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Wed 28 Jan 2009 01:22 PM

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UBS cuts target price on real estate giants

Investment bank takes decision on continuing concerns over exodus of expat workers from UAE.

UBS on Wednesday cut its target price on Emaar, Aldar and Union Properties, on continuing concerns over the outflow of expat workers from Dubai and flat population growth in the UAE capital.

On a positive note, the Swiss investment bank believes the companies will be able to repay their debt, given strong results in 2009 from property handovers.

UBS cut its target price for Emaar by 34 percent to AED2.30, for Aldar by 33 percent to AED5.00; and for Union Properties by 44 percent to AED0.70.

“We…would not be surprised to see the market continue to exhibit high volatility and potentially seek lower levels in the coming quarters as retail investors react to relatively disappointing headline earnings and outlook for 2009,” analyst Saud Masud said in a research note.

The bank’s previous estimate of an 8 percent population decline in Dubai this year followed by a 2 percent decline next year could be conservative, he added.

“In our view expat-led population outflows in Dubai and flattish trends in Abu Dhabi will pressure house prices in the foreseeable future.”

Shares in Aldar, Abu Dhabi’s largest developer by market capitalization, may have been oversold, Masud said. “While UAE regional markets and house prices may be well correlated, we believe downside risk is better mitigated with Aldar given relatively stable macro backdrop.”

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Skeptical 11 years ago

Since the current prices for Emaar, Aldar and Union Properties are all BELOW the "new" targets by UBS, is UBS just a little late in adjusting their projections? These guys crack me up. I think all the pundits should go find another job since they obviously are not doing so good in their current job.

Karl Haddad 11 years ago

When all is well, 'entities' such as Banks and research groups are pretty good at saying what will happen. It took EFG 6 years to finally get their prediction of property bubble to actually come true. Anybody who listened to them would have lost tens of millions in doing so. Now we look at the other side of the coin: UBS finally wakes up to tell us the new valuations, months after they crash and nearly bottom out, but their last target prices where drastically different. In a nut shell, rather than listen to these people who are as likely to get it right as they to get it wrong, I would say the following: Listen to yourself. On average every 9 yrs there is a recession of varying magnitude, so what do you do: SIMPLE. You buy half way through a recession and sell after 7-8 yrs. then you take a 2 yr sabatical. And this is free from me! Oh and on another factual note; fix your own home before telling others how to fix theirs, how many billions did u lose last year again?

Mohamed Djirdeh 11 years ago

These days the least to consider is this type of advice, after the event. In fact UBS is just correcting it's earlier wrong advice and readjusting the earlier mistaken estimates. For such AUGUST financial inistitution custmers and the public deserve more proffessional and seroius advice, not what we can find in any newspaper. Expats are leaving UAE & especially in Dubai in droves, due to lack of employment & high costs. Begining of end of May, after schools close, the out flow will be subistantial. The best the goverment can do is to issue a year or two free residence visa for all ex-employees to look for a job.