Dubai: Market speculation on Arabtec’s involvement in a $35 billion-plus (Dh128.55 billion) housing project in Egypt dragged its share price right from the opening of Sunday’s trading on DFM.
Investors say the scrip will continue to be in their crosshairs unless Arabtec comes out with a definitive statement on the status of its planned Egypt exposure. The share was down 8 fils (3.32 per cent) to Dh2.33.
“Ever since boardroom turbulence has hit Arabtec, roughly a year ago, the company has been reticent informing investors of its revised operational and strategic plan in the market,” said Sameer Lakhani, managing director at Global Capital Partners, and which has an exposure in the scrip.
“And through this period, investors only had the ‘grapevine’ to take any sort of position on the company. The stock has been hurting because of the perceptions over management strategy. The latest speculation that Arabtec’s role in Egypt has been scrapped will not help the majority of the company’s shareholders, institutional and retail. Only a select few are likely to ‘win’ from any continued pressure on the share price.”
That there is a lot happening around the share would be an understatement. In fact, through the last two weeks, investors vented their disappointment over the company’s first quarter 2015 results. Arabtec reported a Dh315.31 million loss in the three months, when the market was expecting another set of bullish profit tidings.
All through this, the confirmation that Arabtec’s role in Egypt was still on was reassuring for its shareholders. In April, reports came out that it was close to signing off on the first phase of the multi-year development. This followed a protracted period of negotiations with Egypt’s Ministry of Housing.
The terms of the deal, it was reported, included a provision that Arabtec’s profit margin would be capped at 7.5 per cent. The last set of statements on the Egypt plans from the company was that it was working to raise the initial capital that it would need for the ministry project.
According to construction industry sources, talk of an end to Arabtec’s role in Egypt would be “premature”. Some of the UAE’s biggest investors have committed substantial project funding for Egypt, and many of them have had a track-record of past associations with Arabtec. That, sources say, will count a lot in determining whom they take on as contractors on their Egypt plans.
Last May, Arabtec’s stock fell from a high of Dh7.37 per share to Dh2.24 per share a month later. The stock price was also affected by a fight between Aabar Investments PJS, which today is the single largest shareholder with 30 per cent plus, and former CEO Hasan Ismaik over control of the company.
“Ismaik has consistently maintained that he plans to dispose his stake or bring it down even further, whereas it used to be over 30 per cent plus,” Lakhani said. “Obviously, where the share price is headed will have an influence on major shareholders’ decisions.”
Ismaik’s current shareholding is now estimated at 10 per cent.