Further challenges loom for Arabtec
Analysts say share price outlook remains negative in medium to long term
Arabtec Holding, the Dubai-listed construction firm, has about Dh4.6 billion in accumulated losses, a Dh1.5 billion rights issue to ready for and a capital reduction plan afterwards. But none come close to being the company’s greatest challenge.
Its greatest challenge is to contend with what seems to be market perception, with analysts echoing bearish views on the company’s outlook and the overall construction sector for the medium to long term.
This comes amid challenges across the construction industry, with contractors like Arabtec facing squeezed margins and delayed payment cycles from developers and governments.
“Crude oil is now at $56 or $57, which is good, but I think you need to see crude at $65 before you get another round of spending in infrastructure, and that is when contractors may start to do better, but until then it’s basically going to be batting down the hatches,” said Sanyalaksna Manibhandu, director of research at the National Bank of Abu Dhabi Securities.
For Arabtec specifically, he said he didn’t expect to see growth in the company for at least another two years.
“I think the fact that Aabar Investments [Arabtec’s largest shareholder] is going to effectively underwrite the capital increase means that there is intention for the company to survive. The first thing they need is for the company to sort out its capital structure, and go through another round of restructure, and then one might think about growth but this would take maybe two years,” Manibhandu said.
He noted that Arabtec had earlier said it was aiming to break even in 2016, but its losses only widened in the year.
Technical outlook
From a technical perspective, analyst Osama Al Ashry said the technical outlook was negative for the medium and long terms. In the short term, however, prices may rebound to above Dh1.
“Share prices dropped nearly 43 per cent in the week after the company announced results … and I expect prices to reach new lows, so I wouldn’t advice investors to buy the stock,” he said.
Yesterday, Arabtec’s share price moved sideways, ending the day 1.14 per cent lower at Dh0.955. The shares were the most actively traded on the Dubai bourse, accounting for 27 per cent of total trade value.