Arabtec shares rebound as Dubai builder denies delisting rumours

Arabtec said on Thursday that it had no intention of delisting from the Dubai stock market, and was seeking with market officials to establish who spread rumours that it might delist.

The decrease in the stake has raised questions over whether Aabar might change its strategy of supporting Arabtec by awarding it business contracts. Courtesy Arabtec

Shares in Arabtec Holding rose by more than 11 per cent yesterday as the company moved to quash rumours that it was preparing to delist from the Dubai Financial Market (DFM) at the end of a volatile week for its stock price.

The builder’s shares rose by 50 fils to end the day at Dh5 apiece, breaking a four-day losing streak and making it the standout leader on the Dubai bourse.

But yesterday’s recovery was not sufficient to claw back the losses of the week, with shares ending 16.7 per cent lower than last Thursday’s close.

The company issued a statement on the DFM yesterday denying rumours that the company’s management planned to take the company private and remove its shares from the bourse.

"We would like to confirm that Arabtec Holding did not apply for the cancellation of its shares and there have not been any discussions with the management of [the markets regulator] SCA on this subject," the statement said.

Rumours about the company’s future have intensified after a huge purchase of Arabtec shares by the company’s chief executive, Hasan Ismaik, followed in turn by a selldown in shares by its largest institutional investor, Aabar Investments.

Mr Ismaik increased his personal shareholding in Arabtec to 28.84 per cent at the end of last week, up from just 8.03 per cent in late May.

It was announced on Wednesday that Aabar, the Abu Dhabi investment fund, had cut its shareholding in Arabtec to 18.85 per cent from 21.6 per cent.

Aabar acquired its stake in Arabtec for Dh827.6 million in early 2012.

Taking the company private does not fit with Arabtec’s growth strategy, said a UAE-based analyst.

“Arabtec won’t be able to grow their business in the way they’ve said they want to if it’s a private entity,” he said, requesting anonymity.

“To achieve their ambitions growth aims they need outside financing, which they wouldn’t be able to tap as a private company. If they’re looking at big deals they would need to be able to offer their stock as a means of payment.”

In March, Arabtec secured a deal with the Egyptian government to build more than a million low-cost homes across the country in what is believed to be the largest housing project in the Arab world.

Before yesterday’s recovery, Arabtec’s shares had lost 30 per cent of their value in the first four days of the week’s trading.

An Arabtec statement issued on Wednesday insisted that the changes in share price during the week were “influenced by the conditions of supply and demand, and should not affect investors and shareholders confidence in the company.”

But yesterday’s dramatic share price recovery raised the spectre of stock price manipulation, with the country’s regulators duty-bound to investigate, said the analyst.

Spokesmen for the DFM and the SCA declined to comment.

Such volatility in the share price, coupled with the movements in share price, had led a number of regional and international investment funds to back away from the stock, the analyst said.

“We haven’t seen the last of this, I fear. There’s so much happening behind the scenes that no serious investment manager is going to look at it anymore. Institutional investors, both regional and internationally, are walking away from it.”

Arabtec Holding’s shares have a consensus analyst rating of just 1.91 out of 5, with 54.5 per cent of analysts issuing a sell recommendation on the stock.

Despite the recent volatility, Arabtec is still one of the best-performing Dubai stocks of the year, with its shares up 143 per cent so far this year. It has been included in MSCI’s Emerging Market Index since the start of the month.

First-quarter profits at Arabtec more than doubled year-on-year to Dh138 million on revenues of more than Dh2 billion, it said last month.

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