BUY OR SELL-Can Emaar escape Dubai's property woes?

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* Emaar shares over-sold after Dubai property crash

* Most of Burj Khalifa revenues still to be booked

* Opaque results make it tough to judge diversification

By Matt Smith

DUBAI, Aug 29 (Reuters) - Dubai's Emaar Properties EMAR.DU, builder of the world's tallest tower, offers value for long-term investors, but opaque earnings make it difficult to gauge its diversification into malls and hospitality.

Emaar's second-quarter profit came in below forecasts at 802 million dirhams ($218.4 million), but this shortfall was due to a slower-than-expected handover of units from the 828-metre high Burj Khalifa, rather than a loss of value.

These revenues are now slated to be transferred to the second-half of 2010.

Emaar's move into hospitality, mall management and property rentals give it more predictable, recurring income.

But property development remains its core business and there are scant signs of a turnaround in Dubai's battered real estate sector, with prices down about 50 percent from 2008 peaks, while Dubai's estimated $110 billion debt burden makes it an unattractive macroeconomic play for foreign investors.

BUY

"Emaar's current share price only prices in its tangible assets that are producing cash flow and ignores its land bank, international operations or properties that have already been sold and are about to be delivered," said Fadi Al Said, lead fund manager for ING Investments' MENA fund and head of MENA equities.

"Emaar isn't the best opportunity in the region, but it is at very attractive valuations and long term, it will continue to be a successful company."

Chet Riley, Nomura property analyst, said Emaar's valuation of its property assets is conservative, with the developer giving a book value of 8.5 billion dirhams, while the current market value is about 15 billion dirhams.

Emaar's shares are 79 percent below a January 2008 peak and today trade at a price-to-earnings ratio of 6.8, a marked discount on other regional developers such as Abu Dhabi's Sorouh Real Estate SOR.AD and Qatar's Barwa Real Estate BRES.QA, which have p-e ratios of 11.7 and 9.8 respectively.

"Usually the best investments are made during tough times or when there is strong negative sentiment towards a sector," said ING's Said.

"Emaar has been taken as a proxy for Dubai real estate, which is struggling and is not expected to recover in the short term. This has created a very bad perception on Emaar from investors who are less familiar with the stock."

SELL

Robert McKinnon, ASAS Capital chief investment officer, warned against over-playing Emaar's diversification.

"The recurring revenue argument becomes difficult to make when we don't know exactly how much money this generates - Emaar's results are too opaque," said McKinnon. "Hopefully, Emaar will start reporting by market segment so we can see the revenues from its malls and hospitality businesses and value these relative to other operators."

These alternative revenue streams are also low growth, McKinnon said, while further expansion -- building new malls or hotels -- is expensive and UAE property developers typically offer little visibility on project handovers, default rates or construction costs.

Dubai Mall, one of the world's largest shopping centre, is among Emaar's assets and it also has a joint venture with Italian fashion house Georgio Armani to develop hotels.

There are also some overhangs on Emaar's balance sheet. It faces an estimated impairment of about 500 million dirhams from its mortgage subsidiary Amlak AMLK.DU, which would be around 3 percent of Emaar's net asset value.

Amlak's shares and those of rival provider Tamweel TAML.DU have been suspended since November 2008 ahead of a mooted merger as their business model of financing loan-term lending with short-term borrowing collapsed in the financial crisis.

Emaar has also guaranteed some loans on behalf of its Indian affiliate Emaar MGF, lending the latter 760 million dirhams in the second quarter to plug a funding gap, according to HC Research. The unit's initial public offering, which has been delayed since April, would free Emaar from these obligations.

(Reporting by Matt Smith; Editing by Jason Benham and David Cowell)