Falcom reiterates ‘Underweight’ on Emaar EC on weak earnings visibility

Falcom Financial Services maintained an “Underweight” rating on Emaar The Economic City (Emaar EC) and revised the stock’s target price downward with a fair value of SAR 7.4, after incorporating the dismal Q3 2018 performance.

“We reiterate our ‘Underweight’ stance on the stock as operating performance continues to deteriorate and earnings visibility is expected to be weak,” Falcom stated.

Emaar EC reported net losses of SAR 149.1 million in Q3 2018, versus net profit of SAR 27.0 million in Q3 2017, primarily owing to lower sales across residential, industrial, hospitality & leisure, and other segments. Higher operating expenses, an increase in net financial expenses and lower other income also contributed to the losses.

“We continue to remain cautious about Emaar EC’s performance, following its disappointing performance this quarter,” Falcom noted.

King Abdullah Economic City attracted 370,000 visitors in 2017 for ticketed events and set an ambitious target of 1 million visitors this year amidst a slew of entertainment and leisure attractions.

Furthermore, the company’s chief executive officer (CEO) Fahad Al Rasheedare, stepped down, and was replaced by Ahmed Linjawy.

“We would wait and watch the company’s performance as it welcomes Ahmed Linjawy, deputy CEO who shall be taking over as CEO,” it noted.