Morgan Stanley, Nomura Say It’s Time to Bet on Dubai Tourism

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Morgan Stanley and Nomura Holdings Inc. say it’s time to bet on a rebound in Dubai’s tourism industry as200,000 travelers fly in to the desert city for the Christmas and New Year holidays.

The rollout of Covid-19 vaccines, a thaw in relations with Israel and Qatar, and the rescheduled Expo 2020 exhibition will benefit the Gulf Arab 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 chief executive officer 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 Gulf Arab 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. S&P Global Ratings sees the economy contracting almost 11% in 2020.

Emaar Malls PJSC, the company that owns Dubai’s biggest shopping center, is Morgan Stanley’s top pick within the United Arab Emirates’ equity market. Its estimated price-to-earnings in the next 12 months was at 15 times on Dec. 16, a discount of about 50% versus emerging-market retailers tracked by MSCI Inc.

Its parent, Emaar Properties, the developer of Burj Khalifa, the world’s tallest building, 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., a real estate developer that owns mix-use commercial properties, is up 29% 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. “There will be casualties along the way.”

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