Emaar Properties PJSC fell the most in more than seven weeks after EFG-Hermes Holding SAE cut the stock to neutral from buy as it said a surge in the shares may be overdone given the outlook for international operations.
The shares of the developer of the world’s tallest skyscraper decreased 3.6 percent, the most since Feb. 3, to 5.07 dirhams at the close in Dubai. Emaar was the biggest decliner and most traded on the benchmark DFM General Index, which slumped 1.6 percent to 1,836.71, the weakest since Jan. 28.
“The Dubai recovery is already priced in,” Cairo-based EFG-Hermes analysts Jan Pawel Hasman and Shaza El Kady said in a note dated yesterday. “Going forward, Emaar’s growth is likely to depend on its ability to replicate its existing Dubai experience internationally, which could prove challenging.”
Emaar has surged 35 percent this year, making it the second best-performing stock on Dubai’s stock index, as it benefits from a property recovery in the emirate that was on the brink of default in 2009. The company is seeking to diversify revenue with plans to expand in Egypt and Iraq. Emaar, which also operates in China, Pakistan and Syria, derived 28 percent of sales from outside of the U.A.E. in the fourth quarter, according to data compiled by Bloomberg.
Despite cutting its recommendation, EFG-Hermes raised the price estimate on the stock to 6 dirhams from 5.15 dirhams, citing Emaar’s recurring income. Emaar is poised to report a 5 percent increase in 2013 earnings after an advance of 18 percent last year, according to the mean estimate of 12 analysts compiled by Bloomberg. The stock’s 50-day volatility rose to 33 today, the highest since April, according to data compiled by Bloomberg.
“The sentiment-driven market is likely to become increasingly erratic, and the stock’s volatility could increase in the medium term,” Hasman and El Kady said.
Dubai announced in November plans to develop a new district with the world’s largest mall, 100 hotels and gardens larger than London’s Hyde Park, which Emaar will co-develop. That followed plans to form a joint venture with Iraq to help develop and manage housing projects in the country as well as a deal with Al-Futtaim Group to develop Cairo Gate, a project valued at 5 billion Egyptian pounds ($735 million).
Ten analysts recommend investors buy the developer’s shares, while five say hold them and one says sell, according to data compiled by Bloomberg.