Quarterly Result Update

Dubai Financial Market (DFM) reported an operating income of AED 121.40 million for 1H10, down 40.9% YoY.

Net profit declined 56.7% to AED 80.80 million.

We are revising our FY2010E operating income downwards by 39.0% due to lower trading activities. Accordingly, we have reduced our net profit estimate by 43.3%.

We are reiterating our UNDERWEIGHT recommendation with a revised target price of AED 1.05, implying a downside of 27.3%.

Net profit
Net profit plunged 56.7% to AED 80.80 million from AED 186.78 million in 1H09, due to declines in operating income, higher operating expenses and lower net investment income. In tandem, adjusted EPS stood at AED 0.020, down from AED 0.047 in the year ago period.

We had updated DFM on July 02, 2010 with an UNDERWEIGHT recommendation (target price of AED 1.34 with a 7.4% downside). Currently, the company’s stock is trading at a P/E multiple of 50.01x and 34.64x on 2010E and 2011E earnings, and at a P/BV multiple of 1.46x and 1.46x on 2010E and 2011E BVPS. Meanwhile, the stock has declined 23.4% since the beginning of 2010 compared to a loss of 6.8% by the Dubai Financial Market General Index (DFMGI). Considering the above factors, we have arrived at a target price of AED 1.05, implying a downside of 27.3% over its current price of AED 1.44 (as on August 11, 2010). Accordingly, we are reiterating our earlier UNDERWEIGHT recommendation on Dubai Financial Market.


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