The Dubai Financial Market had its best day in more than nine months yesterday as shares in Arabtec rebounded to close up 5.1 per cent.
The Dubai market’s broad rally lifted its main index 6 per cent on the day and nearly reversed Tuesday’s losses, when the index shed 6.6 per cent.
While Arabtec shares finished up yesterday, it was far from a smooth ride.
Arabtec dropped to Dh2.85 in early trading – 8 per cent below its opening price – before rallying towards the session's close and ending at Dh3.28.
Arabtec yesterday attempted to clear up some of the confusion around its plans. The company repeated that it had no plan to delist its shares and, significantly, referred to itself as a regional rather than a global player.
"[Arabtec confirms] the invalidity of rumours about the company's intention to delist from the market," the company said. "Arabtec has never requested or discussed with the Securities and Commodities Authority (SCA) to be delisted."
The company’s chairman, Khadem Al Qubaisi, partially addressed reports of mass firings and speculation over strategy.
“Arabtec has a qualified executive management team that receives significant support from the board of directors, and Arabtec’s team will spare no effort to achieve the highest returns for shareholders and investors,” Mr Al Qubaisi said.
Arabtec said that its “internal actions … included a positive restructuring process that has been considered carefully and accurately, with a view to reducing costs and improving productivity, which would reflect positively on the results of the company in the future.”
“[This] restructuring process did not affect the competences and expertise and resources related to the company’s ability to execute the current and future projects.”
Arabtec, it said, is “a leading UAE company that executes the most prominent projects in the UAE and the region”.
Sanyalaksan Manibhandu, a senior analyst at National Bank of Abu Dhabi, said: “That statement [describing Arabtec as a regional company] gives away what it’s about … Arabtec’s management have lowered their sights.
“Market participants were concerned about delisting,” he added. “The statement moved one uncertainty out of the way, but there are others to clear up – like former chief executive Hasan Ismaik’s stake and what will he will do with it.”
Mr Ismaik – whose 15-month tenure as chief executive ended with his resignation on June 18 – had repeatedly stated his ambition for Arabtec to become one of the world’s top 10 construction companies.
Mr Ismaik at last report still owned 28.8 per cent of Arabtec’s shares. He had built up his stake in recent months, from 8 per cent at the end of last month.
Despite this month’s tumult, one investment executive took a sanguine view of the situation.
“If you get an exuberant market it tends to be more irrationally exuberant,” Shirish Saraf, the founder of Samena Capital, said yesterday. “But Arabtec is still up, and any investor that came in a year ago would be significantly up, probably doubling his money in a year.”
Arabtec stock closed at Dh1.41 a year ago today. Anyone who bought at that price would have more than doubled their money, with a gain of 132.2 per cent through yesterday’s trading.
On the other hand, anyone who bought Arabtec at the peak close of Dh7.40 on May 14 would have lost 55.6 per cent of their investment in only six weeks.
More widely, the Arabtec fall also appears to have created uncertainty about the Dubai economy.
The price of credit default swaps – a measure of perceived risk – based on Dubai’s 10 year sovereign bonds rose by 7 per cent yesterday, while 3-year credit default swaps rose by 8.6 per cent.
abouyamourn@thenational.ae
ascott@thenational.ae
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