Arabtec shares rally after rights issue plan Price jumps 15% as firm gets recapitalisation approval Published: February 22, 2017 11:31 By Sarah Diaa, Staff Reporter Follow us Dubai: Arabtec Holding, the Dubai-listed construction firm, announced on Wednesday it has received approval from the market regulator for its recapitalisation plan, which encompasses a Dh1.5 billion rights issue followed by capital reduction. In a statement posted to the Dubai Financial Market (DFM) website, Mohammed Al Rumaithi, Arabtec’s chairman, said the programme “will provide the foundation for building a successful and sustainable future” for the company. Under the programme, Arabtec is planning a rights issue, which will increase the company’s paid up capital to Dh6.1 billion from Dh4.6 billion. Arabtec’s largest shareholder, Aabar Investments, will subscribe to its full entitlement under the rights offering and any unsubscribed shares remaining up to Dh1.5 billion, the statement said. This step will be followed by a capital reduction, which will involve the cancellation of up to 4.5 billion shares to extinguish accumulated losses. As of December 31, 2016 accumulated losses are estimated at around Dh4.6 billion, Arabtec said, including a net loss for the year of Dh3.5 billion. The announcement caused a spike in share prices, which ended the day 15 per cent higher, reaching the daily market cap for a price rise. Arabtec’s shares were also the most actively traded on the DFM in terms of value, with over Dh173 million in traded shares, accounting for 23 per cent of the total market trade value. The DFM index rose 2.42 per cent to reach 3,646.08. Unusual However, market analysts seemed baffled by the jump in share prices, saying it was fundamentally unjustifiable considering the statement on Wednesday did not have much new in terms of details. News of the recapitalisation programme was first announced by Arabtec in a statement last week. “I think we can agree that there is basically nothing new in terms of genuine information flow. Sentiment is on a knife’s edge, and having seen the stock fall 10 per cent on Tuesday, which was the second day of near limit-down, people decided to buy back even though there was nothing new. It’s sentiment. Now that we’ve seen the stock go limit up, you might see some toing and froing until such time that there is genuinely new information given to the market,” said Sanyalaksna Manibhandu, director of research at the National Bank of Abu Dhabi Securities. He added that he expected share prices to be testing both support and resistance levels in the near future, with support at nearly 70 fils and resistance at Dh1.08. “In their fourth quarter [statements] Arabtec and Drake and Scull suggest that it’s [construction] still not a very good industry to be operating in. It seems that customers are still asking the contractors to delay work, which is not good,” Manibhandu said. “If customers still want to delay, it means they’re not confident about the project they’ve hired a contractor to do. Until such time when customers are saying they should accelerate or at least progress on their timeline, then it’s still a difficult market condition to be operating in.” For Arabtec, delays and uncertainty are likely to create further challenges in 2017, especially considering that construction firms have been facing delayed payment cycles and squeezed profit margins over the past two years.