It's June and, so far, 81 UAE companies out of the 131 listed have announced their earnings for the first quarter. A glance through these numbers will give us an understanding of the health of the corporate sector and how it has navigated the pandemic.
The aggregate revenue of 80 companies, for which information is available, shows that it rose by 12.40 per cent year-on-year and 6.52 per cent quarter-on-quarter. On the other hand, profits had a steeper rise, jumping 66.46 per cent on an annual comparison and 93.63 per cent in quarter terms.
The stellar profit growth shows the improving operating leverage of UAE companies. Operating leverage measures the degree to which a firm or project can increase operating income by increasing revenue. In this case, companies had cut down on their costs significantly, which helped record faster profit growth, even with a lower revenue growth number.
More signs of health
In other words, corporate health has improved. Overall, UAE companies benefitted from higher vaccination rates as it enabled a faster normalization of the economy and thus gave them a revenue boost.
The companies with the highest revenue growth in the first quarter are Foodco Holding (2,628 per cent), Al Salam Bank Sudan (1,612 per cent), Abu Dhabi National Energy (632 per cent), RAK Properties (223 per cent), International Holding Co. (219 per cent), National General Insurance (79.67 per cent), Gulf Pharmaceuticals (59.77 per cent), Amanat Holdings (59.60 per cent), Fidelity United Insurance (52.33 per cent) and Gulf General Investment (51.97 per cent).
Those with the highest profit growth are Al Salam Sudan Bank (2,174 per cent), International Holding Co. (1,087 per cent), Fidelity United Insurance (609 per cent), Ajman Bank (579 per cent), Deyaar Development (481 per cent), Amanat Holdings (449 per cent), Abu Dhabi Commercial Bank (440 per cent), RAK Properties (432 per cent) and Emirates Refreshment Co. (372 per cent).
The companies with the highest profit growth are always interesting. Nevertheless, investors should watch out for them than those with revenue growth. These are the companies that can generate good returns for the shareholder. Among the large companies that are a crowd favorite, there is International Holdings, whose profits rose by 1,087 per cent when compared to revenue gains of 219 per cent. The other large companies worth watching are Aldar, Ras Al Khaimah Ceramics, Agthia Group, Orient Insurance, and Sharjah Islamic Bank.
Agthia Group, recently included in MSCI Small Cap Emerging Markets Index, is an exciting company to have in the portfolio. The company grew profits by 86 per cent in the first quarter. Inclusion in the index should also help attract more foreign portfolio inflows, which can be bullish for the counter.