Tabarak raises stake in Drake & Scull even as construction firm struggles

Private equity firm Tabarak Investment has increased its shareholding in Drake & Scull International, despite a drop in the Dubai contracting company’s shares and ahead of a stakeholder meeting later this month that may decide the its fate.

Tabarak Investment raised its share to 13.73 per cent from 13.26 per cent, DSI said in a statement to the Dubai Financial Market yesterday.

“Some of these shares are held in the name of Ajman Bank as a collateral against financial facilities,” DSI said. “Tabarak Investment retains its actual ownership rights as the beneficiary owner of the shares.”

DSI, which has faced mounting losses since 2015, said last week it would call a shareholder meeting on September 27 in accordance with UAE company law.

The law states that shareholders must decide on whether to dissolve a company if its losses amount to half of their issued share capital.

After the statement on the Dubai bourse, DSI shares plunged the maximum daily limit of 10 per cent to Dh0.405, leaving them down 82 per cent since the end of last year.

The construction engineering company, which posted a second-quarter net loss of Dh181.1 million, issued a second statement later the same day last week, emphasising that its board is exerting all its efforts to safeguard shareholders’ interests and “ensure the seamless operation of the company and its continuity”.

The shareholders meeting to vote is a “mere legal requirement” in accordance with the UAE company law and does not mean that it intends to dissolve the company before its expiry term, DSI said.

Tabarak Investment’s incremental stake increase in DSI is evidence of its commitment to the company, analysts said.

“Tabarak increasing its stake in DSI marginally is symbolically positive, particularly, after the recent speculation on whether the company will get dissolved or not,” said Nishit Lakhotia, head of research at Sico, based in Bahrain.

Tabarak Investment’s move will have a “neutral” impact on DSI, said Lina Hisham, research analyst at Naeem Brokerage.

“Symbolically, it shows Tabarak Investment’s commitment to Drake & Scull, that everything is fine and that the company will not necessarily dissolve.”

Tabarak Investment was being strategic when it raised its share in DSI, said Nabil Al Rantisi, managing director of capital markets at Daman Investments.

“They see value in investing at these prices and it probably helps boost confidence,” Mr Al Rantisi added.

DSI must focus on its nearterm liquidity problems, given its “huge” short term liabilities, Mr Lakhotia said.

“What DSI currently needs is more cash inflow through either equity infusion from Tabarak or raising debt. The probability of both options looks low currently.”

Analysts said dissolution of the company is not an inevitable outcome and alternative solutions could include taking the company private, recapitalising or taking on an strategic investor.

On August 14, the company said it would appoint Yousef Al Mulla as chief executive from August 26, replacing Fadi Feghali, who took the post in April. It did not provide a reason for hiring its second CEO in a year.

Tabarak Investment see value in investing at these prices and it probably helps boost confidence NABIL AL RANTISI Daman Investments