FIN512

Financial Management

FINANCIAL RATIO ANALYSIS AND

INDUSTRY AVERAGE FOR EMAAR &
DAMAC PROPERTIES

Presented By
Jawaher Al Ahbhabi Aysha Al Dhaheri Sara Ayaad Hamda Al Farsi
1061894 1007574 1045226 1066239
DATE
 Agenda
Number Four
Number One
Dupont Analysis
Introduction

Number Five
Number Two
Ratio Analysis Discounted Dividend
Model

Number Three Number Six

Comparison Emmar Vs Conclusion
Damac

2
Introduction

3
 4
Emaar Properties . .

Emmar Properties is an Dubai Based Public Joint Stock Company

specialized in Real Estate industry
It was founded in 1997.

Emaar is one of the listed developer by market capital in MENA

region

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Ratio Analysis . .

5
 Liquidity Ratios
Commonly used to determine how quickly a company can turn its assets into cash if it experiences financial difficulties

Current Ratio = Current Assets / Current Liabilities

1.08 1.50 1.36

2014 2015 2016

Quick Ratio = Current Assets - Inventory / Current Liabilities

1.05 1.48 1.34

2014 2015 2016

Cash Ratio = Cash / Current Liabilities

0.49 0.59 0.49

2014 2015 2016

NWC to TA = NWC / Total Assets

0.03 0.19 0.13
2014 2015 2016
6
Financial Leverage Ratios . .

7
 Financial Leverage Ratios
Times Interest
Earned Ratio
indicates the interest
Total Debt Ratio Equity Multiplier covered that has Cash coverage
measures the total measure what proportionate amount of ratio
liabilities as in terms of proportion of firm’s income determining the amount
percentage of the total asset has financed by Long Term Debt of cash available for a
asset its shareholders Ratio borrower’s interest
Debt Equity Ratio expense
reflects the ability of the
measures the degree of
company to pay its long
asset that is financed
term obligations
through outside/inside
funding or by both

•2014 115.07
•2014 2.08 •2015 216.39
•2014 141.94
•2014 0.52 •2016 110.88
•2015 1.90 •2014 1.08 •2015 259.57
•2015 0.47
•2016 2.02 •2015 0.90 •2016 129.00
•2016 0.51 •2014 1.08 •2016 1.02
•2015 0.90 5
•2016 1.02 3
6
1 4
2 8
Asset Management Turnover Ratios

9
 Asset Management Turnover Ratios
Receivables NWC Turnover Days Sales Receivable Fixed Assets Turnover
Turnover Ratio
3.95 57.05
1.22 0.40
6.40
0.89 79.37
83.26 0.25
4.60 0.32

4.38

2014 2014 2014 2014

2015 2015
2015 2015
2016 2016 2016 2016

10
Profitability Ratios . .

11
 Profitability Ratios
Profit Margin Return on Assets Return on Equity

Shows how much of Measures the Shows how much of

profit is generates for profitability of the profit the company
each 1 AED compare company relatively to generated from the
to sales its total assets shareholders equity
they invested.

36% 14 5% 14 10% 14

28% 15 5% 15 9% 15

28% 4% 9%
16 16 16

12
Market Value Ratios

13
 Market Value Ratios
Used to evaluate the current share price of company's stock.

Price Earnings Ratio

How investors in the market evaluate
Emaar performance.

2014
15.13 times

2015

9.98 times
2016

9.77 times
14
 Damac Properties

15
 Liquidity Ratios
Commonly used to determine how quickly a company can turn its assets into cash if it experiences financial difficulties

Current Ratio = Current Assets / Current Liabilities

0.84 1.12 1.31

2014 2015 2016

Quick Ratio = Current Assets - Inventory / Current Liabilities

0.76 1.11 1.29

2014 2015 2016

Cash Ratio = Cash / Current Liabilities

0.49 0.72 0.71

2014 2015 2016

NWC to TA = NWC / Total Assets

-0.11 0.07 0.15
2014 2015 2016
16
17
18
Profitability Ratios

19
Market Ratios

20
 Comparison of Emaar and Damac properties
with its industry average
Current Ratios-2016

1.36 1.31 2.14 Analysis

Emaar reflects efficiency and closer to UAE
industry average therefore displays a positive
sign.
Damac ratios last year yet unable to effectually
operate as the UAE average industry ratio

Emaar Damac UAE Average

21
 Comparison of Emaar and Damac properties
with its industry average
Asset Management
Emaar Damac UAE Average
Receivables 4.60 1.49 6.3
Turnover
Days Sales 79.37 245 58
Receivable
Total Assets 0.16 0.29 0.1
Turnover
Fixed Asset 0.32 0.77 1.2
Turnover
• Damac properties takes lesser time to get their money from the customers. When compared to industry
average 6.3 for receivable turnover ratio.
• Days sales receivables 58 days and Damac properties is better off than Emaar properties when it comes to
collecting its cash from customers but Damac properties to be efficient in managing its assets investments
when compared to Emaar properties.
• Damac properties total assets and fixed assets ratios are closer to industry average which is reflected to be a
positive sign for provisions of firm in the UAE industry.

22
 Comparison of Emaar and Damac properties
with its industry average

Profitability Ratios
• Damac profit margin is considerably higher
Emaar Damac UAE Average than the industry average .
• Damac properties return on assets & ROE is
comparatively higher than Emaar properties
Profit Margin(%) 28% 52% 18.2
in last year and when compared with UAE
industry average the ratio is three times the
higher and illustrates efficiency in producing
Return on Assets(%) 4 15 2.1
revenue, profits and various cash flows in the
business.
Return on Equity(%) 9 29 9.4

23
 DUPONT ANALYSIS
Strengths • EMAAR VS DAMAC
• Emaar properties is able to enhance its ROE
without an increase in its financial leverage
hence its less risky.
• Damac properties is selling its goods and
services at lower margin but having quite
high asset turnover ratio representing that it
is making greater amount of sales

Weaknesses
• Emaar properties is unable to generate higher
sales while preserving lower cost of goods sold
in its business.
• Damac properties is unable to increase its ROE
without an increase in its financial leverage
therefore its risky as Damac properties is able
to increase its assets by taking debt
 Discounted Dividend Model-Emaar
Emaar Divident per share 2012
20% Required return on 13.14%
2013
15% 14% 15% 15%
15% 13.14% 2014 investment
10%
10% 2015 RFR beta e(MRP) RFR
2016
5%
5% 1.05 12.75% 5%
0%
Required Return
2012 2013 2014 2015 2016
Emaar 10% 15% 14% 15% 15%

2016 2016

4.67 < 7.11 =

Intrinsic Value Market Price
25
 Discounted Dividend Model-Damac
Divident Per Share
2012
15%
11%
12% Required return on 9.24%
10% 10% 10% 2013
10% investment
9.24% 2014
5% 2015 RFR beta e(MRP) RFR
2016
0%
2011 2012 2013 2014 2015 2016 2017 5% 1.05 8.75% 5%
Required Return

2016 2016

3.36 < 2.53 =

Intrinsic Value Market Price
26
DDM (Discounted Dividend Model) to estimate intrinsic value of firms stock
 Investor Decision ? Investor would like to invest in Damac stock rather than in
Emaar stock

 Damac stock has higher intrinsic value than its market price
margin of safety investors purchase Damac stock at
lower price than its intrinsic value If by chance intrinsic
value of Damac drops by few dirhams investor will still
have cushion and ample room to sell out the stock and get
desired profit selecting stocks with market prices lower
than their intrinsic value could also support in saving
Emmar money when making a portfolio.

 Emaar stock is climbing in market price  overvalued

stocks best decision for investors would be to wait until
the market drops the market price of Emaar stock below the
intrinsic value so as to realize bargain  protects an
investors from big losses but offers for wiggle room to allot
their cash into more safe investment vehicles such as bonds
and T-bills

Damac
Investor would like to invest in Damac stock rather than in Emaar stock

 Damac stock has higher intrinsic value than its market price margin of safety investors
purchase Damac stock at lower price than its intrinsic value If by chance intrinsic value of
Damac drops by few dirhams investor will still have cushion and ample room to sell out the
stock and get desired profit selecting stocks with market prices lower than their intrinsic value
could also support in saving money when making a portfolio.

 Emaar stock is climbing in market price  overvalued stocks best decision for investors would
be to wait until the market drops the market price of Emaar stock below the intrinsic value so as
to realize bargain  protects an investors from big losses but offers for wiggle room to allot their
cash into more safe investment vehicles such as bonds and T-bills
 Conclusion & Recommendations

To Conclude

To Recommend

Within the performed scale to invest in properties.

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Thank You !

31
 THANKS FOR
YOUR TIME

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