Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Where next for the share price of Dubai bellwether Emaar Properties?

 Anybody who picked up shares in Dubai mega developer Emaar Properties at the start of the year has seen their stock jump from Dhs1.77 to Dhs2.74 at the close last week. But if you had bought at almost Dhs11 a year ago there would be no cause for celebration.

Next week the Dubai Financial Market will digest the $350 million half-year loss posted after the market had closed on Friday. Emaar was forced to complete the write off of the full value of its disastrous US investment in John Laing Homes amounting to $470 million.

The half-year operating profit of $120 million was pretty credible in the circumstances of a 57 per cent slump in revenues to $951 million.

Future prospects

Going forward the outlook for Emaar stock depends on two factors that are very difficult to predict: will the oil price crash to $20 this autumn and cripple local business, or rise to $70-80? Analysts are pretty split on this question but it makes a huge difference.

Then there is the proposed merger of Emaar with the three property divisions of Dubai Holdings: will this be done on commercial terms or to the detriment of shareholder interests? It is impossible to call, and might well be hard to call even if the deal is done.

If history is any guide then the Emaar share price should hit a base and move sideways for several years. That is what happened after the 1999 Dubai stock market crash.

But at that point Emaar was a very different company, and still essentially a highly capitalized start-up. Now Emaar is in premature middle age and about to deliver the world’s tallest building, the Burj Dubai.

Rental income

The group has also become a substantial landlord with massive rental incomes from properties led by the flagship Dubai Mall. It also owns the largest portfolio of land in India, which ought to be a positive one day given the growth prospects there.

The problem is that short of an oil price boom prospects for a global hub city like Dubai in a deep world recession do not look that great, to say the least. Property prices are down by 40-50 per cent and could fall further in a deep downturn.

That said Emaar is a survivor, and there is a lot of upside in the share price if it is ever to return to previous highs of around Dhs30. But investors could find that their patience is sorely tried in waiting for a recovery.

Position: No holding long or short in Emaar Properties