Oman Cables to benefit from massive government spending on power upgrades.
Power pledge throws Oman Cables a line
Oman Cables Industry (OCI) operates in a competitive market and the cost of copper, a raw material used in the sector, is up more than 30 per cent in the last year.
But that is more than cancelled out by one big positive: the Omani government's commitment to invest more than US$7 billion on power generation and transmission in coming years.
The company is a leading maker and exporter of low and medium-voltage electric cables, and overhead transmission line conductors. Shares in OCI, trading at 1.235 Omani rials on the Muscat exchange, have gained more than 15 per cent in the past six months and analysts believe they have more juice left.
"We remain positive on the overall demand outlook for cables in the Omani market on the back of government commitment towards the improvement of its power-generation and transmission network," said Kanaga Sundar, an analyst at Gulf Baader Capital Markets in Oman.
Energy demand in Oman has doubled in the past decade as a result of strong growth in the industrial sector. In response, the government has said it intends to invest more $6bn to increase its power generation capacity through 2016, in addition to another $1bn to upgrade its national grid. The company this week reported an increase in net annual profits of 22.3 per cent from 2009 to 8.1 million rials. Profits for the fourth quarter improved significantly, by 30 per cent to 2.2m rials, with profit margins increasing "commendably", Mr Sundar said.
The company also announced a dividend of 40 per cent for last year. Despite a surge in the price of copper in the past year, OCI has been successful in hedging its risk through the use of various derivative instruments, Mr Sundar said.
The GCC is dominated by big players such as Elsewedy Cables of Egypt and Saudi Cable, and a number of smaller private cable companies. OCI is becoming more geographically diversified by entering new markets in Europe and South East Asia.