Union Properties’ stock has been having a wild ride


UAE indexes closed the week on a strong note, helped along by banking heavyweights.
Image Credit: Gulf News Archive

UAE equities had a strong day with DFM rallying 1.35 per cent and ADX gaining 1.25 per cent. The heavyweight Emirates NBD was the key driver on DFM, while another financial institution, First Abu Dhabi Bank, drove ADX.

Aramex rallied 3.34 per cent on better than expected results while Union Properties managed to close the week in the black by 0.30 per cent.

The shares of UP have been pretty volatile in recent times. In an exchange filing on June 28, Union Properties had mentioned that it was in the last stages of debt restructuring.

There are rumors floating that the company will be selling some of its key assets as a part of final settlement. An asset often mentioned in this breath is the Autodrome.

Adding up to a sizeable pile

The accumulated losses has crossed billions of dirhams, with write-offs in the value of the assets. The debt on the balance sheet stands at Dh1.8 billion when compared to cash in hand of Dh260 million.

The fundamental reason behind the huge losses was the demand-supply imbalance in the Dubai property market. One possible trigger for an up move in Union Properties’ shares can be the outcome of a legal arbitration case initiated for the recovery of Dh1.5 billion.

The arbitration is happening in front of an international tribunal in Dubai and an outcome is expected by the end of 2021.

Surfing on ecommerce

Meanwhile, revenues of Aramex grew 4 per cent year-on-year in the second quarter to Dh1.33 billion driven by surge in ecommerce activities. The company is a good play as logistics is the vital cog of online trade.

Before the pandemic, Aramex had a compounded annual growth rate in revenues of 5.15 per cent over the last five years, while profit more than doubled from 2012 to Dh499 million in the last year.

Another interesting aspect is that Mohamed Alabbar, who is one of the promoters of noon.com, is a stakeholder in Aramex. The shares of Aramex, traded on DFM, are currently above the 50-,100- and 200-day simple moving average, indicating bullishness. The stock also yields almost 4.85 per cent.

Among other news, Khaleeji Commercial Bank issued a $159 million Sukuk issuance which was fully subscribed by GFH group. The sukuk will go towards Additional Tier 1 capital and also help develop online solutions for its customers.

– Vijay Valecha is Chief Investment Officer at Century Financial.

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