Deyaar Development PJSC, a builder of homes and commercial towers in Dubai, climbed to the highest level in more than 16 months as investors sought cheap valuations amid a recovery in property prices in the emirate.
The stock rose 4.9 percent to 44.8 fils at the close in Dubai, the highest since March 2012. About 117 million shares traded, or 4.7 times the three-month average. Deyaar was the most-traded stock on the Bloomberg GCC 200 Index and the biggest gainer on Dubai’s benchmark gauge, which fell 0.6 percent.
Dubai’s property prices, which crashed more than 65 percent from a peak in 2008, are recovering as the economy rebounds amid an acceleration in tourism and retail trade. Deyaar trades at 0.7 times book value, compared to a multiple of 1.1 for Emaar Properties PJSC, developer of the world’s tallest tower.
Rising property prices boosted Emaar’s valuations, while those of Deyaar and Union Properties PJSC, another Dubai developer, “have not seen the same interest and underperformed the market significantly,” Amer Khan, a Dubai-based director at Shuaa Asset Management, said by e-mail today. “It’s natural for investors to rotate into the laggards eventually, and Deyaar is a significant one.”
Deyaar’s shares have gained 27 percent this year, trailing a rally of 65 percent for Emaar and compared with a gain of 5.1 percent for Union Properties, which is controlled by Dubai’s biggest bank. Deyaar has been trading at a discount to Emaar since April 2012, data compiled by Bloomberg show.
Home prices in the Persian Gulf business and trading hub, which is also home to the world’s biggest man-made island, have climbed 28 percent on average in 2013, according to Cluttons LLC. The emirate’s economy expanded 4.4 percent last year, the fastest pace since 2007, government data show, boosted by an upturn in domestic real estate sales.
Deyaar reported a 47 percent advance in second-quarter profit to 27.3 million dirhams ($7.4 million) on Aug. 1. Two analysts recommend investors hold the shares, according to data compiled by Bloomberg.
The stock “should certainly trade at a discount to Emaar, but whether a nearly 40 percent discount is justified in a market that is recovering with catalysts on the horizon warrants careful consideration,” Shuaa’s Khan said. “Though challenges do exist, the improvement in the real estate market and sentiment in Dubai makes it easier for these challenges to be addressed.”