EFG Hermes maintains buy rating for Emaar Malls on long-term business prospects and solid business model

The company has access to an undrawn Dh6.6bn credit facility that offers comfort in its liquidity position, especially in view of current market conditions

Dubai Mall shoppers told they will need to wear gloves as well as masks. AFP

EFG Hermes maintained its buy rating for Emaar Malls Group based on the long-term prospects of Dubai's global positioning as a business and retail hub and the company's business model.

The retail arm of Emaar Properties, the biggest UAE property developer, is currently trading at about 50 per cent discount to its five-year average, EFG Hermes, the biggest-listed investment bank in the region, said in a note to investors on Sunday.

Like other mall operators in the region and beyond, Emaar Malls is facing headwinds due to the coronavirus pandemic.

However, despite recent changes in the market conditions, the “long-term picture is still relatively positive”, EFG said.

"Amid the currently challenging operating environment, Emaar Malls Group's solid business model stands out, in our view."

EFG Hermes said Emaar Malls' market positioning, its ability to outperform the wider-market averages in terms of occupancies and lease rate growth, as well as gross leasable area portfolio across various segments, sets it apart from the other operators.

The company’s “exposure to the largest and most prominent retail groups in the region” also adds to the “uniqueness” of its model, it said.

Emaar Malls also has a strong balance sheet and access to Dh6.6 billion credit facility that is untouched and offers comfort in its liquidity position, especially in view of current market conditions, EFG said.

In February, the company reported a 2.5 per cent jump in its 2019 net profit as revenue climbed 5 per cent, driven by the strong performance of its shopping malls and online retail business.

Net profit stood at Dh2.29bn and revenue for the reporting period rose to Dh4.673bn.

The government enforced movement restrictions and forced malls to shut down in March to stem the spread of Covid-19. Malls were allowed to reopen last week at a limited capacity of 30 per cent.

In an interview with CNN, Mohamed Alabbar, Emaar Properties chairman and board member of Emaar Malls, said the emirate's retail sector will see a gradual recovery by the middle of 2021.

Dubai will rebound from the crisis in "better shape" than other cities across the world, thanks to the size of its commercial hub and its lack of dependence on oil, he said after Dubai Mall reopened.