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Dubai: The combined value of assets of the major Dubai Government-owned entities has crossed Dh416.20 billion ($113.4 billion) while their net profits exceeded Dh25.72 billion ($7.01 billion), which investment bank Lehman Brothers has labelled with a 'positive outlook'.
"However, given the emirate's ambitious growth strategy, there is a risk that continued heavy supply could weigh on technicals," it said in a latest report.
Debt of Emirates airline, DP World, DIFC, Nakheel, Dubai Holding COG, Emaar, Dewa, Jafz and Tamweel totalled Dh81.51 billion ($22.21 billion), the report said.
"Two large holding companies dominate business in the emirate - Dubai World and Dubai Holding. To prevent monopolies, the corporate landscape has been planned as a series of competing entities," Lehman says in the report.
Thirst for capital
Most of Dubai's major corporates are in the initial stages of development and are thirsty for capital. The city is run much like a large corporation, with each arm levered up to support the ambitious growth strategy.
"However, we expect high leverage levels to decline as companies mature," it said.
"As far as sovereign support is concerned, we see no difference between assets under either umbrella. Sovereign support, expected from Dubai and to some extent implicitly from Abu Dhabi as well, dictates the basis on which most credits trade."
This is also reflected in ratings, with most entities in Dubai rated A+/A1 irrespective of whether they operate ports (DP World), run free zones (Jafz), build properties (Dubai Holding COG) or provide utilities (Dewa).
"However, underlying credit quality differs vastly among these names, with some, like DP World, being well established, cash-flow-positive powerhouses and others, like Dewa, weighed down by ambitious investment plans that require constant external financing," it said.
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