• Upgrade rating to Buy, on recent stock price weakness We maintain our fair value of AED3.08/share, implying an upside of 28% and thus upgrade our rating to Buy. The stock price is down 13% YTD, underperforming DFMGI (-5%), which we believe is unjustifiable, given the company’s strong earnings visibility and solid business model. The stock is trading at 2016e PER of 15.3x and 11.7x in 2017e, and an EV/EBITDA of 13.5x and 11.0x, respectively. Moreover, we expect improved dividend yield; estimating 4.7% in 2016 and 7.0% in 2017. We highlight: i) the start of operations of TDM Fashion Avenue extension (expected mid this year); and ii) the release of improved tourism numbers, as two stock triggers.
• 4Q2015: We do not expect negative surprises We do not expect 4Q2015 to carry any negative surprises, with sequential improvement to be seen across the board, compared to 3Q, which was affected negatively by seasonality. We estimate revenue of AED787.0 million, EBITDA of AED566.5 million, translating into an EBITDA margin at 72.0%, and net income of AED410.4 million. We expect the overall portfolio occupancy rate of 96%, in line with 9M2015 numbers.
• Operations remain intact; maintain our forecast We believe EMG’s operations will continue to be strong despite the less-robust outlook for Dubai tourism and retail spending, in light of the lower oil environment. This is supported by the higher representation of base rent in total revenue, indicating lower sensitivity to changes in tenant sales. We expect the Fashion Avenue expansion to become operational in 2H2016, supporting a double-digit growth rate in the revenue in 2016-17. We note that the revenue breakdown for the Dubai Mall extension will be more dominated by base rent, rather than turnover rent with lease contracts concluded at attractively high lease rates (of 30% of planned GLA having heads of terms signed). Leveraging on its strong market position, being a market leader in Dubai's growing retail market, we estimate EMG to witness 2015-19e rental revenue CAGR of 14%,14% for EBITDA and 20% for net income, whilst keeping its EBITDA margins at a high range, forecasting +75% starting 2015e.

Mai Attia
Sara Boutros