Liberum, a leading independent UK investment bank, initiated research coverage on Dar Global company with a ‘Buy’ rating and set a target price of $5 per share after its robust interim results for the six months to June 30, 2023.
This price represents an increase of 36% from the current trading price of $3.69 per share, which reflected the investment bank’s confidence in the company’s growth potential amid the current unstable macroeconomic conditions.
Liberum based its recommendation on a comprehensive analysis of the company's current project pipeline, its unique business model and ambitious growth plans.
The investment bank said that the company's core market, represented by second homes and luxury holiday homes, constituted a sector less impacted by market fluctuations.
Liberum pointed out that the portfolio of Dar Global includes a strong pipeline of projects with a gross development value exceeding $4.5 billion and an expected gross profit of more than $2 billion over the next ten years.
The company’s results for the period of half-year 2023 (HY 2023) showed that the earnings before interest, taxes, depreciation, and amortization amounted to US$ 22.5 million, and the bank expected to achieve a return on equity of 20%, which means that the book value of 1.5 times is easily attainable.
According to Liberum, the company's valuation has positive tailwinds due to its strategic choice of desirable locations like Dubai, which benefits from high prices. Despite the global economic slowdown and the rise in global interest rates, demand for luxury second homes remains strong, driven by the pandemic and the shift towards a remote work model.
The research note pointed out that the capital-light business model enabled the company to achieve a high return on equity. The company also has successful collaborations with well-known brands, such as Lamborghini, Pagani, Missoni, and Dolce & Gabbana.
In the near term, Liberum forecasts the projects that are about to be completed will yield US$ 62 million EBITDA in fiscal year 2023, growing by 23% to US$ 77 million in fiscal year 2024.
It’s worth mentioning that Liberum's valuation of Dar Global came after the announcement of its great unaudited interim results for the first half of 2023.
The company reported a profit before tax of US$ 20.8 million for the period of half-year 2023 (HY 2023), compared to US$ 3.7 million for HY 2022.
Revenues stood at US$ 108.4 million, compared to US$ 27.5 million in the same period a year earlier.
The company posted a gross profit of US$ 45.7 million, resulting in a gross profit margin of 42%.
Moreover, contracted sales for new and existing projects remained strong, with 1,281 units sold and a total sales value of approximately US$ 839 million as of June 30, 2023.
Ziad El Chaar, the CEO, said that 2023 was a milestone year for the company, following its strong performance in the first half.
El Chaar also stated that the successful listing on the London Stock Exchange in February was a significant step forward in supporting their ambitious growth trajectory.
Shares of Dar Global PLC , listed on the London Stock Exchange, can be traded on the Mubasher trading platform.