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This month, Emaar Properties reported just three per cent growth in annual profits. And last week the Dubai-based developer said that profit growth for this year too would slow down due to higher construction costs, which led the investment bank EFG-Hermes to cut the fair value target for the company shares to Dh18.50 each from Dh20.04.
In a statement, it had said profits were hit by lower land sales and a slowdown in the US real estate sector in 2007. But it also reported profits for the first time from its ventures abroad, namely from India and Morocco.
For shareholders, perhaps it's time to apply a degree of patience as Emaar transforms into a global company. The days of heady profit growth - like 30 per cent in 2006 and 180 per cent the year before - could be over.
The business is evolving, and with that outlook and expectations will change. As Emaar goes progressively overseas, it has to confront the vagaries of different markets. As long as it loses only relatively little and gains more - itself requiring sharp minds in these turbulent types in the global economy and markets - on a trajectory of continuous growth, shareholders need not worry.
With its land bank in Dubai more or less exhausted, the outward-looking initiative is the only way to grow the company. Also, as a company statement said, the approach of developing lifestyle communities rather than land sales in Dubai will go a long way to achieve its goal of becoming "one of the valuable companies in the world" by 2010.
Whether it achieves that status, we will see it soon. But global investments are always a mixed bag. Who would have predicted that the US housing market would suddenly implode the way it has, even two years ago?
Adjustments
Like many who have ventured into the US, Emaar might have adjusted its sights when it came to the property scene. But the company has hit the right note as it extends its footprint in different regions of the emerging world. Realistically, a step into the US market is as necessary as it is in emerging markets such as India. And, as the results show, Emaar's has had successes by forming strategic partnerships in these countries.
Coming back to shareholders' concerns about profitability and dividends, with its accompanying impact on the value of the shares, it is important also to note that if the company wishes to have the most realistic expectations from investors in a globalising world - affected as it is by the ups and downs in both developed and emerging markets - it needs to be circumspect in its projections and characterisations of its proposed deals.
Becoming one of the valuable companies in the world is not easy. The effort begins at home, and, in this endeavour, both the company and its shareholders have an equal role to play.
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