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Exclusive: Revealed: UAE stocks trading below book value

January 2016

By Sunil Kumar Singh

January 14, 2016 | 09:45 | Dubai 

In a bull market, all eyes are on the companies’ stock prices. It’s only when the tide goes out and markets start getting wobbly that everyone returns to basics and looks out for stocks that are not fully valued. Here’s the list of UAE stocks with low price-to-book (P/B) values, shared exclusively by Marmore Mena Intelligence with Wealth Monitor.

Book value per share is generally considered a measure of value and it is arrived at by subtracting total assets of a company from its intangible assets and liabilities and divided by the number of outstanding shares. If the P/B is less than one, it indicates the stock is trading below its book value or in other words, stocks are trading for less than the value of the company’s assets.

But bargain hunters, beware! It could either be a value play or a value trap, caution experts. So don’t judge a book by its cover. While for many investors, P/B could be a measure for undervalued stocks it’s not the only one and it should not be seen in isolation. There’re several reasons why a stock trades at a deep discount to its book value. During tough market conditions, many companies, especially those into cyclical business, may trade at a discount to their book value.

So take an informed decision and consult an expert before investing or not investing in such stocks.

Markets in the UAE and the wider GCC region have been overwhelmed by repeated negative shocks in the past week, especially the oil price rout and the dip in Chinese equities. Year-to-date (YTD) DFM is down around 7% while Abu Dhabi index has lost 6.3%. Last year, UAE and the wider GCC markets closed lower, accentuated by the sharp fall in oil prices that weighed on investor sentiment. Overall, the combined market capitalization of GCC bourses dipped 11.4% to $856.3bn last year from $954.2bn in 2014.
UAE Stocks with low Price to Book Values (Data as of Jan 12, 2016)

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