Builder of World’s Tallest Tower Seen Buoyed in 2017 by Oil Recovery

  • Emaar’s shares 2nd-best among EM real estate this month
  • Newest Dubai tower to top height of current world’s tallest

The rally in one of emerging-markets’ best performing real estate stocks this month will probably extend into 2017.

Emaar Properties PJSC, the builder of the world’s tallest tower in Dubai, will likely gain next year as the emirate’s economy absorbs the effects of higher oil prices after major global producers agreed to cut output, said Marwan Shurrab, a fund manager and head of trading at Dubai-based Vision Investments & Holdings.

Having started this year on a $1 billion skyscraper in Dubai that will be even taller than Burj Khalifa, Emaar is a good choice for investors seeking exposure to the sheikhdom’s markets, he said. The developer, which is 30 percent owned by the Dubai government, rose on Monday to the highest level in 16 months.

“Although Dubai is a market that doesn’t rely on oil as much as its neighbors, it will feel the impact of a pick-up in several different industries,” Shurrab said. “There is positive momentum building up. The stock is rebounding to a more fair price level.”

* EFG-Hermes U.A.E. Ltd. reaffirmed its buy recommendation Tuesday and has a price estimate of 10.29 dirhams per share, compared with yesterday’s close of 7.68 dirhams.
* Stock is up 13% this month through Tuesday, second in performance only to Sunac China Holdings Ltd. on the MSCI EM Real Estate Index.
* Emaar outperforms Dubai’s DFM General Index, which is up 7.9 percent this month; Emaar makes up 22.6% of the index.
* “Dubai’s proxy name Emaar is benefiting the most from the increased rotation from EM bonds to equity,” said Julian Bruce, the head of institutional trading at EFG-Hermes U.A.E. in Dubai, a unit of the biggest publicly traded Arab investment bank.

Valuation to Peers

* Emaar is trading at 9.5 times its estimated earnings, according to data compiled by Bloomberg.
* Third-quarter net profit was 1.15 billion dirhams ($313 million) versus 843 million a year earlier, below the mean of four analyst estimates of 1.22 billion dirhams.
* CEO Mohamed Alabbar said last week the company should see growth next year even amid the correction in the housing market, and that Emaar will be "tightening its belt."

* The number of shares exchanged was above the stock’s 15-day average in the last five sessions.
* Stocks gained earlier in December after a local newspaper reported the developer signed an insurance settlement of 1.2 billion dirhams for a fire that engulfed one of its hotels on New Year’s Eve.

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