Emaar Drops to Three-Year Low as Investors Doubt Share Buyback

By Matthew Brown and Glen Carey

Sept. 14 (Bloomberg) -- Emaar Properties PJSC dropped to the lowest since April 2005 as investors doubted the Middle East's largest real-estate developer will follow through with a plan to buy back 10 percent of its shares.

``The market doesn't seem convinced that Emaar will complete the 10 percent share buyback,'' Ali Khan, head of equity trading at Arqaam Capital Ltd. in Dubai, said in a telephone interview.

Emaar lost 3 percent to close at 7.34 dirhams. The shares earlier surged as much as 6.1 percent.

The Dubai-based company yesterday said it plans to begin the buyback from the beginning of October because the shares, down more than 50 percent this year, are undervalued. Emaar received regulatory approval in December to buy back 10 percent of its stock. In the United Arab Emirates companies have one year to complete buybacks once they have been approved, giving Emaar a little more than three months to purchase the shares.

Emaar bought only around 3 percent of its stock after announcing in May 2006 that it planned to buyback 10 percent, said Zahed Chowdhury, head of research for Deutsche Bank AG in the Middle East, in a telephone interview from Dubai.

``They have announced the intention to buyback shares; if they don't go ahead with it, then it's not going to be seen positively by the market,'' said Chowdhury. He has a ``buy'' recommendation on the shares and a price estimate of 16.50 dirhams.

The Dubai Financial Market Real Estate Index has fallen 45 percent this year on concern that property growth in the emirate may slow and after arrests at some of Dubai's largest property companies, including Deyaar Development PJSC and Tamweel PJSC, the U.A.E.'s second-largest home finance provider. Emaar has not been implicated in any of the investigations.

To contact the reporter on this story: Matthew Brown in Dubai at mbrown42@bloomberg.net; Glen Carey in Dubai at gcarey8@bloomberg.net.