Drake and Scull is ahead of the game

At a conference for investors in Sharm al Sheikh, Egypt, earlier this month, one company's name was buzzing among delegates as a potential hit for the Emirates: Drake and Scull. The construction and engineering company has been quietly building up its business over the past two years, launching one of the region's few public offerings of stock and beginning to acquire companies around the region.

Last week, one of its subsidiaries won two construction contracts in Dubai worth a combined total of Dh484 million, and the company is voting today on whether to make forays into Oman and Egypt as part of its expansion strategy. As competitors and their order books are slimming down, and their margins contracting, these recent accomplishments are significant. Yesterday, Drake and Scull's shares rose 3.4 per cent to Dh0.91.

The company is capitalising on the downturn by acquiring smaller firms at competitive prices, and moving into wastewater treatment and telecommunications infrastructure. In December, it paid Dh80.5m to increase its stake in Kuwait's Electrical Contracting to 75 per cent. In November, the company paid Dh145m for an 82 per cent stake in Passavant-Roediger, a wastewater unit of Germany's Bilfinger Berger.

Nabil Ahmed, a Dubai-based analyst at Deutsche Bank, wrote in a recent report that Drake and Scull was "an attractive equity story" because its execution strategy was "well on track" and it financials were relatively strong. For instance, the company's exposure to the challenging Dubai market was just 37 per cent of its backlog in the fourth quarter, compared with 51 per cent in the third quarter.

In one recent report from the Dubai-based management solutions company CMCS, the GCC was described as a safe bet for the next five years as far as construction goes. At this rate, Drake and Scull should be among the winners when the market picks up. [e-mail]