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MIDEAST STOCKS-Dubai's DSI slumps on more write-offs, oil below $50 sours sentiment
May 7, 2017 / 2:44 PM / 6 months ago

MIDEAST STOCKS-Dubai's DSI slumps on more write-offs, oil below $50 sours sentiment

* Arabtec at 14-mnth on potential 722 mn dirhams further write-off

* Tabarak may offer DSI future value but outlook uncertain

* Saudi drop weighed down by petchems

* But STC up on Q1 net profit beat

* Foreign funds net buyers in Egypt

By Celine Aswad

DUBAI, May 7 (Reuters) - Shares of Dubai builder Drake & Scull (DSI) slumped to a 14-month low in heavy trade on Sunday as investors reacted to the company’s revised capital restructuring plan, while last week’s fall in oil prices knocked down oil-sensitive shares.

Dubai’s stock index fell 1.0 percent as DSI plummeted 9.9 percent to 0.399 dirham after a shareholder meeting held on Thursday.

“The new news from the meeting is the 722 million dirhams additional write off from potentially unrecoverable receivables, and the market - rightfully so - was reacting to that as it would effectively dilute current shareholder value by up to 75 percent, more than previously anticipated,” said Allen Sandeep, head of equity research at Naeem Brokerage in Cairo.

The capital reduction of up to 722 million dirhams is in addition to a previously planned reduction of 992 million dirhams, it said.

In 2016 the company made a full-year net loss attributable to owners of the parent of 732.9 million dirhams.

DSI also said that shareholders had “unanimously expressed no interest” in a 500 million-dirham ($136 million) capital increase via a new share issue at 1 dirham per share.

Instead, Tabarak Investment, a Dubai-based investment firm which currently does not hold any stock in DSI, agreed to buy the new shares, which will be issued if the securities regulator approved the further capital reduction by DSI, the builder said.

Analysts at Abu Dhabi’s Alramz Capital said the injection of capital by Tabarak could play a significant role because of the builder’s ability to negotiate and to settle outstanding cases with clients and creditors.

“Tabarak have done it before with Gulf Navigation as a very recent example. Some of the favourable scenarios for DSI include settling the Aramco case as well as renegotiating with creditors for better financing terms,” said Talal Touqan, head of research at Alramz Capital.

“And these serve as positive catalysts for DSI’s long-term perspective. But the timeline and when this might happen is still unknown.”

As of December 2016, DSI had an outstanding order variation of 1.7 billion dirhams from contracts in Saudi Arabia, according to Alramz.

In Abu Dhabi, the index dropped 1.0 percent dragged down by a 4.6 percent fall in the shares of natural gas producer Dana Gas. In Doha, oil rig provider Gulf International Services dropped 4.0 percent to 23.96 riyals, a four-year low. Qatar’s index lost 1.1 percent, its fourth straight session of declines.

All but three of 14 listed Saudi petrochemical makers fell after Brent crude dropped below $50 late last week. Heavyweight Saudi Basic Industries retreated 1.0 percent; the main market index dropped 1.0 percent.

Saudi Arabian Mining Co (Ma‘aden) lost 1.0 percent, failing to hold onto gains in the day. The company reported a first-quarter net profit of 275.6 million riyals ($73.5 million), up 41.9 percent from a year ago and beating the average analyst forecast of 167.9 million riyals.

Shares of Saudi’s largest telecom operator, Saudi Telecom Co (STC), rose 1.1 percent after it reported a first quarter net profit of 2.53 billion riyals ($674.63 million), up 5 percent from a year earlier and above the 2.21 billion riyals analysts had forecast the former monopoly would make.

Alrjahi Capital said that historically the company’s costs are lowest in the first quarter. It also said that revenues, which fell 3 percent in the first quarter, could improve because of a reversal in civil servant allowances announced last month.

Egypt’s index edged down 0.1 percent but daily traded volumes rose to their highest in seven weeks with international funds net buyers on Sunday, bourse data showed.

Investment bank and brokerage firm EFG Hermes, a stock favoured by foreign funds, added 0.6 percent.

Sixteen shares on EGX 30, however, dropped, with GB Auto declining 2.4 percent.

HIGHLIGHTS

SAUDI ARABIA

* The index fell 1.0 percent to 6,857 points.

DUBAI

* The index dropped 1.0 percent to 3,384 points.

ABU DHABI

* The index lost 1.0 percent to 4,570 points.

QATAR

* The index fell 1.1 percent to 9,834 points.

EGYPT

* The index edged down 0.1 percent to 12,692 points.

KUWAIT

* The index dropped 2.8 percent to 6,565 points.

BAHRAIN

* The index fell 0.5 percent to 1,325 points.

OMAN

* The index declined 0.5 percent to 5,450 points. ($1 = 3.7502 riyals)

Editing by Andrew Torchia

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