Earnings for Arabtec Holding are likely to be reduced into next year as profit margins tighten and orders slow in Saudi Arabia and Kuwait.
The company, which has been expanding rapidly overseas to diversify its portfolio beyond its home market in Dubai, had its fair value reduced to Dh1.24, from Dh1.30 but its "hold" rating maintained at Rasmala Investment Bank.
"We expect margins to remain under pressure due to increasing competition in the civil segment in major Middle East and North African geographies," said Saud Masud, a property analyst, in a note to clients.
The company is looking to eventually more than double its workforce to 25,000 in Saudi Arabia as the country rolls out a US$400 billion infrastructure spending plan to address its massive housing problem.
Arabtec suffered after Dubai's property market experienced one of the biggest declines after the global financial crisis, with home prices dropping 64 per cent since they peaked in mid-2008, according to estimates from Deutsche Bank.
The company reported a 15 per cent decline in revenues in the third quarter to Dh1.08bn from the same period last year as gross margins declined to 10.2 per cent from 15.1 per cent.
"The decline was mainly led by delays in project execution in Saudi and Kuwait and margin pressures in the UAE," Mr Masud said.
Despite lower revenue and gross margins, quarterly net profit rose to Dh39.1 million from Dh6.8m in last year's third quarter.
"This was mainly due to the company reversing its provisions of Dh20m on the receivables linked to Nakheel after getting the sukuk and Dh23m on collecting other receivables," Mr Masud said.
Arabtec was unchanged at Dh1.34 yesterday. The contractor's shares are down 14.9 per cent so far this year, while the Dubai Financial Market General Index is down 15.5 per cent.