Impairments to weigh heavily on Emaar

What's Down: A brokerage cut its price target for Emaar Properties shares, even before a new report showed that property prices in Dubai continue to decline.

The Cairo stock exchange. Property prices in Dubai have failed to improvesince unrest broke out in parts of the Middle East and North Africa, contrary to speculation that investors would flock to the Show more

A brokerage cut its price target for Emaar Properties shares yesterday, even before a new report showed that property prices in Dubai continue to decline.

Alembic HC Securities forecastEmaar's next three quarters would be weighed down by a Dh172 million impairment on Dubai Bank, sluggish property deliveries and a full write-down of the Islamic mortgage company Amlak Finance.

"We feel that the timing [of the impairments] may be unfavourable given the already weak earnings outlook for the year on the back of an expected slowdown in deliveries," Majed Azzam, an analyst at Alembic,told clients in a note yesterday.

The analyst cut the stock's fair value to Dh3.20, from Dh3.30, while maintaining a "neutral" rating.

Dubai Bank, which was known to have been under pressure for some time, was taken over by the Dubai Government on May 16. Emaar had a 30 per cent stake in the lender.

Amlak was suspended from trading in 2008 after the financial crisis cut its access to credit. Emaar holds a 45 per cent stake in the company.

"An impairment of Dh800m on Amlak this year now appears more probable, as it appears unlikely that the Government will intercede with a bailout that would benefit Emaar," Mr Azzam said.

Meanwhile, property prices in Dubai have failed to improvesince unrest broke out in parts of the Middle East and North Africa, contrary to speculation that investors would flock to the emirate as a safe haven, according to a Deutsche Bank report.

The report showed home values declined 1.2 per cent last month compared with the previous month and rents fell by 1 per cent, the analysts Nabil Ahmed and Athmane Benzerroug said in a note.

"Despite talks of renewed interest in real estate following regional unrest, there is no visible sign of an improvement," they said.

Dubai property prices have dropped 64 per cent from their peak in mid-2008, while rents have fallen by 55 per cent, according to Deutsche Bank.

Emaar closed 0.9 per cent higher at Dh3.12 yesterday.