Tamweel PJSC fell the most in seven weeks after Dubai Islamic Bank PJSC’s offer to take over the mortgage provider via a share swap was seen by Al Ramz Securities LLC as providing “limited upside” for the stock.
Shares of Tamweel fell 4.2 percent, the most since Nov. 19, to 1.14 dirhams at the close in Dubai. About 25 million shares were traded, five times the three-month daily average. Dubai Islamic, the United Arab Emirates’ biggest lender complying with Shariah banking laws, slipped 1 percent to 2.04 dirhams. Tamweel was the biggest decliner on a percentage basis on the benchmark DFM General Index, which gained 0.7 percent.
Tamweel shareholders will be offered 10 Dubai Islamic shares for every 18 held, the bank said Jan. 3. The fair value of Dubai Islamic and Tamweel shares was set at 2.25 dirhams and 1.25 dirhams, respectively. Tamweel shares, which resumed trading in May 2011 after being suspended in 2008, will be delisted from the stock market after completion of the takeover.
“The valuations of Dubai Islamic and Tamweel from the appointed adviser imply a limited upside,” said Talal Touqan, head of research at Al Ramz in Abu Dhabi. “The deal makes Tamweel 100 percent dependent on Dubai Islamic’s price till the transaction takes place, as a no-arbitrage situation dictates a lower price for Tamweel unless Dubai Islamic rises back to higher levels.”
Tamweel, which has a market value of 1.14 billion dirhams ($310 million), may post a 40 percent drop in 2012 profit, according to an EFG-Hermes Holding SAE estimate compiled by Bloomberg. Dubai Islamic may post full-year net income that’s little changed, according to the median estimate of three analysts on Bloomberg.
The takeover offer followed the U.A.E. central bank’s decision to cap mortgages for foreigners and nationals at 50 percent and 70 percent of the property values, respectively. Dubai’s real estate market is showing some signs of recovery after prices plunged about 65 percent over four years after the global credit crisis, bringing the emirate to the brink of default in 2009.
“Such inorganic growth might help give Dubai Islamic an advantage of expanding its loan portfolio, without going through the hassle of the newly set cap limits,” Touqan said.