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Egypt-based financial services provider CI Capital is penciling in 4.9% real GDP growth for the UAE this year, with the tourism and real estate sectors driving the rally, according to a research note seen by EnterpriseAM UAE. While the investment bank expects the UAE’s “positive fundamentals and steady population growth” to fuel domestic demand, it noted that “the UAE remains relatively more susceptible to external shocks.”
Top equity picks for 2025: The asset manager assigned an “overweight” rating for companies including Dubai Islamic Bank, Emaar, Adnoc Drilling, and Dewa. Here’s what you need to know about the investment case for each:
Emaar’s retail and hotel segments are set to benefit from the population growth targets for this year, along with other development related targets. The company’s diversified portfolio of offerings is expected to hedge against future development downturns. The real estate company offers a high dividend yield of c. 8%.
The downside risks for Emaar include lower demand for real estate in light of a global slowdown, and geopolitical tensions.
Adnoc Drilling’s stock is expected to trade at lower price relative to its growth potential in 2025 with a price/earnings-to-growth ratio (PEG) of 0.94x compared to its peers’ 1.14x, suggesting the stock is undervalued. The drilling company is also set to achieve positive growth rates in revenues of certain projects, along with a 10% annual increase in dividends per share (DPS). It will also benefit from the USD 1.5 bn acquisitions planned by its JV Enersol, along with its potential expansion into Kuwait and Oman.
The downside risks for Adnoc Drilling include a slowdown in Abu Dhabi’s oil and gas growth appetite, suppressed oil prices, along with further supply cuts, and geopolitical tensions.
Dubai Electricity and Water Authority’s (Dewa) stock is expected to trade at a lower price relative to its growth potential this year with a price/earnings-to-growth ratio (PEG) of 3.74x compared to its peers’ 5.1x. Potential interest rate cuts are expected to “bode well for stock performance, resulting in better dividend yields compared with treasuries,” CI Capital said. The company is also in for positive CAGR rates for revenue and EBITDA, and is expected to benefit from higher margins thanks to a shift towards renewable power generation.
The downside risks for Dewa include “weaker-than-expected demand on the back of slower-than-expected population growth figures,” as well as continued growth in the prices of key commodities such as copper — which is critical for renewable projects — and aluminum.
