UAE investors will do well to pick up some defensive stocks
There is a hint of volatility in global investment universe and best to be prepared
Investors seemed to find cheer in a US federal judge issuing an executive order to stop Trump administration banning Chinese-owned TikTok - it certainly boosted global risk sentiments. The DFM rallied 0.73 per cent and ADX ended the day in the black by 0.14 per cent.
But brace for some volatility on the horizon - with the first US Presidential debate this week, a spike in market turmoil can be expected. At this juncture, it would be worth looking at UAE stocks that are defensive in nature.
There's the National Central Cooling Company (Tabreed), a district cooling company with 72 plants across five Gulf countries. Tabreed has also pursued strategic acquisitions whenever it fund this necessary - case in point being the acquisition of a 80 per cent stake in Emaar's Downtown district cooling business at Dh2.48 billion.
Tabreed has grown its revenues from Dh1.12 billion in 2012 to Dh1.52 billion in 2019 while profits more than doubled to Dh472 million. This year, revenue is expected to increase to Dh1.78 billion while for 2021 it is estimated at Dh1.94 billion.
Tabreed with a market cap of Dh6.16 billion yields 6.16 per cent and is a good company for the risk-averse investor. From the beginning of 2012, the share has rallied by 363 per cent.
Gulf Medical Projects is another interesting company in the heathcare sector that can be rated as defensive. The stock with a yield of 4.29 per cent has a market cap of Dh1.62 billion. Revenues have grown from Dh320 million in the beginning of the decade to Dh534 million, while profits rose by almost 50 per cent to Dh74 million in the period.
Julphar medicals is another interesting company in pharmaceuticals, but it is a turnaround story right now and cannot be considered as a defensive stock now. Once revenues mature, it can be considered so.
- Vijay Valecha is Chief Investment Officer at Century Financial.