x Abu Dhabi, UAESunday 21 January 2018

Hurdles, but analysts tip Aramex to deliver

Aramex outlook appears positive after strong earnings.

Aramex may face some challenges in the year ahead as its chief executive predicts a "cautious outlook", but analysts are backing the Middle East's largest courier company.

The company reported an 11 per cent rise in fourth-quarter profits to Dh55 million, compared with the same period in 2009, and a "healthy balance sheet", it said in a statement to the Dubai Financial Market yesterday. Full-year profit was up 9.7 per cent to Dh204.1m, compared with Dh184.3m in 2009.

Fadi Ghandour, the chief executive of Aramex, said the "outlook for 2011 is cautious" as operating costs were likely to rise because of sustained inflationary pressure and higher fuel prices. But analysts were more optimistic, noting the company's ambitious expansion plans. Aramex embarked on a series of acquisitions last year in Turkey, Malaysia, Bangladesh and Vietnam as part of its expansion plans into high-growth markets.

It intends to make two acquisitions this quarter, including one in Kenya within 10 days, Mr Ghandour said, adding that an acquisition in east Africa would be concluded before the end of next month.

"It's been a tough year [which has] put pressure on margins," said Kareem Murad, a transport and logistics analyst at Shuaa Capital, but he added the outlook was not "extremely negative".

Mr Murad's estimate for net income was not far off the result, at Dh52.8m for the fourth quarter. He said the company's foreign investor interest had helped the stock's desirability. "Let's not forget there is interest from foreign owners, the cap is at a maximum [of 49 per cent]," Mr Murad said, adding the logistics company would experience growth this year alongside market recovery, "albeit at a slower rate" than last year.

But it will be a tough call for the company as higher fuel prices put pressure on the bottom line with logistics carriers needing more expensive oil. The price of the fuel approached US$100 (Dh367) a barrel yesterday. Mr Murad added that the freight business, which is growing faster than the express unit, may pull margins lower.

The stock closed up 0.5 per cent to Dh2.04 in Dubai.