The National Bank of Abu Dhabi and the Aldar Properties Pjsc - Case Study Example

Analyses of Two United Arab Emirates Companies: the National Bank of Abu Dhabi and the Aldar Properties PJSC [Full Table of Contents Contents Table of Contents 2 Contents 2 Executive Summary 3 Introduction 3 The National Bank of Abu Dhabi (NBAD) 4 Consolidated statement of financial position as at 31 December 2012 4 Consolidated income statement for the year ended 31 December 2012 5 Consolidated statement of comprehensive income for the year ended 31 December 2012 5 Stock Market Movement for February 2014 5 Aldar Properties 6 Consolidated income statement for the year ended 31st December 2013 6 Consolidated statement of comprehensive income for the year ended 31st December 2013 7 Stock market movement for February 2014 7 Conclusion 8 Executive Summary This paper is aimed at financial analyses of two Abu Dhabi based companies, namely: the National bank of Abu Dhabi (NBAD) and Aldar Properties PJSC. The financial structures of the two companies are naturally different. One is a bank, dealing primarily with currency and securities, while the other is a real estate company that deals with construction, purchase and sale of properties. A comparison between the two would therefore probably yield interesting findings but the analyses to be done in this paper are separate. The merger between Aldar and Sorouh in January 2013 has since seen a significantly positive impact on Aldar’s financials. Sorouh was also a property management company also based in Abu Dhabi and the merger was almost unanimously supported by its board members as well as Aldar’s board members. Individually, both Aldar and Sorouh were real estate giants in the Middle East. Together however, they have arguably become the Largest Real estate force in the Middle East but more specifically in the Emirates. Introduction In financial analysis there are numerous guidelines to be followed. However, a more basic approach is following steps. The first of these steps is to acquire the company’s financial statements over several years. Next is to quickly scan the statements to identify large movements in consecutive years. Also, reviewing the notes accompanying the company’s financial statements helps to shed light on said movements. After this, you can carefully analyse the financial statements and calculate financial ratios to find the trends in ratios from year to year. Next is obtaining data for the company’s key competitors and data about the industry and reviewing this data. Finally, answer this question: “Based on everything I Know about this industry and the competitors, and the external factors that will influence the company in the future, do I think this company is worth investing in for the long term?” (Lermack, 2003) The National Bank of Abu Dhabi (NBAD) Consolidated statement of financial position as at 31 December 2012 2012 AED’000 2011 AED’000 Assets Cash and balances with central banks Investments at fair value through profit or loss Due from banks and financial institutions Reverse repurchase agreements Loans and advances Non-trading investments Derivative financial instruments Other assets Investment Properties Property and equipment Total Assets 54,943,221 3,274,313 14,615,968 18,509,608 164,599,378 32,286,857 5,583,080 4,300,195 14 140,061 2,346,488 300,599,169 24,468,641 1,610,745 15,166,763 16,425,020 159,522,178 26,569,340 5,605,647 4,083,411 - 2,215,760 255,667,505 Liabilities Due to banks and financial institutions Repurchase agreements Euro commercial paper Customers’ deposits Term borrowings Derivative financial instruments Other liabilities Subordinate notes Total liabilities 35,477,275 2,017,041 2,831,198 190,303,573 19,073,630 6,652,508 7,448,492 263,803,717 5,662,361 269,466,078 39,795,601 3,513,726 - 151,816,887 15,148,516 4,784,473 6,228,763 221,887,966 7,990,054 229,278,020 Equity Share capital Statutory and special reserves Other reserves Government of Abu Dhabi tier 1 capital notes Share option scheme Subordinated convertible notes - equity component Retained earnings Total equity ­­­Total liabilities and equity 3,874,558 4,065,532 14,067,140 4,000,000 95,312 21,420 5,009,129 31,133,091 300,599,169 2,870,043 3,563,274 11,466,410 4,000,000 76,497 27,639 4,385,622 26,389,485 255,667,505 Consolidated income statement for the year ended 31 December 2012 2012 AED’000 2011 AED’000 Interest income Interest expense Net interest income 7,979,592 (2,156,628) 5,822,964 7,651,786 (2,156,538) 5,495,248 Income from Islamic financing contracts Depositors’ share of profits Net income from Islamic financing contracts Net interest and Islamic financing income 316,085 (42,957) 273,128 6,096,092 362,811 (55,165) 307,646 5,802,894 Fee and commission income Fee and commission expense Net fee and commission income 1,905,488 (359,092) 1,546,396 1,635,945 (245,126) 1,390,819 Net gain on investments Net foreign exchange gain Other operating income 537,234 403,000 88,063 1,028,297 93,540 522,231 71,378 687,149 Operating income General, administration and other operating expenses Profit before net impairment charge and taxation 8,670,785 (2,870,053) 5,800,732 7,880,862 (2,563,724) 5,317,138 Net impairment charge Profit before taxation (1,336,543) 4,464,189 (1,498,555) 3,818,583 Overseas income tax expense 36 Net profit for the year (131,961) 4,332,228 (111,036) 3,707,547 Basic earnings per share (AED) 42 Diluted earnings per share (AED) 42 1.06 1.04 0.90 0.88 Consolidated statement of comprehensive income for the year ended 31 December 2012 2012 AED’000 2011 AED’000 Net profit for the year 4,332,228 3,707,547 Other comprehensive income Exchange difference on translation of foreign operations Change in the fair value reserve Directors’ remuneration Buy back of subordinated convertible notes (97,085) 1,598,331 (5,450) 3,999 (1,193) (484,408) (5,450) 8,188 Other comprehensive income / (expense) for the year 1,499,795 (482,863) Total comprehensive income for the year 5,832,023 5,832,023 3,224,684 Stock Market Movement for February 2014 Share National Bank of Abu Dhabi Period 02/02/2014 - 27/02/2014 Currency AED Date Open High Low Close Volume 02/02/2014 14.32 14.32 13.82 14.18 1,794,049 03/02/2014 13.82 13.95 13.68 13.68 1,205,292 04/02/2014 13.64 13.73 13.64 13.68 738,777 05/02/2014 13.73 13.77 13.64 13.64 662,380 06/02/2014 13.73 13.73 13.45 13.59 718,173 09/02/2014 13.59 13.73 13.50 13.64 1,279,511 10/02/2014 13.64 13.73 13.59 13.73 1,421,638 11/02/2014 13.73 13.77 13.50 13.55 409,593 12/02/2014 13.64 13.64 13.50 13.64 279,578 13/02/2014 13.64 13.86 13.64 13.86 2,092,552 16/02/2014 13.86 13.91 13.77 13.86 940,815 17/02/2014 13.82 13.86 13.59 13.86 432,059 18/02/2014 13.86 13.86 13.82 13.86 249,572 19/02/2014 13.77 13.91 13.77 13.91 114,292 20/02/2014 13.95 13.95 13.82 13.91 178,816 23/02/2014 13.86 13.91 13.64 13.68 867,610 24/02/2014 13.68 13.86 13.64 13.86 62,272 25/02/2014 13.77 14.05 13.77 13.95 183,040 26/02/2014 14.00 14.09 14.00 14.09 299,460 27/02/2014 13.91 14.23 13.50 13.50 730,824 Aldar Properties Consolidated income statement for the year ended 31st December 2013 2013 AED’000 2012 AED’000 Revenue Direct costs Gross profit 5,379,757 (3,615,700) 1,764,057 11,403,921 (8,166,330) 3,237,591 Selling and marketing expenses General administrative expenses: Staff costs Depreciation and amortisation Provisions, impairments and write downs Reversal of provision of receivables from investment in associates and joint ventures Reversal of provision amounts due from a related party Other general and administrative expenses (12,170) (249,818) (309,188) (1,135,997) - - (158,051) (11,351) (197,875) (434,587) (1,187,102) 50,000 201,025 (100,544) Share of (loss)/profit from associates and joint ventures Gain on assets held for sale Gain on business combination Fair value loss on investment properties Impairment loss on available-for-sale financial assets Finance income Finance costs Other income Profit for the year Attributable to: Owners of the company Non-controlling interests (16,475) 3,018 2,590,782 (340,544) - 186,237 (727,020) 630, 364 2,225,195 2,246,294 (21,099) 2,225,195 121,489 - - (169,956) (2,139) 222,989 (835,382) 446,490 1,340,658 1,340,658 - 1,340,658 Earnings per share Basic and diluted AED per share 0.34 0.30 Consolidated statement of comprehensive income for the year ended 31st December 2013 2013 AED’000 2012 AED’000 Profit for the year Other comprehensive income/(loss) Gain/(loss) on fair valuation of available-for-sale financial assets Hedging (loss)/gain recognised in profit or loss. Changes in fair value of cash flow hedges Director’s remuneration Total comprehensive income for the year 2,225,195 1,213 (1,525) 13,125 - 12,813 2,238,008 1,340,658 (27,542) 1,023 (7,951) (16,000) (50,470) 1,290,188 Total comprehensive income attributable to: Owners of the company Non-controlling interest 2,259,107 (21,099) 2,238,008 1,290,188 - 1,290,188 Stock market movement for February 2014 Share   Period 02/02/2014 - 27/02/2014 Currency AED Date Open High Low Close Volume 02/02/2014 3.45 3.45 3.33 3.33 87,624,080 03/02/2014 3.33 3.34 3.23 3.31 66,063,836 04/02/2014 3.22 3.35 3.22 3.34 83,986,328 05/02/2014 3.40 3.43 3.37 3.41 94,650,576 06/02/2014 3.45 3.47 3.39 3.40 83,423,040 09/02/2014 3.45 3.58 3.44 3.53 187,051,632 10/02/2014 3.58 3.59 3.54 3.57 73,149,704 11/02/2014 3.59 3.61 3.46 3.55 114,246,832 12/02/2014 3.50 3.53 3.38 3.40 166,541,584 13/02/2014 3.38 3.40 3.35 3.35 52,110,440 16/02/2014 3.37 3.40 3.34 3.34 42,328,604 17/02/2014 3.36 3.39 3.31 3.35 53,307,532 18/02/2014 3.36 3.38 3.26 3.30 44,966,332 19/02/2014 3.28 3.29 3.20 3.27 34,841,184 20/02/2014 3.26 3.34 3.26 3.31 31,008,100 23/02/2014 3.31 3.31 3.22 3.22 22,526,856 24/02/2014 3.21 3.23 3.14 3.20 41,601,620 25/02/2014 3.24 3.42 3.20 3.40 62,434,648 26/02/2014 3.42 3.44 3.36 3.36 32,482,974 27/02/2014 3.36 3.37 3.31 3.32 30,852,896 Conclusion Both companies’ analyses lead to a similar conclusion, i.e., that both companies are worth investing in for the long term. This is in response to the question asked at the end of the introduction. References References Aldar, Sorouh Shareholder Circular Detailing Merger Plans Now Available. (2013, January 28). CPI Financial, 203, 17. Annual Bank Benchmarking Index Topped by Abu Dhabi Islamic Bank. (2012, October 2). CPI Financial, 12, 21. Bellini, O. E., & Daglio, L. (2008). New frontiers in architecture: Dubai between vision and reality. Vercelli, Italy: White Star. Pederson, J. P. (2014). International directory of company histories. Detroit, Mich.: St. James Press. Lermack B. H. (May 23rd 2003) Steps to a Basic Company Financial Analysis. Retrieved from http://faculty.philau.edu/lermackh/financial_analysis.htm Read More