Arabtec Holding reported Dh17.8 million in net profit on Wednesday for the third quarter of this year, a jump from the Dh225.5 million in losses recorded in the same quarter of 2016.
The figure brings profits for the first nine months of 2017 to Dh75 million, also a turnaround from the Dh458 million in net losses recorded in the same period last year.
The profits mark the Dubai-listed construction company’s third consecutive quarter of profitability following nearly two years of mounting losses that saw the company accumulate Dh4.6 billion in losses by the end of 2016. Arabtec has since restructured its capital and implemented a turnaround plan.
Revenues in the third quarter of 2017 rose nearly 6 per cent year-on-year to reach Dh2.1 billion, as revenues for the first nine months of the year inched up 3.2 per cent to Dh6.34 billion.
In a statement, Arabtec said it has a “solid pipeline” of project opportunities going forward, with its backlog now at Dh16.8 million.
“The group remains on track to achieving the first phase of its strategic road map to stabilise the business in 2017, ensuring long-term, profitable, and sustainable growth,” said Hamish Tyrwhitt, group chief executive officer of Arabtec.
Despite the swing to profitability, Arabtec’s share prices fell 4.55 per cent to Dh2.73 on Wednesday as third quarter profits missed expectations.
Sanyalaksna Manibhandu, director of research at National Bank of Abu Dhabi Securities, had projected Dh21 million in profits for the quarter. He said he had expected some more improvement in general and administrative expenses.
“It’s quite possible that the fourth quarter will be a very good quarter, and they will continue to improve in 2018. But the market at the moment is risk-averse, and that tends to be at the expense of stocks that have high PE,” he said. PE is ratio of a company’s stock price to its earning.
Manibhandu added, “The market has a problem with trying to value this stock because how do you value it? Do you value on book, on DCF (Discounted Cash Flow), on PE? It’s just very difficult. However you do it, it looks expensive, so I think you might see some challenge for the stock to go up until quarterly disclosures improve a lot more.”
In a presentation posted to the Dubai bourse’s website, Arabtec said that in 2018 it plans to consistently secure an annual backlog of new projects of at least Dh8 billion — Dh9 billion, while it plans to see consistent growth in profits and cash flow in 2019.
In the third quarter of 2017, Arabtec was awarded projects that include a Dh628 million contract from Damac, a Dh363 million contract for the Dubai South Mall from Emaar, and a Dh196 million contract for phase 1 of a project by Emaar in Downtown Dubai.
Arabtec had earlier this year completed a recapitalisation programme, which included a Dh1.5 billion rights issue followed by capital reduction. The latter step saw the company’s capital reduced to Dh1.5 billion from Dh6.1 billion.
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