Deyaar traded down before earnings report

Developer attracts attention as Tamweel returns to lending.

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Tamweel's return to mortgage lending this week helped to spur intense interest in Deyaar Development, but most of the sentiment remains negative as the stock lost 4.5 per cent yesterday. The beleaguered Dubai property developer, the emirate's second largest, is expected to announce its third-quarter results this week. The share is now priced at 35 fils.

The company made a net loss of Dh243 million in the second quarter this year, compared with a profit of Dh76.4m for the same period last year. The developer was also in the red in the first quarter of the year, with a loss of Dh100m down to significant provisions. Chet Riley, an analyst at Nomura, forecasts another dismal performance in the company's third-quarter results. Mr Riley predicts a net income loss of Dh53m because of the lack of progress in the hand-over of four buildings scheduled for this year. "It is now looking increasingly unlikely and will result in a deferral of revenue recognition," he said. Despite this, Deyaar has been one of the most actively traded stocks in the past few days, with volume hitting 45.8 million yesterday.

Mr Riley said the activity was driven by two factors: regained confidence in underperforming stocks from risk-averse investors; and Tamweel's return to mortgage lending after a two-year hiatus.

"The fact Tamweel could provide mortgage financing will bode well for the so-called distressed companies like Deyaar," he said. The Islamic mortgage provider said it would offer up to 80 per cent financing of the current value of completed residential property in Abu Dhabi and Dubai. Dubai Islamic Bank rescued Tamweel in September after a "significant increase" in the equity stake by the bank from 21 per cent to 57 per cent, Tamweel said. Analysts said Deyaar still needed a clearly defined strategy for next year and beyond.

"We would need to get some reassurance from management regarding the strategy before we became more positive on the stock," Mr Riley said.