After a dramatic drop in topline revenues last year, Dubai Financial Market (DFM) is likely to see 17.7 per cent growth in revenues this year as investor confidence turns positive, a report by Global Investment House, said.
Revenues are slated to increase to Dh223.3 mn this year compared to
Dh189.6 mn posted in 2010, it said.
The Kuwaiti investment company further estimates that on a 2010-2014 compound annual growth rate (CAGR) basis, DFM’s revenue will increase 31.9 per cent. This remains, however, far from pre-crisis levels.
“The growth in trading fees will mainly be driven by the increase in trading activity as the credit crisis calms and sign of economic revival arises from better economic indicators in UAE, resurgence of the real estate market, a better performance of the banking sector and the increased positive sentiment in the markets,” it said.
The report adds that the gross margins will increase and reach 82 per cent in 2014 as the company develops synergy with Nasdaq Dubai to decrease investment cost.
“The company will continue to benefit from favorable economic and demographic factors,” Global said. “As a part of the merger between DFM and Nasdaq Dubai, we expect the number of international retail and institutional investors to increase by the end of 2014, as DFM- Nasdaq consolidation takes its effect.”
In July 2010, DFM welcomed the trading shares of Nasdaq Dubai on its platform as the first step of the consolidation. Investors will be entitled to have one investor number to trade in both exchanges, in addition the trading, clearing, settlement, and custody of Nasdaq Dubai securities will operate under the DFM platform.
Last year, trading commission fees were more than halved, pulling down DFM’s revenues in 2010 by 73.1 per cent to reach Dh189.6mn.
The DFM General Index also suffered badly and witnessed 60 per cent decline in the average daily trading value on a year-on-year basis as stocks plummeted due to market correction and negative news from the European Sovereign debt crisis.
The year ended with DFM reporting Dh78.9 mn net profit, 77 per cent lower than in 2009. Its net profit margin went down to 38.7 per cent.
As trading commissions make more than 80 per cent of DFM’s revenues, DFM is currently working on diversifying its income away from the trading commission by introducing new fees on its advanced services, including relooking at the imposed fees on new listings, collaborating with Abu Dhabi Securities Exchange to collect yearly fees from listed companies and introducing new financial services and by attracting more IPO’s.
According to Essa Kazim, Managing Director and CEO, Dubai Financial Market said, the company is increasing its focus on market data sales, which DFM had launched at the beginning of 2011.
"Through 2010 DFM has been intensely engaged in discussions with various business sectors in an attempt to encourage initial public offerings and magnetise new listings,” Kazim said.
“One of DFM's top priorities in the upcoming stage include the diversification of listed companies, better representation of economic sectors in Dubai and more importantly attracting listings from sectors that are entirely unrepresented despite their crucial role in the economy, such as commerce, tourism and health,” he added.
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