Undervalued Middle Eastern Financial and Infrastructure Stocks: A Deep Dive into UAB, Miahona, and Rotshtein Realestate

The Middle East is undergoing a profound economic metamorphosis, driven by Vision 2030 in Saudi Arabia, Vision 2040 in the UAE, and similar diversification strategies across the Gulf. As governments pivot from oil dependency to sustainable, high-value industries, the utilities, real estate, and non-bank financial sectors are emerging as critical growth engines. Amid this backdrop, three stocks—United Arab Bank (UAB), Miahona (SASE:2084), and Rotshtein Realestate (ROTS.TA)—stand out as compelling undervalued opportunities, offering exposure to regional optimism while navigating sector-specific catalysts.

United Arab Bank: A High-Yield Play on UAE's Financial Resilience

United Arab Bank (UAB) has demonstrated exceptional resilience in H1 2025, with net profit surging 50% year-on-year to AED 208 million. This growth stems from a 24% rise in total income, driven by a 70% jump in non-interest income and a 13% increase in net interest income. The bank's cost-to-income ratio improved to 47.4%, reflecting disciplined expense management.

Valuation metrics paint a compelling picture. UAB's P/E ratio of 7.4x (as of June 2025) is a stark discount to the UAE banking sector's average of 13.4x. Even more intriguing is its Shiller P/E ratio, which smooths out cyclical volatility by averaging inflation-adjusted earnings over a decade. At 7.4x, UAB trades at a level typically reserved for distressed assets, suggesting a potential mispricing.

The bank's capital strength further bolsters its appeal. A CET1 ratio of 12.1% and a total capital adequacy ratio (CAR) of 16.3% position UAB to withstand macroeconomic shocks. Its ongoing AED 1.03 billion Rights Issue will expand share capital by AED 3.09 billion, enhancing resilience while supporting asset growth. With non-performing loans (NPLs) at 2.2% and provision coverage at 148%, UAB's asset quality is among the best in the region.

Investment Thesis: UAB's undervaluation, robust capitalization, and alignment with UAE's infrastructure-driven growth make it a high-conviction buy. However, investors should monitor the Rights Issue's execution and macroeconomic risks tied to oil prices.

Miahona: A High-Risk, High-Reward Bet on Saudi Water Utilities

Miahona, a Saudi water utilities and construction firm, has seen EPS surge from SAR 0.086 to SAR 0.38 in Q1 2025, reflecting strong demand for its services. The company's TTM revenue of SAR 594.98 million and net profit margin of 13.77% underscore operational efficiency. Yet, its P/E ratio of 51.5x and P/S ratio of 7.1x suggest a disconnect between fundamentals and valuation.

The risk lies in Miahona's debt-to-equity ratio of 129.8%, which raises concerns about leverage. However, Saudi Arabia's push for water infrastructure—such as district cooling projects and desalination plants—creates a long-term tailwind. Miahona's recent 18% and 22% stock price surges in June and April 2025 indicate speculative momentum, though analysts caution it may be overvalued by 21% as of May 2025.

Investment Thesis: Miahona is a speculative play on Saudi Arabia's water infrastructure boom. While its valuation appears stretched, the lack of analyst coverage and opaque financials warrant caution. Investors with a high-risk appetite may consider a small position, but due diligence on debt sustainability is critical.

Rotshtein Realestate: Undervalued Israeli Developer with Regional Exposure

Rotshtein Realestate (ROTS.TA), an Israeli real estate developer, has outperformed the market with EPS growth of 61.7% in 2025 and a TTM revenue of ILS 831.14 million. Its P/E ratio of 13.2x and P/S ratio of 1.7x suggest reasonable valuation, especially given its 13.17% net profit margin. The stock trades 51.6% below its estimated fair value, according to Simply Wall St, hinting at undervaluation.

Despite a debt-to-equity ratio of 167.3%, Rotshtein's EBIT covers interest payments 4.1x over, and its ILS 80.87 million cash balance provides liquidity. The company's focus on residential construction aligns with the Middle East's real estate boom, including projects in Saudi Arabia's NEOM and UAE's Abu Dhabi 2030 initiatives.

Investment Thesis: Rotshtein Realestate offers a compelling risk-reward profile. Its leverage is offset by strong cash flow generation, and its exposure to high-growth Middle Eastern real estate projects positions it to benefit from regional infrastructure spending. A 1.5% dividend yield adds income potential, though investors should monitor interest rate risks.

Regional Catalysts: Why These Sectors Matter

The Middle East's infrastructure and utilities sectors are being turbocharged by:
1. GDP Growth: Saudi Arabia's Q1 2025 GDP rose 3.4% YoY, driven by 4.9% non-oil growth. Abu Dhabi's non-oil sector now accounts for 56.2% of GDP, up from 43.8% in oil.
2. Government Spending: The UAE's AED 22 billion sewerage tunnels project and Saudi Arabia's $83.24 billion construction contracts in 2024 highlight infrastructure momentum.
3. Policy Tailwinds: Vision 2030 and Vision 2040 prioritize private-sector partnerships, with $2.5 trillion in GCC infrastructure opportunities.

Final Verdict: Balancing Risk and Reward

• United Arab Bank is the most compelling buy, offering a rare combination of undervaluation, strong fundamentals, and alignment with UAE's economic vision.
• Miahona is a high-risk speculative bet, suitable for investors who can tolerate volatility and are bullish on Saudi water infrastructure.
• Rotshtein Realestate provides exposure to Israel's real estate boom and regional infrastructure projects, with a valuation that appears attractive relative to earnings and cash flow.

As the Middle East transitions toward a post-oil economy, these stocks represent opportunities to capitalize on structural growth. However, investors must weigh leverage risks (particularly in Miahona and Rotshtein) and ensure valuations align with long-term sector trends. For those with a 3–5 year horizon, the rewards could outweigh the risks.