,646
Equity Value 73,513 86,842
Implied Price per Share 11.64 13.75
2/24/2014 EMAAR Profile - By Imran Almaleh

16. WACC Calculations
Actual Estimated
2010 2011 2012 2013
Net Debt to Equity Ratio 19.57% 26.13% 14.72% 16.79% Capital Structure
Average 19.31% Debt 16.18%
Equity 83.82%
(AED
'000,000)
Actual Estimated
2010 2011 2012 2013
Interest Expence (355) (562) (705) (746)
Net Debt Outstanding 6,127 8,256 4,832 5,803
Cost of Debt 5.79% 6.81% 14.59% 12.85%
Average 10.01%
Tax rate 1.02%
After-Tax Cost of Debt 9.91%
Beta 1.26
Risk free rate 2.50%
Equity Risk Premium 11.68%
Cost of Equity 17.22%
WACC 16.03%
2/24/2014 EMAAR Profile - By Imran Almaleh 16

17. References
• 4-traders.com
• Aljazira Capital EMAAR initiation report 2012
• Asma.info
• Bloomberg.com
• Dfm.ae
• EMAAR Annual, Semi-annual financial Reports
• Goldmen-Sachs Quantum: EMAAR (Dec-19-2013)
• Gulfbase.com
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