Arabtec shares plunged 10 per cent yesterday, the maximum allowed in a day under stock exchange rules, amid confusion over its ownership. The stock closed at Dh4.05 – the second consecutive session it has hit the market's daily downward limit.
The stock has now fallen 37 per cent in total since Sunday after a series of announcements regarding stakes held by the company's largest shareholders, the Abu Dhabi government-controlled fund Aabar and Arabtec's chief executive, Hasan Ismaik.
Speculation about the company’s future intensified after Mr Ismaik increased his personal shareholding in Arabtec to 28.84 per cent on June 5, up from just 8.03 per cent late last month. Last week Aabar cut its shareholding in Arabtec to 18.85 per cent from 21.6 per cent.
“As an analyst, Arabtec is not an easy stock to cover because the company has several ambitious plans both in Egypt and globally, which it has discussed openly with the media and with analysts but which have yet to come to fruition, and so it is difficult to make a proper valuation of the stock,” said Nishit Lakhotia, the head of research at Securities & Investment Company.
“The volatility in the stock that we have seen recently would be concerning to many investors, especially in light of the recent dramatic changes in the company’s ownership,” he added. “The company has got the right mix available to it with funds available, implicit Abu Dhabi government support and a strong management team in place, and it is expanding at the right time in the cycle. But there is a lot of confusion and uncertainty about the stock at the moment and about its overall ownership.
An Arabtec spokesman declined to comment on the share price falls.
“At this point in time nobody has a clear understanding of what is happening at Arabtec,” said one analyst who asked not to be named. “The stock is so volatile that most institutional investors would not even think of going near it.”
Before its recent slump, Arabtec's share price had more than quadrupled since the start of the year after it announced a series of grand project wins, including a deal to build 1 million affordable houses in Egypt.
However, analysts question whether Arabtec will realistically be able to achieve these ambitions.
Difficulties in pricing Arabtec’s volatile stock have prompted a number of analysts to review their coverage of the company. NBK Capital has recently suspended its coverage of the company while Arqaam Capital is currently reviewing its target price for Arabtec.
Analysts pointed out that the majority of Arabtec shares are held by retail investors who are often highly leveraged and are therefore forced to sell shares to cover losses when prices fall, extending declines.
“If we as analysts, with a considerable access to the company and information about it, find it hard to assess Arabtec at the moment then I do not find it surprising that retail investors who have lesser information about the company are booking their profits and exiting,” Mr Lakhotia said.
lbarnard@thenational.ae
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