Dubai builders start to regain some momentum

Doubts over Dubai World slowed amount of construction work.

Construction companies are expected to start regaining some momentum with second-quarter earnings now that Dubai World's debt issues are mostly resolved, analysts say. Overall, Nomura expects a 12 per cent decline in earnings for the sector compared with the second quarter of last year, largely because Dubai World's issues slowed the amount of work available.

Late last month, Nakheel said it had reached an agreement with 75 per cent of its trade creditors and would settle just over $US1 billion (Dh3.67bn) of claims within two weeks. Arabtec Holding said last week it had received its first cash payment but did not reveal how much. A consensus of three analysts, from Nomura, Shuaa Capital and UBS, predicted a net profit of Dh146 million for Arabtec in the second quarter.

"The first quarter of the year was marred by a UAE construction-wide slowdown between the two Dubai World announcements," said Chet Riley, an analyst with Nomura. "We expect (the second quarter) to witness an improvement in construction activity." Saud Masud of UBS cut his target share price for the contractor to Dh1.70 from Dh2.10 last week, as he saw Arabtec's opportunities in Saudi Arabia to be less attractive than initially perceived.

Analysts expect Drake & Scull International (DSI), based in Dubai, to post improved numbers over the past quarter, but with a lower net profit against the same period last year. [e-mail]