Dubai builder Arabtec yet to convince analysts with new strategy

Analysts have been left nonplussed by Arabtec's attempts to outline its new strategy as the company's shares continued their rocky ride.

Arabtec on Wednesday pledged to focus on its core business and a commitment to press ahead with its current projects. Silvia Razgova / The National
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Analysts were left nonplussed by Arabtec’s attempts to outline its new strategy despite a sharp rise in the builder’s stock price yesterday.

The Burj Khalifa builder held a press conference on Wednesday to address investor concerns following a catastrophic stock decline in recent weeks.

But that was not enough to restore confidence among analysts contacted by The National yesterday.

"We're a bit more positive than before, but we still don't believe we have enough information to be able to offer a target price for the stock," said Sanyalak Manibhandu, research manager at NBAD Securities. "We are glad that there appears to be more stability at Arabtec and expect that the news will bring more stability to the Dubai stock market. But in order for us to give a meaningful target price to investors we need more than this.

Shares closed at Dh3.52 yesterday, a 6.3 per cent increase on the previous day. That helped to lift the Dubai Financial Market by 0.2 per cent.

It follows weeks of declining prices that contributed to the DFM losing a quarter of its value between early May and the end of June as investors reeled from the shock departure of the former chief executive Hasan Ismaik, news of redundancies and fears that Arabtec's major shareholder Abu Dhabi government fund Aabar was loosening its ties with the company.

Analysts who suspended their coverage of the stock following the company’s shares crisis still say that they do not have enough information to offer a guide price to investors.

Three brokers are reviewing their coverage of Arabtec in the light of the company’s shares crisis – NBAD Securities, NBK and Shuaa Capital. EFG Hermes has suspended its coverage of the stock.

“The key thing about Arabtec is the margins and we have had no new information about that and we can only get that sort of detailed information from a meeting or at least a conference call,” said Mr Manibhandu.

Other analysts added that although Wednesday’s press conference addressed some of investors’ biggest concerns about the company, it failed to answer many more.

Arabtec declined to answer media questions about the exact number of job losses made during its recent restructuring. And investors were left wondering exactly what Arabtec’s new role would be in the company’s much-hyped plan announced earlier this year to build a million homes in Egypt.

“Arabtec’s conference was positive as Aabar announced their commitment to the company, but we were eager to know more information on the shares of the ex-chief executive. If his stake is still offered for sale, it will have more pressure on the stock price,” said Tariq Qaqish, the head of asset management at Al Mal Capital.

“We advise investors to be careful at this point due to the huge volatility of the stock,” he added.

“Though some key questions are left unanswered we view yesterday’s conference as a good starting block towards a more transparent strategy going forward,” said another equity analyst who declined to give his name.

selgazzar@thenational.ae

lbarnard@thenational.ae

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