7.39 PM Friday, 29 March 2024
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 04:56 06:10 12:26 15:53 18:37 19:52
29 March 2024

A barometer for investments

(GERMAN FERNANDEZ)

Published
By Ryan Harrison
Corporate earnings are a stock market investor's barometer, so the coming weeks will offer crucial information into the country's listed companies' fortunes as they release their third-quarter results.

After a difficult summer, which saw Dubai and Abu Dhabi bourses down at least a quarter, the Emirates is now facing the prospect of what could be seen as its own version of the global credit crunch.

Local banks are set to suffer the brunt of any fallout from the worldwide financial storm. But at the other end of the spectrum, property firms are expected to post bumper profits on the back of the UAE's continued real estate boom.

All eyes are now on the Q3 October results season, which will undoubtedly shape short-term stock market sentiment.

"The results season is always a critical time of year for the direction of a particular company and the market as a whole," said a spokesperson for Dubai Financial Market.

"It's also important because of the transparency issue – a company's chief executive will have to stand in front of his shareholders and explain the results."

Khaled Masri, a partner at investment bank Rasmala, said he was braced for financial results from a battered UAE banking sector that has been under strain in recent months.

"The key will be the banking sector as there's been some funding issues, including the increasing cost of funding and the fact that a lot of money has left the market," he said.

"Banks' profits may be under pressure as they are not able to grow their loan books as quickly and cheaply as they used to. We have come out of a difficult summer and Ramadan period, but fund managers will be looking at company results for the third quarter to confirm that, although the markets have gone through certain technical issues as well – such as a drop in foreign money and tightening levels of liquidity," Masri said.

He said he expected banking sector net profit growth to slow to 20 per cent in the third quarter, from up to 40 per cent over the first and second quarters.

UAE stock prices have been savaged since the end of July, with investors increasingly fixated by the turmoil engulfing US banks and the wider American economy. Analysts are now hoping a strong results season will convince them to instead focus on the bullish domestic economy.

"Institutions are waiting for the third-quarter results before making a move – they want to be reassured that the crisis in the West hasn't hurt the UAE bottom line," said Sherif Abdul Khalek, Beltone Financial Institutional Trading Manager.

"We will have to wait until mid-October and the start of the third-quarter results season before the market can start to look up."

Investors told Emirates Business they will also be monitoring the results of UAE-listed companies caught in the eye of an anti-corruption campaign by the government that was launched earlier this year.

Of the pre-results forecasts being made, no analysts have yet attempted to predict the financial situation of these companies.

Meanwhile, other listed property and construction firms have all received positive forecasts from experts. Investment bank Prime Holding said it expects Abu Dhabi-listed Aldar Properties' third- quarter profit to jump to Dh1.3billion, up from Dh505.4million last year.

Emaar Properties' recent battle with its share price is to be reflected in its Q3 results, according to Prime Holding. Profits may drop to Dh1.550bn in the third quarter this year, from Dh1.560bn in 2007. Etisalat is expected to pip its rival du to the profits post, by reporting Dh1.902bn earnings from July to September, up from Dh1.801bn a year earlier. Du will witness a third quarter loss of Dh44m.


Winners and losers so far

-- Biggest name winners so far in 2008:

(DFM) Ajman Islamic Bank, up 62%
(DFM) Arabtec, up 36%
(DFM) Dubai Insurance, up 35%
(ADX) Takaful, up 35%
(DFM) Mashreq, up 13%

-- The biggest losers so far in 2008:

(DFM) Deyaar Properties, down 45%
(DFM) DFM Co, down 45%
(DFM) Tamweel, down 43%
(ADX) ADCB, down 39%
(DFM) DIB, down 39%
(DFM) Amlak Finance, down 35%
(ADX) etisalat, down 13%

-- Results to watch:

(DFM) Emaar Group, down 49%
(DFM) Tamweel, down 43%
(DFM) DIB, down 39%
(DFM) Shuaa Capital, down 35%
(DFM) du, down 33%
(ADX) Aldar Properties, down 32%
(DFM) Emirates NBD, down 30%
(ADX) Sorouh, down 21%

(Percentage figure refers to share price performance year-to-date)


Q3 forecasts

EMAAR PROPERTIES

Emaar Properties will report lower third-quarter profit at Dh1.55 billion. Emaar reported a profit of Dh1.56bn a year earlier.

DU

Emirates Integrated Telecommunications (du) is expected to record a third-quarter loss of Dh44 million. Du reported a loss of Dh242m a year earlier.

UNION PROPERTIES

Prime Holding sees Dubai–listed Union Properties' third-quarter net profit at Dh125m. Union Properties reported a net profit of Dh176.8m in the third quarter of 2007.

ARABTEC HOLDING

Dubai-based construction firm Arabtec Holding is expected to post an increase in third-quarter net profit to Dh250m, according to Prime Holding. Arabtec reported a net profit of Dh169.6m in the third quarter of 2007.

TABREED

Prime Holding expects National Central Cooling's (Tabreed) to post a third-quarter net profit of Dh22.5m. Tabreed reported a net profit of Dh14.5m a year earlier.

ETISALAT

Emirates Telecommunications Corp (etisalat) is seen reporting a third-quarter profit of Dh1.90bn, says Prime Holding. Etisalat reported a profit of Dh1.80bn a year earlier.

DANA GAS

Prime Holding expects oil and gas company Dana Gas to record lower third-quarter net profit of Dh20m. Dana Gas reported a net profit of Dh22m in the third quarter of 2007.

SOROUH REAL ESTATE

Prime Holding sees Sorouh Real Estate post a third-quarter net profit of Dh400m. Sorouh reported a net profit of 216.9m in the third quarter of 2007.

ALDAR PROPERTIES

Prime Holding expects Aldar Properties to report a higher third-quarter net profit of Dh1.3bn. Aldar reported a net profit of Dh505.4m in the third quarter of 2007. Aldar has borrowed Dh6.98bn this year for funding its projects.

UNION CEMENT

Prime Holding sees UAE-based Union Cement's third-quarter net profit higher at Dh69m. Union Cement reported a net profit of Dh31.07 million in the third quarter of 2007.

(Data supplied by Zawya.com, unless otherwise stated)