Union Properties denies merger reports as real estate stocks remain under pressure

Union Properties (UPP) said in a statement issued to the Dubai Financial Market on Monday that it was “not considering any merger” after rumours had emerged about a potential tie-up with another Dubai-based developer.

Following reports in Arabic media that the company had been assessing a tie-up with Dubai-based Deyaar Development, Union Properties said in its statement that “the management of the company would like to point out that it is currently not considering any merger and in the event that such merger exist(s), the company’s management will follow the procedures prescribed by the laws, regulations and the disclosure and transparency rules”.

UPP and Deyaar had previously held merger talks back in 2009, but the fallout from the financial crisis put paid to the deal at that time.

Amer Saqfelhait, AVP trading manager at Al Mal Capital, said: “Overall, we still see some pressure on the real estate sector as a whole.”

Both developers are close in terms of market capitalization, with UPP having a market cap of just over $800 million and Deyaar having a market cap of $714.27 million.

“In all cases, if this merger takes place, it would be beneficial to both of them and the whole sector as well,” Saqfelhait added.

Property stocks have performed badly in the UAE so far in 2018 due to the underlying weakness of the real estate market. An index of UAE property shares has declined by 27.31 percent since the start of this year, data from Thomson Reuters Eikon showed on Monday.

UAE’s real estate shares appear to be oversold overall, according to the Relative Strength Index (RSI 14). The index is a measurement between zero and 100. Traditionally, the RSI is considered overbought when above 70 and oversold when below 30.

Data from Thomson Reuters’ Eikon shows that Thomson Reuters UAE Real Estate Development & Operations Index has an RSI of 27.528.

UPP is down 29.44 percent so far for this year, while Deyaar is 6.53 percent lower compared to the start of 2018.

UPP ended the day 0.44 percent higher on Monday, while Deyaar added 0.88 percent, but Dubai’s index closed 0.31 percent lower, dragged down by a retreat in the shares of Drake and Scull International, which dropped 2.56 percent.

Elsewhere in the region, Abu Dhabi’s index edged 0.07 percent lower on Monday, Qatar’s index dropped 0.38 percent, while Oman’s index dropped 0.74 percent. Kuwait’s index edged 0.07 percent lower and Bahrain’s index was 0.35 percent higher.

Saudi Arabia’s index was closed for a national holiday, while Egypt’s index was 0.48 percent lower by 16:11 GST.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@thomsonreuters.com).