The Dubai-listed company’s shares closed at Dh5.08 yesterday, up 3.04 per cent from Thursday’s close and 77 per cent for the year to date.
Arabtec shares boom as company expands
Arabtec shares reached a five-year high as the engineering and construction company’s global expansion gained steam with a restructuring that features a push into financial services.
The Dubai-listed company’s shares closed at Dh5.08 each yesterday, up 3.04 per cent from Thursday’s close and 77 per cent for the year to date.
As part of its expansion, Arabtec is setting up a unit, Arabtec Capital, to provide global financial services.
The company’s move also includes the creation of four other subsidiaries:
• Two subsidiaries to focus on infrastructure projects inside and outside the UAE;
• One subsidiary for water and energy projects;
• The fourth to focus on the Egyptian market.
The overhaul will “clarify their structure now that they are becoming a multinational company”, said Sebastien Henin, the head of asset management at The National Investor, an Abu Dhabi-based advisory company.
Mr Henin noted that the creation of the new subsidiaries would enable Arabtec to set up joint ventures or raise capital.
The company has won a slew of contracts in the past month and a half.Mr Henin said: “Their [rapid] change of scale in six weeks by doubling their backlog shows they don’t want to remain a UAE-oriented construction company but want to expand in the region and new areas, not only civil construction and housing.”
Last week, Arabtec said it would build 28 towers in Abu Dhabi and nine in Dubai, valued at Dh22.4 billion by 2020.
“This would increase [Arabtec’s] existing backlog by 60 per cent and take it to a record high of over Dh62 billion,” according to an analysts’ note from Jan Pawel Hasman and Kareem Ghaly at the investment bank EFG-Hermes, referring to the contract.
The awarding of the Dh22.4bn contract could “reduce focus on Arabtec’s [engineering and construction] expansion announced in 2013, and provide a major shift to its existing story”, they wrote last week.
Last month the company also secured a Dh2.6bn contract to build a 61-storey block of flats and hotel complex in the second phase of the Gate Towers development on Abu Dhabi’s Reem Island.
The same month, Arabtec bagged a US$1.55bn contract for a resort in Aqaba, Jordan.
One of the reasons for global expansion was to diversify the backlog of construction projects away from the Dubai market into Middle East and North Africa, besides Asia, according to the note from EFG-Hermes. Arabtec is already operating in Saudi Arabia, Qatar and India.
While few details are known about the Arabtec Capital unit, Mr Henin expects it to be related to the construction and core sectors of Arabtec.
A separate subsidiary for Egypt could be a sign of big projects coming from the country, and also an attempt to isolate the risk associated with it, he said.
“The big challenge for Arabtec is now execution,” Mr Henin said. “If you double the backlog in six weeks, at one point of time you need to deliver it.”
Yesterday’s announcement by Arabtec was made in a bourse statement and did not give details. The company did not respond to requests for interviews.