An Arabtec construction site at Business Bay. Market watchers never lost sight of the fact that the company’s operational fundamentals remained intact. Image Credit: Gulf News Archives

Dubai: Arabtec is hoping to script a new — and upbeat — chapter by confirming the extremely well-connected Mohammad Thani Murshed Ghannam Al Rumaithi — who currently heads the Abu Dhabi Chamber of Commerce and Industry — as its new Chairman. He is taking over the mantle at the construction giant from Khadem Abdullah Al Qubaisi, who was not renominated to the Board of Director.

The stock closed on Wednesday with a slight gain, by 3 fils to Dh2.71, on volumes of 30.08 million shares. But it is still a long way from the 52-week high of Dh7.74. According to some market observers, the stock is at a 25 per cent discount to a fair trading value. The announcement of the new board was made after trading hours.

At the time of going to press, the company had not issued a formal statement to the media regarding the confirmation of the new chairman.

But the Board is starting to wear a new look with Al Qubaisi’s exit as well as that of Riad Kamal, a doyen of the region’s construction industry and founder of Arabtec. Kamal had resigned last year, but the official confirmation was made only recently.

But Al Rumaithi and his team will want to create as much distance — principally in image perceptions — starting now and what had transpired at the company in the last 15 months and more. During this time, it lost a CEO, in Hasan Ismaik — who was caught up in a boardroom struggle with Aabar Investments, Arabtec’s primary shareholder — and investors responded by tanking the share price.

It recorded a drop in 2014 net profit, totalling Dh241.6 million, compared with 2013’s Dh468.26 million.

But all through the tumult, market watchers never lost sight of the fact that the company’s operational fundamentals remained intact. “The Group never had any issues relating to its pipeline … with the appointment of the new chairman, the road is paved for a consolidation of strategies and a clear way forward,” said Sameer Lakhani, Managing Director at Global Capital Advisory. “For investors, that’s something to cheer about.”

Overall project

The company can certainly draw on a few positives — one gargantuan proportioned one is recent affirmation that its involvement in a $40 billion (Dh147 billion) long-term development in Egypt is still on. It should soon start mobilising for the first phase, which would involve building 100,000 homes. The overall project, conceived as a ten-year development, could create as many as 1 million units. (But, as per Egyptian public sector development policy, builder margins will be capped at 7.5 per cent.) According to construction industry sources, an entrenched presence in Egypt for Arabtec would place it at an advantage in surfing a wave of projects expected in the country, and especially those led by the UAE and other Gulf investors. (These projects would be a progression from the commitments announced at the recent Sharm Al Shaikh summit held to crystallise inward investments into Egypt.) And in the recent past, Arabtec has been shedding all non-core exposures, a legacy of the pre-financial crisis years when it had wanted to extend itself into multiple markets as well as take on additional business lines as part of an ambitious diversification.

“This is what the new Board/management will have to address and allay investor concerns,” said a market watcher. “The ‘off-balance-sheet’ turbulence has been in its ecosystems for a while now.

“This is reflected in the current stock price — it is at roughly a 25 per cent discount to fair value levels.

“With a new chairman anointed, market chatter about these issues could subside and a clear road map can emerge.”