MSM30 ends flat as in­vestors re­main cau­tious amid Q2 re­sults

Muscat Daily - - BUSINESS -

The bench­mark in­dex of the Mus­cat Se­cu­ri­ties Mar­ket (MSM) ended last week slightly up by 0.04 per cent at 5,121.38 points. A re­cov­ery was seen in the mar­ket per­for­mance dur­ing most of the past week de­spite re­gional chal­lenges and in­vestors’ over­all cau­tious sen­ti­ment. Fac­tors such as the an­nounce­ment of the projects by the gov­ern­ment and start of the earn­ings sea­son have played role in this per­for­mance. As we stated in our pre­vi­ous re­port, stock prices have al­ready re­flected most of the neg­a­tive fac­tors leav­ing am­ple room for in­vestors to catch op­por­tu­ni­ties, es­pe­cially in com­pa­nies that man­aged to sus­tain op­er­a­tional mar­gins and will ben­e­fit from the up­com­ing projects. How­ever, the mar­ket lost 0.95 per cent on Thurs­day pres­surised by neg­a­tive per­for­mances of some com­pa­nies in sec­ond quar­ter re­sults.

As per the com­pa­nies’ dis­clo­sures to the MSM, total ini­tial net earn­ings of 60 com­pa­nies, which have so far an­nounced sec­ond quar­ter re­sults, grew by 13.2 per cent in the sec­ond quar­ter of 2017 on se­quen­tial ba­sis. This im­prove­ment came on the back of bet­ter per­for­mance of power com­pa­nies which were im­pacted by spe­cial de­ferred tax ex­penses in the first quar­ter.

Total net in­come of th­ese listed firms was down by 17.9 per cent in the sec­ond quar­ter on year-on-year ba­sis. Sec­tor wise, fi­nan­cial sec­tor re­sults fell by 19 per cent on quar­terly ba­sis to RO79mn (bank­ing sec­tor con­sti­tuted 89.4 per cent of the fi­nan­cial sec­tor). In­dus­trial sec­tor’s total net earn­ings came at RO12.8mn in sec­ond quar­ter, a de­cline of 13.6 per cent on quar­terly ba­sis and 39.2 per cent fall on year-on-year ba­sis. Ser­vices sec­tor earn­ings grew which ben­e­fited from lesser-de­ferred tax ex­penses by many of power com­pa­nies.

Subindices

All sec­toral in­dices closed in red ter­ri­tory last week led by the In­dus­trial in­dex which fell 2.98 per cent to 6,835.42 points. Fi­nan­cial in­dex de­clined 0.85 per cent to 7,575.02 points and the Ser­vice in­dex fell 0.78 per cent to 2,581.26 points. The MSM Shariah in­dex closed down by 0.54 per cent at 759.67 points.

Tech­ni­cal anal­y­sis

As we fore­casted last week, the MSM30 in­dex reached the level of 5,160 points. Cur­rently, the MSM30 in­dex is likely to con­tinue to be volatile be­tween the lev­els of 5,160 points and 5,040 points.

Lo­cal news

Na­tional Se­cu­ri­ties dis­closed that its board of di­rec­tors pro­posed to re­struc­ture the share cap­i­tal of the com­pany by writ­ing off the ac­cu­mu­lated losses, then in­creas­ing the cap­i­tal to com­men­su­rate with the le­gal re­quire­ments. The board also ap­proved the trans­for­ma­tion of the le­gal sta­tus of the com­pany from pub­lic joint stock com­pany to closed joint stock com­pany.

Al­izz Is­lamic Bank dis­closed that its board of di­rec­tors de­cided not to pur­sue the pos­si­ble merger with United Fi­nance Co through a com­bi­na­tion of a share swap and cash and stopped dis­cus­sions af­ter a re­cent de­ci­sion of United Fi­nance Co to de­cline the bank’s of­fer.

The un­der­sec­re­tary of the Min­istry of Oil and Gas said that the trial pro­duc­tion from the Khaz­zan gas field was suc­cess­ful and the ac­tual pro­duc­tions will be start­ing in early Septem­ber. He added that the first train has a ca­pac­ity of 500mn cu­bic feet per day of gas, while the sec­ond train, which has a sim­i­lar ca­pac­ity, will be in op­er­a­tion in early 2018.

Ac­cord­ing to a me­dia re­port, Oman Oil Co man­aged to se­cure and com­plete US$2bn loan fi­nanc­ing and the com­pany has signed a re­volv­ing credit fa­cil­ity of US$1.15bn, with a five year ma­tu­rity, and has slightly amended the terms of an ex­ist­ing US$850mn re­volv­ing loan that ma­tures in 2019. The re­port said that the US$850mn loan was part of a dual-tranche US$1.85bn fi­nanc­ing the com­pany raised in 2014. Oman Oil Co is tar­get­ing to de­velop the Duqm Re­fin­ery, other oil projects and Salalah LPG, a liq­ue­fied petroleum gas (LPG) ex­trac­tion project.

GCC mar­kets

Qatar Ex­change posted the high­est weekly gain of 6.13 per cent fol­lowed by Dubai Fi­nan­cial Mar­ket which ended the week 4.01 per cent higher.

In a move aimed to in­crease pri­vate sec­tor con­tri­bu­tion in Saudi Ara­bia’s health­care sec­tor, me­dia re­ports said Saudi Ara­bia’s King Sal­man bin Ab­du­laziz al Saud agreed to a pro­posal by the Saudi Min­istry of Health con­cern­ing the pri­vati­sa­tion of health in­sti­tu­tions and work on a com­pre­hen­sive pro­gramme for cit­i­zens’ in­sur­ance. Ac­cord­ing to the Min­istry of Health, hos­pi­tals and health cen­tres will be sep­a­rated from the min­istry and they will be con­verted into pub­lic sec­tor com­pa­nies to com­pete with one an­other on the ba­sis of qual­ity and other fac­tors. Fur- ther­more, the estab­lish­ment of a hold­ing gov­ern­ment com­pany was ap­proved which will con­trol five com­pa­nies cur­rently owned by the Min­istry of Health dur­ing the tran­si­tional pe­riod. Th­ese steps are part of Saudi Ara­bia’s ‘Vi­sion 2030’ and the Na­tional Trans­for­ma­tion Pro­gram 2020.

In the UAE, the In­sur­ance Author­ity an­nounced the ap­proval of the Coun­cil of Min­is­ters to in­crease the for­eign­ers’ own­er­ship in lo­cal in­sur­ance com­pa­nies by mod­i­fy­ing the min­i­mum cap­i­tal to be­come at least 51 per cent of the cap­i­tal of the com­pany. The ap­proval cov­ers com­pa­nies that are es­tab­lished in the UAE and owned by cit­i­zens or GCC na­tion­als or le­gal per­sons. Such move will be re­flected pos­i­tively on the in­sur­ance com­pa­nies, es­pe­cially in terms of im­prov­ing the terms of rein­sur­ance con­tracts and the in­tro­duc­tion of new in­sur­ance prod­ucts with the as­sis­tance of for­eign ex­per­tise.

Ac­cord­ing to a Bloomberg re­port last week, Abu Dhabi Na­tional Oil Com­pany (ADNOC) is look­ing to float some of its ser­vices busi­nesses and en­ter tie-ups with global in­vestors to help it cre­ate new rev­enue streams and se­cure more mar­ket ac­cess. ADNOC is re­port­edly plan­ning an IPO of its re­tail unit, with a po­ten­tial val­u­a­tion of up to US$14bn, mak­ing it po­ten­tially the largest trans­ac­tion on lo­cal eq­uity mar­kets since the DP World listing in 2007.

The Amer­i­can Petroleum In­sti­tute in its re­cent re­port stated that crude in­ven­to­ries dropped by 8.13mn bar­rels in the week ended July 7, reach­ing 495.6mn bar­rels, be­low than an­a­lysts’ ex­pec­ta­tions as they ex­pected a de­cline of only 2.9mn bar­rels. Data col­lected by Bloomberg sug­gested that in June 2017 stock­piles have de­clined by 1.4 per cent on monthly ba­sis to 502.9mn bar­rels.

Rec­om­men­da­tion

Over­all in­vestors re­main cau­tious which would be the best prac­tice in the cur­rent cir­cum­stance as the mar­kets are over­shad­owed by geopo­lit­i­cal ten­sion, funds and for­eign in­vestor move­ment and fi­nan­cial re­sults. In­vestors need to an­a­lyse the re­sults tak­ing into ac­count the im­pact of taxes and higher op­er­a­tional cost.

Given the cur­rent sce­nario, we ad­vise in­vestor to wait for ad­di­tional in­for­ma­tion and data on quar­terly re­sults as only ini­tial fig­ures have been an­nounced. We ad­vise to look for com­pa­nies which man­aged to ab­sorb pres­sures and were ef­fi­cient in util­is­ing the right tools.

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