UAE stock markets give a guarded response to a Biden win
Aramex benefits from digital transformation, while theme park operator has work to do
Even though the final result is yet to come, the stock markets have anointed Joe Biden as the next US President. And reacting to the event, DFM closed higher by 0.32 per cent while ADX ended up by 0.60 per cent.
The Abu Dhabi National Energy Company (Taqa) rallied by 14.69 per cent with the company all set to announce third quarter results on November 9. A sneak peak of some of the recent results will give us insights into the UAE economy.
Digital led
The logistics company Aramex posted stellar results with revenues rising 18.7 per cent to Dh1.5 billion on the back of strong e-commerce growth. The earnings report is a proof of the digital transformation that is happening in the UAE economy and the company’s importance in last-mile connectivity.
Aramex had a stupendous 35 per cent growth in total volumes, with the bulk coming from its core markets of Saudi Arabia and UAE. E-commerce volumes in core markets surged 71 per cent over the period.
The underlying trends in the logistics business are robust since the transformation from offline to online. Aramex in its comments hinted about the possibility of consolidation in the sector, and it is likely to play a crucial role in M&A activity.
For long-term investors, Aramex is a good proxy for playing the e-commerce growth in the region, given it’s possession of logistics and delivery infrastructure.
Need for patience
The weak results at DXB Entertainments reflects the weakness in the tourism and hospitality industry. This entire segment has seen crushed by the pandemic. And there seems to be no respite with the onset of winter in Europe and the US seeing a record surge in cases.
This has reduced the number of tourists coming to the UAE, giving a jolt to the financials of DXB Entertainments. During the first nine months of 2020, revenues declined by 67 per cent to Dh109 million while number of visitors also dropped the same percentage to 602,000 when compared to last year.
DXB Entertainments is an interesting reopening play for those investors who believe that the COVID-19 vaccine will make the world normal again. Of course, investors have to be prepared to stay in it for the long haul.
Consumer line weaknesses
As for Abu Dhabi National Insurance Company, gross written premiums rose 6.2 per cent for first nine months versus 2019. The rise was powered by 12.8 per cent in commercial lines while the customer segment contracted. This also seems to be in tune with current realities with consumer spending impacted due to loss of income as well as rising unemployment.
Three different companies, but each tell a story of what is happening in the UAE. Consumer spending remains weak; there is a digital transformation; and larger companies are weathering the crisis relatively well.
- Vijay Valecha is Chief Investment Officer at Century Financial.