Investors were left stumped by the abrupt departure of the chief executive of Arabtec yesterday, just weeks after pledging to transform the company into one of the world's biggest builders.
Hasan Ismaik resigned to concentrate on his other business interests, an Arabtec spokesman said yesterday ahead of an afternoon board meeting.
Those roles include the chairmanship of Depa, the interior design company behind Dubai’s Burj Khalifa, and a 60 per cent shareholding in the German football team 1860 Munich.
Arabtec’s shares, which have plummeted in value in the past month, were up by as much as 5 per cent on the news, before closing 1.9 per cent higher at Dh4.30.
“Arabtec now needs to make sure it improves its transparency and stays close to shareholders and close to the market,” said Mohammed Ali Yasin, the managing director at National Bank of Abu Dhabi’s brokerage arm. “The announcement closes one chapter in what has been a tough week for the company and the market.”
Mr Ismaik’s profile rose significantly in the early months of the year with a series of eye catching announcements. In March, Arabtec unveiled a US$40 billion contract for the construction of one million affordable houses in Egypt.
Under his watch, Arabtec unveiled an ambitious four-year plan last month to help it become one of the world’s top 10 contractors by the end of 2018.
Mohammed Ali Al Fahim, an Arabtec board member, was confirmed as the company’s acting chief executive at the company’s board of directors meeting held in Abu Dhabi yesterday.
In addition to his role at Arabtec, Mr Al Fahim is the head of finance at International Petroleum Investment Company (Ipic), and a board member of Arabtec shareholder Aabar Investments.
The resignation of Mr Ismaik caps a tumultuous month for Arabtec, the UAE's largest listed construction company, whose shares had hitherto been among the best performers on the DFM.
The company's shares more than tripled in the first four months of the year, hitting a high of Dh7.4 on May 14, the day before Arabtec became one of nine UAE equities to be included in MSCI's Emerging Markets Index.
Since then, however, the company’s shares have lost more than 40 per cent of their value, while still trading at around double their price at the start of the year.
Not helping matters was Arabtec’s silence in the wake of a dramatic increase in Mr Ismaik’s shareholding in the company, followed by an abrupt sell-down of company shares by Aabar Investments.
Mr Ismaik increased his shareholding in the company to 28.85 per cent in early June, from just 8.03 per cent in late May, a move described as a vote of confidence that would reduce volatility in Arabtec’s share price.
However. the stock’s volatility has only increased since, as it emerged last week that Aabar, previously the company’s largest shareholder, had reduced its stake to 18.85 per cent from 21.57 per cent, sending the share price tumbling.
On Sunday, the Dubai Financial Market reported that Aabar had reduced its stake further to 14.32 per cent.
Despite issuing a correction later in the day, Arabtec’s shares fell 10 per cent for two days in a row on the news, ending Monday trading at their lowest level since the end of March.
Mr Ismaik’s replacement at the helm of the company is likely to draw a line under the events of the past month, according to Taher Safieddine, an analyst at Shuaa Capital.
“There’s been so much negative news around the company recently, what with the Aabar sale and this week’s glitch, and it was seriously hurting the share price,” he said. “I think this move will end a lot of the speculation that’s been going on.”
In an interview with Bloomberg News yesterday, Mr Ismaik said that he had not received any offers from other parties to buy his 28.85 per cent share in Arabtec, but declared himself open to selling.
“If approached by any government entity to buy my stake, I would consider the offer,” he said.
jeverington@thenational.ae
Follow us on Twitter @Ind_Insights
