This study is the Financial Analysis of ALDAR belongingss PJSC. During the class of this survey, we have analyzed the fiscal statements of the company for the last 3 old ages ( 2006, 2007 & A ; 2008 ) and based on our fiscal analysis we have drawn some decision as to whether it would be wise to put in the company at this phase.
2. Company Introduction
ALDAR Properties PJSC is the taking existent estate developer in Abu Dhabi, with more than USD 75 billion worth of developments planned for the following 10 old ages and a land bank with over 50 M sqm. Its major maestro developments include: Al Raha Gardens, Al Raha Beach and Yas Island. Aldar develops belongingss for sale and for its investing belongings portfolio in all cardinal existent estate market sections. The major runing line of the company can be summarized as follows
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Property Gross saless.
Land Gross saless.
2.1 Vision & A ; Mission
“ Vision ”
“ Honoring investing – To make for our stockholders a stable and moneymaking investing platform supplying realistic returns and long term benefits. “
“ Mission ”
“ Deliver maximal return for stakeholders through sustainable and universe category belongings developments ”
Aldar presently owns bets in seven joint ventures ( JV ) involved in territory chilling, building and place funding.
Aldar ‘s Shareholding Structure
The authorities of Abu Dhabi holds 25.4 % of Aldar ‘s portions through a figure of its investing weaponries. With its 14.1 % portion, Mubadala Development Company ( Mubadala ) is the authorities establishment with the largest interest in Aldar. The free float is estimated to be about 74.6 % . Earlier this twelvemonth, the authorities of Abu Dhabi passed a jurisprudence leting foreign ownership of Aldar ‘s portions. However, foreign ownership is non permitted to transcend 40 % .
3. Real estate market overview
The Abu Dhabi existent estate market can be regarded as one of the dominating & A ; fast turning in the part. This is accounted by its strong economic growing, being one of the highest GDP per capita figures worldwide, population growing rate of 7 % , deficit in belongings supply in all major market sections, repressed demand roll uping for the last few old ages and the freshly introduced belongings statute laws leting exiles, estimated 80 % of the population to buy leasehold belongings with 99 twelvemonth renewable contract.
ALDAR histories for 45 % of belongings supply in the capital over the following 10 old ages.
4. Business Strategy Analysis
ALDAR ‘s chief concern schemes can be summarized as follows
Consolidate itself ‘s place in Abu Dhabi.
Further enlargement into mature & A ; emerging markets.
Stressing on development of an investing belongings portofolio.
Sing to Exit of investing belongingss on the long tally
Sell developed serviced land secret plans
Expand Asset Management Services
Continue mortgage & A ; territory chilling markets.
5. SWOT analysis
It has largest land bank in the capital
Its partnership policies with cardinal existent estate participants and fiscal establishments in the capital to supply mortgage finance.
Very strong relationship with the authorities of Abu Dhabi.
Management ‘s s existent estate development experience internationally.
Joint Venture with the part ‘s largest territory chilling service supplier, Tabreed, capturing demand for this type of service in Aldar ‘s developments.
A major Aldar ‘s developments hosted Abu Dhabi F1 Grand Prix in 2009, with a seven old ages renewable contract.
Short runing history with hardly any path record
Income has to day of the month been dominated by just value addition on investing belongingss, which is non unusual for a existent estate developer on the take-over, but however a failing
Strong economic growing in the gulf part as a whole, and more specifically in Abu Dhabi.
Annual population growing of around 7 % in Abu Dhabi, fuelled by turning figure of exiles.
Deficit of belongings supply in all existent estate market sections in Abu Dhabi
Government ‘s new belongings jurisprudence leting exiles to buy belongingss in Abu Dhabi on a renewable 99-year leasehold contract footing. 80 % of Abu Dhabi occupants are non-nationals.
2004 ‘s jurisprudence gave subjects the right to purchase and sell freehold belongings.
F1 Grand Prix, an chance to pull visitants to Yas Island ‘s other leisure finishs and hotels.
New participants come ining the market.
Construction stuff ‘s cost addition.
Mortgage involvement rates increase.
Existing Global Financial Crisis.
6. Accounting Analysis
Adoption of new and revised criterions
Al Dar Properties have adopted new criterions in line with the International Financial Reporting Interpretations Committee criterions that is
IFRIC 11 IFRS 2: Group and Treasury Share minutess
IFRIC 12 Service Concession Arrangements
IFRIC 14 IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirement and their interaction
The amalgamate fiscal statements have been prepared in line with the International Financial Reporting Standards ( IFRS )
Footing of Preparation
The readying of the fiscal statements are chiefly on historical cost footing but have non considered the reappraisal of investing belongingss and other derived functions.
Footing of Consolidation
In the income statement we have seen a higher Net net income in comparing to its Gross net income and the method of accounting is included in the Net income from other operation. The method of accounting has been controlled by the company and has the power to regulate over it accounting policies. The companies have been antecedently mentioned. The company has non accounting for dual accounting where in inter bank balances, gross and disbursals are accounted for twice. Minority involvement has been taken into consideration as a separate point in order to account the activities of the groups individually and non included in the proprietor ‘s equity.
The gross and costs of the group has been measured faithfully and has been accounted for individually under points such as Sale of belongingss, Rental income and Interest income.
Gross saless of belongingss – When a purchaser has been remunerated from the excess sum acquired from a sale and ensured that all the economic hazards, grade over the control of the belongings and cost for transportation has been considered.
Rental income – The group policy for the gross acknowledgment is as per operating rentals
Interest income – The company income is based strictly upon the tenor of the committedness to the principal outstanding and rate of return
Group as a lease giver
Rental income from operating rentals is recognized on a consecutive line method over the period of the rent. Cost that been incurred ab initio are accounted in line with the operating rental are added to the sum of leased plus and recognized on the consecutive line footing.
Group as leaseholder
Assetss purchased at the start are recognized as the group assets at their just value or if lower, at the present value of the minimal rental payments. The liability of this rental would be recovered in the finance duty of the company. Lease payments are apportioned between finance charges and return on the rental in order to equilibrate the staying liability. Finance charges are accounted straight to the net income or loss unless they featured to the measure uping assets.
Operating rental payments are accounted for on a consecutive line method unless there have an economic benefit by accounting through a cut downing balance method or varied clip period. Contingent lease from operating rental are recognized as an disbursal from mentioned clip period.
Borrowing costs are straight elemental to the acquisition, building or production of the plus which are used for the purpose to sell or bring forth income for the concern over a given period of clip. In instance of any adoption availed for certain investing chances pending their outgo on measure uping assets are deducted from the adoption costs eligible for capitalisation.
Property, PLANT AND EQUIPMENT
Property, Plant and equipment are all measured at historical cost less depreciation value. The historical cost straight attributed to the acquisition of the plus. Deprecation is accounted on a consecutive line bases to apportion their existent value over an estimated period. The residuary value is measured and adjusted if required over a period of clip. If an assets estimated transporting value is higher than it recoverable value so its value is written down instantly. Gain and losingss from the assets are determined by comparing to it transporting sums.
Each assets life is accounted as follows –
Buildings – 20 old ages
Labour cantonments – 10 old ages
Leasehold betterments – 4 old ages
Office equipments – 4 old ages
Office equipment – 5 old ages
Computer – 3 old ages
Furniture and fixtures – 5 old ages
Motor vehicles – 4 old ages
Capital Work IN PROGRESS
Capital work in advancement is history at Cost principal. Once the work is completed the value to reassign to the plus and so accounted for as per their depreciating accounting method.
Investing belongings, which is ready to purchase, is history on an grasp footing, ab initio measured at cost which incurs all disbursals used to construct the belongings at its just value. Gains or losingss later included in the net income or loss for each period.
7. FINANCIAL ANALYSIS
7.1 Horizontal Analysis
7.1.1 Balance Sheet
7.1.2 Income Statement
The entire assets of ALDAR shows a growing of 119.94 % but it besides shows entire liabilities addition of 125 % . There has been a enormous growing in gross net income & A ; net income in the Income Statement from 2007 to 2008. The horizontal analysis indicates alterations in financials on a twelvemonth to twelvemonth footing. This helps analyse the growing position of the concern and gives investors a better apprehension of the company ‘s prognosiss. A better feasibleness survey of the company can be assessed to put in the company.
7.2 Vertical Analysis
7.2.1 Balance Sheet
7.2.2 Income Statement
The perpendicular analysis depicts a elaborate dissolution reflecting in the income statement & A ; balance sheet discrepancy in each point.The Cost of goods Sold ratio has decreased, which means that the company decreased the cost per each sale and hence raised gross net income. Although the involvement rates have increased, the company as seen in the ratios achieved more net income by increasing their gross revenues.
7.3 Trend Analysis
We are unable to measure the long term consequences of the Al Dar belongingss as we have really small informations to look into the company ‘s growing. But from the small day of the month that is available we are looking at the company turning at an increasing gait, this could be for strategic grounds such as Location and civilization. The company is heading in the right way for growing and a better appraisal will be done when Net net income is considered. The figures above are complete and audited.
8. Ratio Analysis
8.1 Profitability Ratios
Gross Profit Ratio
The Gross net income of Al Dar has increased from 45.64 % to 53.9 % in 2008 as compared to Emaar belongingss where the gross net net income increased from 39.48 % in 2007 to 42.53 % in 2008. This would bespeak that the cost of support would be higher in the instance of Emaar, i.e. cost of stuff, labour, and undertaking.
Net Net income Ratio
The Net net income of Al Dar belongingss was 158.24 % in 2007 and it is 69.23 % in 2008. The Net net income ratio is more than the G.P ratio because of other income reflected in the P & A ; L of Al Dar belongingss [ Fair value addition on investings 1,532,584 ] . Al Dar has subordinates that have been accounted in the Financials doing crystalline the group financials.
The Net net income ratio of Emaar belongingss has declined from 36.74 % in 2007 to 19.24 % in 2008. This bead in net net incomes in 2008 is because of damage of good will in 2008 2,522,577
On the profitableness forepart, Al Dar belongingss seems to be a much better company
Net Return on Equity
The Return on equity of Al Dar was 25.25 % which has dropped to 21.5 % in 2008, as compared to this the ROE of Emaar belongingss has dropped from 19.55 % to 8.66 % .
The bead in the ROE of Emaar is more than 50 % as compared to Al Dar belongingss where the bead in ROE is merely 14.85 % .
Al Dar is bring forthing a much better Return on Equity than Emaar belongingss ; it shows how much stockholders are able to derive from their investings.
Net Return on Asset
The Net return on Asset of Al Dar belongingss has decreased marginally from 8.58 % to 6.9 % . [ Drop of 19.58 % ]
The Net return on Asset of Emaar belongingss has decreased from 12.67 % to 5.11 % a bead of 59.66 %
Al Dar once more has been able to bring forth gross from the use of their assets.
8.2 Solvency and Liquid Ratio
The current ratio of Al Dar is healthy the standard current ratio of 2:1 has been maintained which shows that the company is in a healthy place and can run into its short term liabilities.
The current ratio of Emaar is much lower than the standard ratio of 2:1 and moreover it has deteriorated from 0.77 to 0.59 in 2008. The company seems to hold a large liquidness crunch and may non be able to run into its short term duties
The speedy ratio of both the company besides reflect similar image as reflected by the current ratio.
Emaar belongingss have a much lower speedy ratio as compared to ALDAR Properties.
Inventory Turnover Ratio
ALDAR and Emaar have a really low stock list turnover and can non be assessed since the industry does non specify a comprehensive list of stock list to be accounted. ALDAR is able to pull off their stock list expeditiously since the ratio is higher.
The industry does hold a specified clip frame which would bespeak a clear receivable yearss since it would ever be on the higher side. The existent value of belongings is recovered once it is ready-to-stay and thereby ALDAR has a higher figure of yearss of Collection since most of their belongingss are on the brink of completion.
8.3 Financing Ratios
Interest Coverage Ratio
The involvement coverage ratio of Al Dar is better than Emaar.
Al Dar is in a better place to refund its involvement than Emaar, 43.57 % as compared to 36.34 % of Emaar.
8. RECOMMENDATIONS & A ; CONCLUSION
ALDAR has chiefly been concentrating their concern on land and free clasp belongings. ALDAR is looking to heighten their undertakings in the commercial part and addition from the grasp value of the developed part. ALDAR R is concentrating on developing varied industry to move as a hub in the part in order to construct capital portion in the World. ALDAR is in an spread outing stage and is looking at moneymaking undertakings in the Capital and is guaranting that the gait is steady. ALDAR is besides guaranting that gross generated in this concern is changeless since slow down on undertakings would halter the industry as a whole. ALDAR is politically connected in the part since it belongs to one of the wealthiest opinion households in the UAE. We recommend a ‘BUY ‘ option for our investors maintaining in head all the above facets of the concern.
hypertext transfer protocol: //www.arabianbusiness.com/arabic/581541
Hilton, R. , 8th edition ( International ) , Managerial Accounting, McGraw Hill/Irwin
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