London, UK, 2 November 2023

Edison issues initiation on Dar Global (DAR): More luxury brand retailer than housebuilder

Dar Global is a developer of premium-priced luxury branded residences, led by a management team with a track record of successful long-term delivery. It employs a ‘capital-light’ business model that reduces risk and allows for rapid scalability. It is in the early stages of delivering over 5,700 residences in the Middle East and Europe, with an ambition to expand the portfolio in number and geography. It also intends to develop a hospitality portfolio. We anticipate that Dar Global will generate a return on equity in the high teens and we value the company on a multiple of shareholders’ funds basis at c US$930m (US$5.17/share), implying c 40% upside.

Dar Global remains in the early stages of its development, although management has a long and successful track record in the space. It targets a 15% return on investment in Gulf Cooperation Council (GCC) countries and 12% elsewhere, but we believe it should generate a return on equity in the high teens by FY24 and FY25, which justifies valuing the company on a multiple of 1.5x estimated shareholders’ funds. Taking our forecast FY25 shareholders’ equity values the group at c US$930m versus a current market capitalisation of US$662m, therefore implying c 40% upside. Further upside could be justified.

  
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