Theme-Park Owner's Scary Dubai Stock Drop May Get Even Worse

(Bloomberg) -- Theme-park owner DXB Entertainments PJSC, whose stock has tumbled more than 30 percent this year, could be poised for a deeper slide starting next month.

The shares have already slumped almost 3.6 times more than Dubai’s equity benchmark as the operator of a Legoland and a Bollywood-inspired attraction reorganizes debt and visitor numbers fall short of targets. That may worsen if the decline in market value prompts MSCI Inc. to cut the stock from its emerging-market index next month. Such a step could trigger outflows as much as about $33 million, said Mohamad Al Hajj, an equities strategist at the research arm of EFG-Hermes Holding.

Theme-Park Owner's Scary Dubai Stock Drop May Get Even Worse

The park operator, the second-worst performing stock in Dubai this year, is among 11 United Arab Emirates companies included in the MSCI Emerging Markets Index, a reference for many money managers who track stocks in developing nations. Its market value is now about 33 percent below the threshold required by the index compiler, Al Hajj said.

“Given the price move year-to-date, it is safe to assume that the news is largely in the price,” he said. “But, depending on the liquidity on the actual trading day of the event, we could see some more weakness before a recovery,” he said, referring to any index change.

DXB Entertainments declined to comment on a potential exclusion by MSCI. Its shares have dropped 75 percent from their 2016 peak, before the company opened Dubai Parks & Resorts, its main attraction.

While the number of park visitors fell short of projections last year, it was 45 percent higher in the first quarter than the same period in 2017, the company said on April 12. It is sticking with a plan to open a Six Flags-branded park in Dubai in 2019, Chief Executive Officer Mohamed Almulla said last month.

MSCI is expected to announce its semi-annual index review on May 14, with changes effective from May 31.

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