Just 18 months ago shares in Arabtec Holding were riding high at about Dh7 each. Recently included in the MSCI Emerging Markets Index and touting orders including a project for a million housing units in Egypt, it had expansion plans across the region and beyond.
Today such dreams seem like a distant memory, with the builder’s stock price having taken a battering thanks to the messy departure of both its chief executive and chairman, the scaling back of many ambitious projects, together with the realities of the new economic climate brought on by lower oil prices.
Yesterday’s announcement of a Dh944.7 million loss for the third quarter resulted in Arabtec’s stock tumbling a further 9.4 per cent at the start of trading in Dubai to its lowest level since May 2013.
The stock eventually pared its losses, ending down 5.07 per cent at Dh1.31 on the DFM.
Traders were puzzled by investor interest in the stock yesterday. “You can only speculate that there are some people who still think the company has some life left in it,” said Khaldoun Jaradat, a trading manager at Brokerage House Securities in Dubai.
A number of financial institutions no longer actively cover Arabtec’s shares.
“The level of disclosure they give isn’t sufficient for us,” said one analyst who has dropped coverage of the stock, asking to remain anonymous.
Of the eight analysts tracking Arabtec shares listed by Bloomberg, seven recommend either reducing or selling any holdings.
Pressure on the share price is set to continue in the near term, according to Mohammad Kamal, the director of research at Arqaam Capital in Dubai.
“As it stands, the level of receivables, irrespective of quality, is greater than what the business is worth in terms of equity ,” he noted.
“The company has a substantial amount of debt maturing in the next 12 months. Sentiment will continue to be determined by Arabtec’s ability to demonstrate future cash generation.”
However, Arabtec’s difficulties are not likely to last forever, according to Allen Sandeep, the director of research at Naeem Holding in Egypt. He still rates the stock as a “hold”.
“Arabtec could be slated for a turnaround in terms of operating performance, which could later on be followed by fresh liquidity injection [through debt or equity]. Through [major shareholder] Aabar’s backing, we foresee Arabtec to be able to get the required funding in order to start on a new growth phase,” he said in a research note.
jeverington@thenational.ae
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