Taqa has definitely caught the UAE investors' eyes... and it had enough ballast on it to go all the way to the top in market cap. Image Credit: Ahmed Ramzan/Gulf News Archive

Abu Dhabi National Energy Company (Taqa) has emerged as the new czar of the UAE stock market with its market capitalization topping telecom heavyweight Etisalat.

When the Eid holidays started, Taqa had a market cap of Dh149.53 billion compared to Etisalat’s Dh144.88 billion. The Abu Dhabi utility giant continued its string of price gains, rising 5.56 per cent for Wednesday.

Through the month of July, Taqa shares rose a staggering 94 per cent - and nothing seems to be getting in its way.

The rise of a new national champion is good for the overall health of the stock market, as it increases the depth and offers more diversity for investors. The “new” Taqa was created after the completion of merger transaction with Abu Dhabi Power Corporation, with the transfer of a majority of its water and power generation assets to the new entity in exchange for 106,367,950,000 new shares.

Apart from the merger, The bull run in Taqa is powered by a host of positive news in the last one month. A consortium led by Taqa and Masdar bagged the award for the world’s largest solar power plant. It also announced the financial closing for the largest gas-fired power plant in the UAE.

Taqa also awarded projects worth Dh900 million to expand the company’s recycled water distribution programme.

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A spot of profit taking

Arabtec shares witnessed profit booking following an exchange filing that the company had no material information to offer behind the recent rally in its share price. Its shares topped the list of declines on DFM, closing Wednesday down by 4.51 percent. Damac shares followed suit, by 3.43 per cent.

While Arabtec recently bagged a 200 million Saudi riyal project from Aramco - thus bolstering its order book - the company is still suffering from a deep financial distress. In 2019, it posted a loss of Dh686 milllion against a profit of Dh255 million the year before.

Debts stand at Dh1.89 billion while the cash on the balance-sheet is Dh991 million. The company had been ravaged by the slump in the UAE property market and is undergoing financial restructuring.

It was in this context that Walled Al Muhairi, Deputy CEO at Mubadala, was appointed as Chairman of Arabtec. Naturally, it spawned hopes that the company will be getting support from Abu Dhabi.

Cold water

The latest stock market filing of the company seems to be pouring cold water on those hopes, with the company saying it doesn’t have any information to offer regarding the share price rally. Nevertheless, the story doesn’t end here...

A clearer view can be taken only after the company comes out of financial restructuring. Only then will the investor get an idea about the amount of debt restructured and the company’s ability to survive market turmoil.

- Vijay Valecha is Chief Investment Officer at Century Financial.