Arabtec Holding Co fell the most in three months after Qatar Airways said it was filing a legal claim against a joint venture of Depa, which is partly owned by the Dubai-based construction company.
The shares tumbled 4.4 per cent, the most since September 26, to Dh2.15 in early afternoon trading in Dubai. They closed the day down 0.44 per cent at Dh2.24.
Arabtec was the biggest decliner on the benchmark Dubai Financial Market General Index. Shares of Depa, the interior contractor that fitted out the world's tallest tower in Dubai, were unchanged at 35 cents when they last traded on Thursday.
Arabtec in November bought almost a quarter of Depa at a 47 per cent premium.
Qatar Airways is filing a US$600 million legal claim against Lindner Depa Interiors for causing a delay of as much as one year in the opening of the new Doha International Airport, the airline said on Saturday.
Lindner Depa, a German-Emirati joint venture, planned to build 19 airport lounges by summer this year as part of a $250m contract, Qatar Airways said. The airport had been scheduled to open this month, it added.
"This is a setback for the company as it will get embroiled in lawsuits and might distract its focus from operations, plus the impact on the profitability in case they lose the case," said Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities. "In the long run, the share price for Depa will probably decline on the news, thus causing Arabtec to record losses on their investment."
Lindner Depa said it was seeking legal counsel after the Qatar Airways statement, which it considered "false and misleading". The joint venture had not received any claims by Qatar Airways, it said.
Depa shares have dropped 17 per cent in this year, compared to a gain of 42 per cent for Arabtec, which bought 150 million shares of Depa at 44 cents each last month.
Depa, which fits out luxury hotels, yachts and apartments, may post a loss of Dh94m this year after a profit last year, according to the median estimate of four analysts on Bloomberg. The company said in June that the New Doha International Airport terminated the joint-venture contract to refurbish the facility. Arabtec will probably post an 18 per cent decline in full-year profit to Dh214m, according to the average estimate of 11 analysts on Bloomberg.
Three analysts recommend investors hold Depa shares, while four analysts advise on holding Arabtec shares and 10 say to sell them.
* Bloomberg News