Aramex is emerging as one of the region's top value performers as investors scoop up stocks trading at levels not seen in several years.
The logistics company has historically been attractive to traders seeking to diversify away from the beleaguered property market.
But after political turmoil grip-ped parts of the Middle East and stocks dropped sharply, Aramex drew attention because of its low debt levels and ambitious expansion plans. The stock has fallen 10 per cent over the past three months.
Analysts at Global Investment House, however, expect Aramex shares to rise 15 per cent in the next year. The investment company, based in Kuwait, has a "buy" recommendation on the stock and a target price of Dh2.07. Aramex ended 4.4 per cent higher yesterday at Dh1.88, paring losses over the past two weeks.
Aramex has "negligible debt" and, with a "significant" cash balance of Dh555 million at the end of last year, it has "the cushion necessary to pursue the strategy of inorganic growth through acquisitions", a note from Global said.
"This strategy of taking small steps to gain a foothold in a new market or to build on existing presence makes the integration process easier to manage, without placing undue financial strain on the company and at the same time gaining access to newer, under-served markets," it added.
Investors will also be pleased by a cash dividend of 7.5 per cent for last year, particularly at a time when property companies such as Deyaar Development and Emaar Properties have announced no payouts to shareholders. Global expects Aramex to continue handing out dividends as it generates a regular cash flow over the next few years.
But traders will still be keeping a close eye on its Mena exposure. Aramex generates 70.7 per cent of its revenues from the region and was forced to suspend operations in countries such as Bahrain and Egypt because of the political uprisings. Although operations have resumed in these places, those in Libya and parts of Iraq are yet to resume.