3 Undiscovered Middle Eastern Stocks Poised to Outperform in 2025

As geopolitical tensions and economic volatility shake global markets, investors are increasingly turning to underfollowed regions and companies to uncover hidden value. The Middle East, often overlooked for its concentration of resource-driven economies, is home to three undervalued stocks—United Arab Bank (ADX:UAB), Pera Yatirim Holding (IBSE:PEHOL), and Umm Al-Qura Cement (SASE:3005)—that boast robust fundamentals, improving debt metrics, and compelling valuation discounts relative to peers. These companies are positioned to capitalize on regional stability and growth trends, offering investors a rare combination of resilience and upside potential.

1. United Arab Bank (UAB): A Regional Banking Giant with Strong Earnings Momentum

United Arab Bank has emerged as a standout performer in the UAE's banking sector. Its Q1 2025 net profit surged 49% year-over-year to AED 102 million, driven by asset growth, lower impairments, and improved operational efficiency. Total assets hit AED 23.4 billion, a 31% yoy increase, fueled by rising loans, investments, and customer deposits.

Key Strengths:
- Debt Management: CET1 and CAR ratios of 12.6% and 17.1%, well above regulatory thresholds, reflect strong capital health.
- Credit Quality: Gross NPL ratio dropped to 3.4% (from 4.8% in 2024), with a coverage ratio of 118%, signaling prudent risk management.
- Valuation: Trading at a 1.07x P/B ratio, UAB is undervalued compared to regional peers like Emirates NBD (1.6x P/B) and First Abu Dhabi Bank (1.5x P/B).

Why Now? UAB's rights issue of AED 1.032 billion reinforces its capital strength, while its diversified asset base positions it to benefit from post-pandemic economic recovery in the UAE.

2. Pera Yatirim Holding (PEHOL): A High-Growth Real Estate Play with Cautionary Risks

Pera Yatirim, a Turkish REIT with assets spanning shopping centers and tourism complexes, has delivered staggering long-term returns—275% YTD in 2025 and 4,879% over three years—but faces valuation and debt headwinds.

Growth and Resilience:
- Revenue dropped 42% in 2024, but its 5-year CAGR of 26% highlights historical outperformance.
- Assets like the Aqua Dolce Tourism Complex in North Cyprus and Sumerpark Shopping Center underscore its portfolio diversification.

Red Flags:
- Debt Growth: Long-term debt surged 135% over five years, raising concerns about leverage.
- Valuation Stretch: An EV/EBITDA of 241x—far above global peers like Gecina (22.4x)—suggests overvaluation.

Verdict: While its 19% upside based on forward P/E multiples is tempting, investors must weigh its growth against its high debt and frothy valuation.

3. Umm Al-Qura Cement (3005): A Value-Driven Play in Saudi Cement Sector

Umm Al-Qura Cement, a Saudi cement producer, trades at a P/E of 20.0x—a modest multiple compared to peers like Yanbu Cement (32x)—despite strong earnings momentum.

Fundamentals:
- Profitability: TTM net profit hit SAR 44.16 million, with a 16.9% profit margin.
- Debt Under Control: A debt-to-equity ratio of 0.29 and interest coverage of 6.1x indicate manageable leverage.
- Valuation Upside: Peter Lynch's fair value model suggests a 24.9% upside to its current price of SAR 16.07.

Risk: Its Altman Z-Score of 2.69 (below the 3.0 threshold) hints at bankruptcy risk, but its Piotroski F-Score of 8 signals improving financial health.

Investment Thesis: Why These Stocks Will Outperform

1. Undervalued Relative to Peers: All three stocks trade at discounts to regional benchmarks, offering a margin of safety.
2. Resilience in Volatile Markets: Strong balance sheets (UAB's capital adequacy, Umm Al-Qura's manageable debt) and diversified portfolios (PEHOL's property mix) reduce downside risk.
3. Cyclical Upside: As Middle Eastern economies stabilize—driven by infrastructure spending in Saudi Arabia and UAE—these companies are poised to benefit.

Action Items:
- Buy UAB for its banking sector dominance and capital strength.
- Consider PEHOL cautiously for its growth, but monitor debt levels.
- Add Umm Al-Qura Cement for its valuation and Saudi exposure.

Conclusion

In a market where uncertainty looms large, these three Middle Eastern stocks offer a blend of value, growth, and stability that few are tracking. While risks exist—especially with PEHOL's valuation—patient investors who focus on fundamentals and regional macro trends stand to profit as economic recovery takes hold.

Investors should conduct further due diligence and consult with financial advisors before making investment decisions.