Tamweel's improved liquidity position should allow the Dubai mortgage firm to capitalise on expected growth in the UAE's property market, according to an analyst at Alembic HC Securities.
The firm "has extended the duration of its obligations to five years. This has led to a solid matching of cash flows, fixing the mismatch position that existed before last year", said Jaap Meijer.
He initiated coverage with an "overweight rating" and a target price of Dh1.42 a share. The stock lost 2.1 per cent yesterday to close at Dh0.94.
Tamweel shares resumed trading last month on the Dubai Financial Market after being suspended for more than two years when the financial crisis cut the company's access to credit.
The UAE's mortgage market is expected to grow by 6 per cent this year and 7 per cent next year, said Mr Meijer. He believes the market could improve further if the larger economic backdrop turns positive, helped by improving liquidity, falling interbank rates, increasing affordability and rising risk appetite among banks.
Emirates NBD recently launched a mortgage promotion offering annual rates as low as 7 per cent, with even better rates available to UAE nationals. This compares with Tamweel's promotion of 5 per cent for its premium customer base. Tamweel will most probably use the strong cash balances of its parent company, Dubai Islamic Bank, to address any funding gaps in the future, Mr Meijer said. The company can also tap into the interbank market, placing new debt through medium-term notes, and securitising assets, he added.
Tamweel pays an average of 4 per cent on its wholesale debt against a 12-month interbank rate of 2.3 per cent, which is expected to fall further thanks to improving liquidity.
"Given Tamweel's 30 per cent market share in retail mortgages, we believe it is well placed to benefit from the improving market dynamics as it moves from a restructuring mode in the past two years to a growth phase starting this year," Mr Meijer said.