Research Update: Dubai-Based Damac Real Estate Development Ltd. Upgraded To 'BB' On Improved Leverage Metrics; Outlook Stable

We expect Damac to report over $2 billion in revenue in 2023 and a notably stronger EBITDA margin of close to 40%. Dubai's residential real estate sector remained resilient in 2023, but we see increased risk of a mild cyclical slowdown over the next 12-18 months. Nevertheless, we expect Damac to continue to report strong revenue and EBITDA, given its large UAE dirham (AED) 40 billion revenue backlog. As a result, we estimate its adjusted debt to EBITDA ratio will have improved to 1.0x-1.1x at the end of 2023 and will remain at 0.8x-1.2x in 2024-2025. We therefore raised to 'BB' from 'BB-' our long-term issuer credit and issue ratings on Damac and its senior unsecured sukuks. The stable outlook

...- We expect Damac to report over $2 billion in revenue in 2023 and a notably stronger EBITDA margin of close to 40%. - Dubai's residential real estate sector remained resilient in 2023, but we see increased risk of a mild cyclical slowdown over the next 12-18 months. Nevertheless, we expect Damac to continue to report strong revenue and EBITDA, given its large UAE dirham (AED) 40 billion revenue backlog. - As a result, we estimate its adjusted debt to EBITDA ratio will have improved to 1.0x-1.1x at the end of 2023 and will remain at 0.8x-1.2x in 2024-2025. - We therefore raised to '##' from '##-' our long-term issuer credit and issue ratings on Damac and its senior unsecured sukuks. - The stable outlook indicates our expectation that Damac will sustain low leverage, with adjusted debt to EBITDA below 1.5x in 2024-2025 supported by good visibility on future earnings, while its sizable cash collections reduce liquidity risks ahead of cyclical slowdown....

Research Update