Julphar's oversubscribed rights issue will give it a lot of heart
Picking up these funds in these turbulent times comes across as a big plus
UAE equities managed to snap a three-day losing streak to close out the week, with ADX gaining 0.83 per cent and DFM in the black by 0.21 per cent.
The gains on ADX were led by FAB, which posted a gain of 2.64 per cent for the day, reversing some of the recent losses. The Abu Dhabi bank is a heavyweight with a 38 per cent weightage on ADX and higher than any other stock.
The second half of this month will see some of the largest UAE companies announcing their earnings for last quarter. Prominent among them are Etisalat on July 21, Mashreq Bank on July 22 and RAK Bank on July 23. Among corporate news, Drake and Skull International has been accepted by Financial Reorganization Committee to support its restructuring efforts.
The big news for this week is Julphar’s rights issue, which got oversubscribed 2.3 times. The rights issue was worth Dh500 million while bids received from existing rightsholders stood at Dh1.14 billion.
A healthy subscription
It is indeed a credible achievement for the company to garner these resources in these turbulent times. The successful conclusion is a testimony of investors’ confidence in the leadership of recently confirmed CEO Dr. Essam Farouk, who took over in April.
The company has gone through tough times with revenues declining from Dh1.47 billion in 2015 to Dh300 million in 2019. It posted a loss of Dh496 million in 2019 when compared to a profit of Dh230 million in 2015.
The share price declined by 78 per cent from a peak of Dh5.69 to its current Dh1.24. During this period, company’s products got banned in Saudi Arabia, Kuwait and Bahrain.
Julphar will use proceeds of the rights issue to repay existing loans and support growth plans. This year, the company was able to get back its license to sell again in Saudi Arabia, and has already announced the relaunch of over 80 products in Saudi Arabia, Kuwait, Bahrain, and Oman.
Dr. Farouk has stated that equity injection will act as a critical growth catalyst and help it build a platform for the near-term.
- Vijay Valecha is Chief Investment Officer at Century Financial.