Dubai property roulette mauls Amlak as analysts say told-you-so

Amlak is sinking more than five times faster than Dubai’s benchmark index after peaking on July 1

Bloomberg/DubaiBack in June, Amlak Finance rose by the maximum allowed for six straight days on Dubai’s stock market as investors defied analyst warnings against buying the shares.Less than three months later, the Shariah-compliant mortgage provider is sinking more than five times faster than the emirate’s benchmark index after peaking July 1.“If you’re looking for a gamble on the market, Amlak is your roulette table and you’re betting on zero,” Ahmed Shehada, the head of advisory and institutions at NBAD Securities, the brokerage of the UAE biggest lender, said by e-mail from Dubai on August 13. “The company will need a long time before it starts reporting numbers that are worth mentioning.”For Amlak, read Dubai’s property market. Real-estate transactions in the Gulf business hub that’s home to the world’s tallest skyscraper and biggest shopping mall dropped almost 30% in the year through July, according to the emirate’s land department. Amlak’s profit collapsed in the second quarter partly as clients repaid loans faster than it booked new business.Investors had been warned. The same month that the company resumed trading following a six-and-a-half year suspension, Standard & Poor’s said Dubai residential property prices may decline as much as 20% this year due to falling demand and increased supply.Amlak, which is 45% owned by Dubai’s flagship real estate developer Emaar Properties, was rescued by the government in 2008 after the global financial crisis tightened credit and forced the company to negotiate with lenders.Investors snapped up Amlak shares when they resumed trading in June, buoyed by the company’s restructuring plan. Shehada was among analysts who said at the time the stock was too expensive.The company’s profit slumped almost 90% to 7.2mn dirhams ($2mn) in the second quarter compared with a year ago, as income from Islamic financing and investing declined 30%. Amlak also had an expense of 51.4mn dirhams related to the amortisation of investment deposits.“While we are aware of our customers deleveraging or selling their properties, we tend to de-link this from our new business origination strategy,” Arif Alharmi, chief executive officer of Amlak, said in e-mailed comments on August 16. “This will allow us to shift our customer base towards our desired target segment, which is the investor segment.”Amlak remains too dependent on the sale of real estate assets rather than on financing and isn’t transparent enough about its restructuring, according to Vishal Gupta, assistant fund manager at Rasmala Investment Bank Ltd in Dubai.“This quarter isn’t very promising,” Gupta said by phone on August 13. “We still have to see how their financing book grows.”Even after dropping 22% since the peak, the stock is the best performer on Dubai’s benchmark stock index since it re-started trading, more than doubling in price.The shares’ 10-day volatility is the highest on Dubai’s DFM General Index.NBAD’s Shehada says the shares may be worth reconsidering should they drop toward 35 fils to 40 fils. That’s at least 82% below Monday’s opening price.