ANALYST CERTIFICATIONS AND REQUIRED DISCLOSURES BEGIN ON PAGE 07

Aldar Properties PJSC (ALDAR)

Moderate Top-line Growth, While Profit Margin Felt the Heat. Aldar Portfolio Continue to Outperform Wider Abu Dhabi Market. Rating Retained at Overweight. Fair Value Estimate at AED3.31 Per Share.

Recurring Business

Yas Mall trading occupancy stabilized at

98% with no notable change QoQ.

Hotel occupancy rate dropped by 6%

during the first half of 2016, resulting in a

net loss for the segment of AED20.5mn in

2Q16 vs. a profit of AED8.9mn in 1Q16.

93% occupancy across office portfolio

slightly lower than 97% in 1Q16 and yet

higher than 2015. Thanks to Daman House

acquisition.

New School (Repton School) to be added

in 2017 to the Company’s Portfolio.

S&P: upgraded Aldar to BBB/STABLE from

BBB-/POSITIVE.

Property Sales and

Development Business

Strong off-plan sales to provide more

visibility for the future.

2Q16 revenues were supported by two

(2) plots sales in Shams Abu Dhabi

(lifted revenues by AED524mn).

Gross margin for the quarter ahead of

our full year estimated margin and

400bps above 1Q16.

Launch-to-Sales ratio increased by

400bps from 70% in 1Q16 to 74% at the

time of this report.

Market Data, Last trade as of 09 June 2016

Market Code:

Bloomberg Code:

Reuters Code:

ALDAR

ALDAR UH

ALDR.AD

Sector Property

Last Price (AED) 2.81

One Day Price Change (%) (0.71)

30d Average Daily Volume 8,952,887

52w High Price (AED) 2.99

52w Low Price (AED) 1.87

Market Capitalization (AEDbn) 22.094

Key Data (based on 09 June 2016 Market Price)

Shares Outstanding (bn) 7.86

Forward PE Ratio (x) 8.35

Price to Book Ratio (x) 0.94

Dividend Yield (%) 3.53

(ROE) Return on Equity ( %) 11.22

Interim Results: Three month ended

(AED mn) 30-June-2016 30-June-2015 % Δ

Revenue 1,696 1,106 53%

Gross Profit 693 494 40%

Finance Cost -59 -62 -4%

Net Profit 654 601 9%

(AED mn) 30-June-2016 31-Dec-2015 % Δ

PPE 3,000 2,936 2%

Cash Balances 5,571 6,260 -11%

Sukuk 2,757 2,755 0%

Bank Borrowings 3,196 3,191 0%

Wednesday, August 10, 2016

Equity Research Update:

Aldar Properties PJSC (ALDAR)

Source: Market Data, courtesy of Bloomberg

Model Update:

We updated our model to reflect material changes in value drivers as of 30 June

2016. In that respect, we took into account the recent pressure on net margin,

specifically for the segment of hospitality and leisure. We also fine-tuned main fair

value drivers to reflect marginal changes in Aldar’s investment properties’

performance, and the better-than-expected margin on sales and development

segment. And last but not least, our estimates were adjusted to reflect cover latest

pressure on Aldar Investment Properties, as well as strong off-plan sales across

several projects.

Rated Overweight, Fair Value Set at AED 3.31 vs. AED3.20 in The Last

Update.

We retain our rating on Aldar with an overweight stance. Our TP of AED 3.31 share

offers 17.84% upside to current price level. We have used the SoTP methodology to

arrive at our TP, with Investment Properties and the Adjacent business contributing

the highest 70% to our Enterprise Value, followed by the Company’s existing and

future development projects at 20%.

Al Ramz Takeaway on 2Q16 Financials:

Mixed results exhibit the cyclicality of the business and current market conditions.

There are lot of developments to be watchful for in the upcoming quarters.

However, we still strongly believe that Aldar’s outlook remains favorable. The

hospitality business came under pressure, while the sales and development

segment was boosted by plot sales. Finally, we think that the school business is one

area where the Company can add value, giving a promising outlook for the sector.

Potential Challenges:

As we anticipated in our pervious investment updated on Aldar (dated 08 June

2016). Hotel revenues per room and occupancy rate came under pressure, hence

this segment may continue to be of prime concern to Aldar, at least in the

foreseeable future.

In Abu Dhabi, the average occupancy rate according to JLL’s most recent report

stabilized YoY. However, with supply set to increase by ~11% in the second half of

2016 and RevPAR trending downward, due to the decrease in corporate demand,

Aldar’s hotel portfolio might suffer further. Although the quality of the room is

important, competition is very high. Generally speaking, tourists-the main arrivals

on the island nowadays– tend to have lower spending compared to corporate

clients. Furthermore, the government of Abu Dhabi imposed a new 4% municipality

fee and a AED15 charge per night. All in all, these new fee and charges along with

current circumstances might drag the segment’s margin lower and may increase

rivalry among competitors.

In the aftermath of lower oil prices, the government of Abu Dhabi is set to be on a

relatively tight budget for the foreseeable future. Therefore, spending cuts may

likely continue with a possibility of spillover to the private sector. This, in turn,

might impose greater business challenges to achieve preset NOI targets.

Share Price Vs. Index

Equity Research Update ALDAR August 2016 Page 3

Sum of the Parts (SOTP) Valuation Summary

(AEDmn) Contribution in EV Notes

Existing and Future Development Projects 5,305.29 19.90% PV of cash flows from already launched projects

Operating Businesses 18,793.19 70.48% PV of cash flows from operating businesses

Associates and JVs 744.40 2.79% Valued at 80% of book value, as od 30 June 2016

Receivables from Government of Abu Dhabi 1,822.33 6.83% PV of future cash flows

Enterprise Value (EV) 26,665.21 (WACC)

Calculation

(Net Debt, as of 30 June 2016) (5,969.22) Risk-free Rate 3.8384%

(Minority Interest, as of 30 June 2016) (234.86) Beta 1.6029

Cash, as of 30 June 2016 5,570.52 Market Risk 6.2500%

Fair Value of Equity 26,031.64 Country Risk 1.0703%

Shares Issued 7,862.63 Cost of Equity 14.9266%

Fair Value per Share 3.31 Cost of Debt 3.7257%

Market Price, as of 09 August 2016 2.81 (WACC) 12.3226%

Potential Upside (Downside) 17.84%

ALDAR: Rating at overweight, Fair Value at AED3.31 per Share. We have valued Aldar stock using SOTP as the Company has different business models across segments. Our valu-

ation model includes the PV of EBITDA margin of 58% from recurring businesses, and an EBITDA margin of 34%

from launched property development projects and estimated value of its land bank. We have also factored in the

contribution from receivables from the government of Abu Dhabi, which will be received by 2016-17 and Aldar’s

investment in associates and joint ventures with 20% liquidity discount.

Share Performance and Catalysts: Aldar’s relatively undervalued stock price beckoned foreigners. According to Abu Dhabi stock exchange, the

net change in foreign ownership (EXCLUDING ARABS and GCC) has surged to 19.48% at the end of July 2016.

Representing an increase of ~53% compared to the same period during 2015. Along with other factors, the

increase in foreign demand might explain the recent upward trend in the price. YTD return is more than

AED1.00 which represents 21.12% gain as of the closing of 09 August 2016. Technically speaking, Aldar’s stock

price had benefited from the recent emerging market rally and broke some important technical levels. Foreign

participation is also underpinned by the Company’s strong operating and cash flow position. After several

attempts, share price finally broke the AED2.81 strong resistance level and reached a preset short-term

technical target of AED2.99 on 27 July 2016. Meanwhile, consolidation is taking place around the mentioned

levels. In the mid-term, the chances remain high for breaking the AED2.91 level.

Equity Research Update ALDAR August 2016 Page 4

Note on IFRS 16. Aldar has opted for the early adoption of IFRS 16, mandatory in January 2019. The impact of such an early adoption, will effect the policy of the Group in relation to its lease contracts. The new standard will mainly impact the treatment and the classifications of the cash flow not the cash flow itself. As a Lessee, the Company will have a single accounting model for all leases, with two exemptions: low-value assets and short-term leases. As a Lessor, the accounting treatment is substantially unchanged. However, the new standard will require additional disclosures. Finally, as we discussed there was no cash impact on Aldar’s income statement nor cash flow position as of 30 June 2016. Though direct cost went up by AED15mn, fair value and finance cost equally offset the mentioned increase.

Peer Comparison analysis: The Following Section is for Illustrative Purpose Only and It Is Not Included In Our Fair Value Calculation.

The following table on page (5) has been created using market data provided by Thomson Reuters as

of the closing prices of 09 August 2016.

Sl. No Tickers Company Name

1 EMAR.DU Emaar Properties PJSC

2 UPRO.DU Union Properties PJSC

3 DEYR.DU Deyaar Development PJSC

4 EMAA.DU Emaar Malls Group PJSC

5 DAMAC.DU Damac Properties Dubai Co PSC

6 MANZp.AD Manazel Real Estate PJSC

7 ESHR.AD Eshraq Properties Co PJSC

8 RPRO.AD RAK Properties PJSC

IMPLIE

D V

ALU

AT

ION

Curr

ency

Unit

ed A

rab E

mir

-ate

s D

irham

Date

8/9/2016

C

om

pany C

om

p S

et

Com

pany N

am

e

LT

M T

ota

l R

evenue

LT

M E

BIT

DA

LT

M E

BIT

N

TM

Revenue

NT

M E

BIT

DA

LT

M B

asi

c E

PS

NT

M E

PS

LT

M T

angib

le B

ook

Valu

e/S

hare

A

ldar

Pro

pert

ies

PJSC

5,2

28.6

8

1,7

22.5

5

1,5

13.8

0

5,6

70.7

4

2,3

88.6

3

0.3

4

0.2

8

2.5

9

Edit

Valu

es

T

ota

l Ente

rpri

se V

alu

e

Mult

iple

s

Pri

cin

g M

ult

iple

s

LT

M T

EV

/Tota

l R

evenues

LT

M T

EV

/EBIT

DA

LT

M T

EV

/EBIT

N

TM

TEV

/Forw

ard

Tota

l R

evenue

NT

M T

EV

/Forw

ard

EBIT

DA

LT

M P

/Dilute

d E

PS

Befo

re E

xtr

a

NT

M F

orw

ard

P/E

LT

M P

/TangBV

Hig

h

60.1

9x

3947.0

5x

88.4

8x

11.6

7x

645.6

3x

106.6

3x

33.4

0x

2.4

6x

Low

2.3

2x

4.1

0x

4.1

1x

1.9

9x

4.2

8x

3.2

5x

3.5

2x

0.3

3x

Mean

15.4

6x

677.2

4x

26.3

6x

4.8

2x

112.6

5x

22.0

4x

15.2

7x

1.0

1x

Media

n

6.8

1x

13.7

4x

11.3

3x

4.3

5x

16.9

0x

9.1

9x

14.2

3x

0.8

1x

Im

pli

ed E

nte

rpri

se V

alu

e

Hig

h

314,7

37.4

6

6,7

99,0

14.5

8

133,9

37.4

6

66,2

03.1

0

1,5

42,1

76.9

0

Low

12,1

10.3

7

7,0

60.8

9

6,2

23.0

3

11,2

82.1

0

10,2

23.9

5

M

ean

80,8

28.5

5

1,1

66,5

78.8

6

39,9

04.9

9

27,3

05.1

6

269,0

72.6

4

M

edia

n

35,5

81.2

1

23,6

72.8

6

17,1

48.3

3

24,6

77.9

0

40,3

72.7

4

+ T

ota

l C

ash

& S

T Invest

-m

ents

5,5

70.5

2

5,5

70.5

2

5,5

70.5

2

5,5

70.5

2

5,5

70.5

2

- T

ota

l D

ebt

6,4

55.1

5

6,4

55.1

5

6,4

55.1

5

6,4

55.1

5

6,4

55.1

5

-

Tota

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f. E

quit

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0.0

0

0.0

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0.0

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rest

234.8

6

234.8

6

234.8

6

234.8

6

234.8

6

= Im

pli

ed E

quit

y V

alu

e

Hig

h

313,6

17.9

6

6,7

97,8

95.0

8

132,8

17.9

6

65,0

83.6

0

1,5

41,0

57.4

0

285,3

00.1

6

74,4

49.0

5

50,1

70.4

9

Low

10,9

90.8

8

5,9

41.3

9

5,1

03.5

4

10,1

62.6

0

9,1

04.4

5

8,6

87.1

8

7,8

46.6

3

6,7

09.9

4

Mean

79,7

09.0

6

1,1

65,4

59.3

7

38,7

85.5

0

26,1

85.6

7

267,9

53.1

4

58,9

72.4

6

34,0

28.5

9

20,6

66.3

7

Media

n

34,4

61.7

2

22,5

53.3

6

16,0

28.8

4

23,5

58.4

1

39,2

53.2

4

24,5

87.1

8

31,7

12.5

4

16,4

66.5

0

/

Share

s O

uts

tandin

g

7,8

62.6

3

7,8

62.6

3

7,8

62.6

3

7,8

62.6

3

7,8

62.6

3

7,8

62.6

3

7,8

62.6

3

7,8

62.6

3

= Im

pli

ed P

rice p

er

Share

Hig

h

39.8

9

864.5

8

16.8

9

8.2

8

196.0

0

36.2

9

9.4

7

6.3

8

Low

1.4

0

0.7

6

0.6

5

1.2

9

1.1

6

1.1

0

1.0

0

0.8

5

Mean

10.1

4

148.2

3

4.9

3

3.3

3

34.0

8

7.5

0

4.3

3

2.6

3

Media

n

4.3

8

2.8

7

2.0

4

3.0

0

4.9

9

3.1

3

4.0

3

2.0

9

M

ean E

quit

y V

alu

e A

cro

ss

Mult

iple

s Equit

y V

alu

e

Pri

ce P

er

Share

Hig

h

1,1

57,5

48.9

7

147.2

2

Low

8,0

68.3

3

1.0

3

Mean

211,4

70.0

2

26.9

0

Media

n

26,0

77.7

2

3.3

2

Financial Summary

ALDAR: Income Statement

(AEDmn) 2015 2016F 2017F 2018F 2019F 2020F

Revenue 4,586 5,398 5,638 5,900 6,186 6,494

Direct costs (2,380) (3,272) (3,613) (3,806) (4,028) (4,270)

Gross profit 2,206 2,126 2,025 2,094 2,158 2,224

Selling and marketing expenses (61) (51) (53) (55) (58) (61)

Staff costs (230) (270) (293) (310) (336) (365)

Depreciation and amortisation (210) (252) (198) (177) (209) (173)

Share of profit/(loss) from JVs and

Associates

161 125 142 160 182 206

Others 302 374 410 456 506 560

Finance income 98 94 121 122 131 145

Finance costs (240) (197) (205) (215) (225) (235)

Other income 694 640 647 653 660 666

Net Profit 2,560 2,465 2,454 2,568 2,627 2,761

Non-controlling interests 23 22 22 23 24 25

Net Profit to Shareholders 2,537 2,442 2,432 2,545 2,603 2,736

ALDAR: Balance Sheets

(AEDmn) 2015 2016F 2017F 2018F 2019F 2020F

Net Intangible Assets 4.6 5.1 5.5 5.8 6.0 6.3

Net Plant, Property & Equipment 2,936 2,704 2,548 2,420 2,343 2,194

Cash and Cash Equivalents 6,260 8,084 8,142 8,775 9,672 10,677

Accounts Receivable 4,938 4,250 5,760 6,392 6,702 7,035

Total Assets 36,141 38,439 41,486 44,330 47,274 50,389

Long-Term Debt 5,535 5,517 3,018 6,019 6,271 6,536

Accounts Payable 8,292 8,464 9,344 9,844 10,418 11,043

Total Liabilities 15,853 16,473 17,741 18,608 19,552 20,569

Total Equity 20,288 21,966 23,744 25,722 27,722 29,819

Equity Attributable to Shareholders 20,000 21,656 23,412 25,367 27,343 29,415

ALDAR: Cash Flow Statements

(AEDmn) 2015 2016F 2017F 2018F 2019F 2020F

Net Income 2,560 2,465 2,454 2,568 2,627 2,761

Change in WC 4,013 902 (615) (140) 257 284

Cashflow from Operating activities 6,008 3,242 1,600 2,127 2,560 2,621

Capex (83) (17) (39) (45) (127) (20)

Cashflow from Investing activities (3,350) (644) (959) (1,004) (1,121) (1,046)

Dividends (688) (786) (676) (590) (627) (663)

Cashflow from Financing activities (3,350) (773) (584) (490) (541) (571)

Equity Research Update ALDAR August 2016 Page 6

22F Sky Tower Al Reem Island

Abu Dhabi United Arab Emirates

Contacts

Talal Touqan Head of Research +971 2 6118817 talalt@alramz.ae

Majd Dola

Analyst +971 2 6118875 majd@alramz.ae

Phone: +971 2 6262626 Fax: +971 2 6262444

E-mail: research@alramz.ae Website: www.alramz.ae

Investment Ratings Guide Al Ramz Research's fundamental views and ratings are Medium-term calls within a 12-month investment

horizon. Meanwhile, Al Ramz Research's technical comments and recommendations are Short-term and

Overweight The target price for the next 12 months is 10% above the current price.

Neutral The target price in the next 12 months is between –10% and 10% of the current

price.

Underweight The target price for the next 12 months is 10% below the current price.

Not Rated No investment rating has been assigned yet.

Important Notice and Disclaimer Notice: In the interest of timeliness, this report has not been edited.

Disclaimer: The information provided in this report has been prepared without taking account of your objectives, financial situation or needs.

You should, therefore before acting on the advice, consider the appropriateness of the advice having regards to these matters and, if

appropriate, seek professional financial and investment advice.

All observations, conclusions and opinions expressed in this report reflect the personal views of the Al Ramz Capital analyst and are subject to

change without notice. The information in this report has been obtained from sources Al Ramz Capital believes to be reliable. However, Al

Ramz Capital does not warrant the accuracy, completeness or currency of, and will not be liable for any inaccuracies, omissions or errors in, or

for any loss or damage (including any consequential loss) arising from reliance on the information in this report.

Al Ramz Securities Capital does not guarantee the performance of any investment discussed or recommended in this report. Any information in

this report relating to the distribution history or performance history of any investment, should not be taken as indication of the future

performance of the relevant investment.

In this report, Al Ramz Capital may express an expectation or belief as to future events , results or returns generally or in respect of particular

investments. Al Ramz Capital makes such statement in good faith and believes them to have a reasonable basis. However, such forward-looking

statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from such forward-looking

statements. No guarantee of future returns is given or implied by Al Ramz Capital.

Required Disclosure for Research Distributed in the United

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-US Group Company”). This report is distributed in the US by LXM LLP USA, a US registered broker dealer, on behalf of AL RAMZ only to major

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