Shares in Arabtec sink to lowest since March as investors continue sell-off

Arabtec shares drop 9 per cent, as uncertainty following the departure of chief executive Hasan Ismaik refuses to dissipate.

Former chief executive Hasan Ismaik's 28.85 per cent stake at Arabtec has diminished in value by almost Dh5 billion in the space of three weeks. Sammy Dallal / The National

Arabtec’s share price tumbled yesterday in a sign that the company has not yet restored investor confidence after the sudden departure of Hasan Ismaik as chief executive after just 15 months in the role.

Shares in the developer fell by 9 per cent to Dh3.84 yesterday, their lowest level since March.

That means the shares have now lost more than half their value from their high price in May of Dh7.74 each.

It also means that Mr Ismaik’s stake has diminished by almost Dh5 billion in the space of three weeks.

"Today's move was harsh," said Taher Safieddine, a research analyst at Shuaa Capital. "The rumours and announcements have hammered the company. Every rumour was floating around the market for two or three weeks before Arabtec announced it. All of this definitely had a negative impact on the stock. This is why we've seen retail investors panicking."

“Arabtec’s management needs to come to the market with a clear strategy and put an end to all the speculation.”

Another analyst, who declined to be named, said: “Arabtec has not made a statement about the company’s future strategy – quite possibly because the company itself doesn’t know what its future strategy will be at the moment. We believe that there could be more management changes to come.”

The consensus of analysts is a target price of Dh2.42 to Dh1.42 lower than its current price – with a majority of analysts recommending that investors sell or hold the stock.

“It’s a fiasco,” one analyst, who also declined to be named, said of the situation.

UPDATE: Arabtec shares fall 9.9 per cent, Monday morning.

Mr Ismaik was replaced as chief executive last week by Mohamed Ali Al Fahim, the former head of finance at the International Petroleum Investment Company (Ipic), which indirectly owns an 18.94 per cent stake in the company though Aabar, an investment vehicle.

Mr Ismaik at last report owned a 28.85 per cent stake in the company, worth Dh4.86bn at yesterday’s share price. This is down from the approximately Dh9.7bn his stake was worth in early June.

It is not known how Mr Ismaik was able to finance this purchase of the company’s equity.

On Wednesday, Mr Ismaik was quoted as saying that he would sell his stake “if approached by any government entity”, but on Friday he appeared to have changed his mind, telling Reuters that he would keep the stake. The slide began after Aabar Investments, which is owned by Ipic, announced in June that it was reducing its shareholding from 21.57 per cent to 18.85 per cent.

Last Sunday, the Dubai Financial Market announced that Aabar had further reduced its stake to 14.32 per cent, but later retracted this, describing the incident as the result of a "glitch".

Arabtec said that Mr Ismaik resigned “due to his personal work and investment preoccupations”, but declined to provide further details.

Arabtec earned profits of Dh153m in the first quarter against revenues of Dh2.152bn, and profits of Dh486.3m last year against revenues of Dh 7.369bn.

The company’s shares have nonetheless risen by 87.3 per cent over the past year – even after the company’s losses were taken into account.

Arabtec has won a number of high-profile deals as Abu Dhabi seeks to use its political clout to gain business for its flagship contractor. Most prominently, it announced in March a $40bn contract with the Egyptian government to construct a million new homes for low-income families.

It has a backlog of commissioned construction projects worth Dh215bn.

Officials at Arabtec were unavailable for comment.

Follow us on Twitter @Ind_Insights