Dubai: Morgan Stanley and Nomura Holdings Inc. say it's time to bet on a rebound in Dubai's tourism industry as 200,000 travelers fly in to the city for the Christmas and New Year holidays. The rollout of COVID-19 vaccines, a thaw in relations with Israel, and the rescheduled Expo 2020 exhibition will benefit the emirate, the strategists say.
The travel rebound and Expo in October will bring a "better-than-expected impact on growth and profits," said Tarek Fadlallah, the CEO of Nomura Asset Management's Middle Eastern unit. Katherine Carpenter, a London-based equity analyst at Morgan Stanley, predicted a "bumper winter tourism season," in 2021, as well as a "small but incremental boost" from an easing of regional tensions.
Built on trade and tourism in a region reliant on oil, Dubai was hardest hit in the region as both industries stumbled amid the pandemic. The emirate reopened its doors to international travelers in July, but tourist traffic is only picking up now.
Gains to be made
Emaar Malls, the company that owns Dubai's biggest shopping center, is Morgan Stanley's top pick within the UAE's equity market. Its estimated price-to-earnings in the next 12 months was at 15 times on December 16, a discount of about 50 per cent versus emerging-market retailers tracked by MSCI Inc.
Its parent, Emaar Properties, is trading at about half the price of the MSCI EM Index based on the same metric and stands to benefit given its share in Emaar Malls as well as other hospitality and entertainment assets. Damac Properties Dubai Co. is up 29 per cent this month, the most among members of the DFM General Index.
At the same time, Hasnain Malik, the Dubai-based head of equity strategy at Tellimer, struck a note of caution, predicting a "stuttering process" of recovery. "Not every hotel or shop will be able to weather the downturn."