Investors look for rosier results

Investors will be looking for some strong first-quarter results to buoy local markets this week after last week's lacklustre performances, but they may be disappointed. With a plan for Dubai World's debt restructuring still being considered and with other big-ticket projects such as the Burj Khalifa yet to begin realising their market potential, analysts say the primary driver for the short term will be infrastructure projects.

On the Dubai Financial Market (DFM), Aramex and Shuaa Capital are to announce the results of their Annual General Meeting today, while on the Abu Dhabi Securities Exchange Abu Dhabi Islamic Bank should release its earnings for the period tomorrow. The bank's shares ended trading on Thursday 0.3 per cent lower for the week. Analysts say the results early this week are unlikely to dazzle. "In terms of catalysts, first-quarter earnings are not going to be something spectacular," said Hassan el Salah, the deputy head of institutional trading at AlRamz Securities in Abu Dhabi.

Mr el Salah said it was too early, for example, for Emaar Properties to be reporting earnings from the Burj Khalifa, given the short time the tower has been open. He said banks were also not expected to report until next month their final decision on a plan to restructure Dubai World debt, so their first-quarter results were likely to remain stagnant. "Catalysts for the banks [to rally] until then would be results on non-performing loans and provisions," Mr el Salah said. "But more importantly, the driving force at the end of day is government spending."

He added the infrastructure component of Abu Dhabi's Economic Vision 2030 would help alleviate the pressure on the economy. The DFM General Index lost 0.4 per cent in the past five trading sessions to close at 1,816.43. The index rallied with Dh1 billion of shares traded last Monday when Shuaa Capital cut its price estimate for the bourse's shares to Dh1.20, reiterating a "sell" rating on lingering uncertainty in Dubai.

"For the GCC and MENA region, there's so much choice out there. Everyone says the UAE is sitting at a discount, but it's sitting at a discount for a reason. Stocks are cheap for a reason," Mr el Salah said. Arabtec Holding accounted for two thirds of the traded value on the Dubai index last Wednesday, when the company announced it would no longer pursue a merger with the Abu Dhabi company Aabar Investments.

"Talk of deal cancellations has been in the market for a few weeks already," Mr el Salah said. "We already saw a rally in the stock from about 2.23 to mid-2.70s also touch below 2.80, which indicates that this was already priced in. Traders were buying on the rumour and selling on the fact." Sentiment towards the merger had been mixed, Mr el Salah said. "No one can deny that the deal cancellation offsets the dilution of the earnings per share to minority shareholders.

"At the same time, Arabtec would still need some cash injection, but perhaps not to the magnitude of 70 per cent to help it towards its working capital requirements," he said, referring to the proportion of Arabtec that Aabar had offered to buy. The ADX General Index edged up 0.3 per cent over last week to 2,856.66 on Thursday. Aldar Properties ended the week down 3.6 per cent to Dh4.41 a share. The company paid a dividend of 5 fils on Thursday.

Kuwait was the biggest regional loser for the week. Its index fell 2.9 per cent over the week to close at 207.34. The Investment Dar, which owns half of Aston Martin, announced a loss of 214.6 million dinars in the fourth quarter compared with a profit a year earlier. Doha's measure lost 1.2 per cent to close at 7,627. Industries Qatar, the largest listed company in the country, posted net income for the first quarter of 1.2 billion rials, down 14 per cent from 1.4bn rials for the first quarter of last year.

Barwa and Qatar Real Estate Investment on Thursday confirmed their merger, and Qatar Navigation completed its acquisition of Qatar Shipping. "In times of economic expansion, companies open left right and centre because it's economically feasible at that point in time," Mr el Salah said. "However in troubled times, when profit projections are not materialising, they have to start consolidating and that's what's happening outside."

The Bahrain All Share Index closed the week 1.4 per cent higher at 1,560.64. Muscat closed 0.6 per cent higher at 6,930.11. Egypt's CASE 30 index closed 1.6 per cent higher 7,573.61 for the week and 17 per cent higher for the year, outperforming the GCC and the MSCI Emerging Markets Index. The regional company Orascom Telecom announced that it had ended a two-and-a-half-year dispute with France Telecom over Mobinil.

Orascom's stock rallied at the start of last week on rumours that the company was in talks for a possible merger. Orascom's shares ended trading 8.1 per cent higher for the week at 7.50 Egyptian pounds. [e-mail] In the article "Investors look for rosier results" dated  April 18, 2010. In the second graph it said "Aramex and Shuaa Capital are to announce their first quarter results today" the companies were actually announcing the results of their Annual General Meeting.