Dubai's Arabtec says to boost transparency after volatility

Dubai-listed builder Arabtec is planning to resume quarterly earnings calls with analysts as part of efforts to improve transparency and provide disclosures to investors.

An Arabtec spokesperson told Argaam that it would remain committed to providing the market with full transparency.

“The company has a policy of not commenting on market rumours; however, the company will in certain circumstances clarify a market rumor to avoid a false market,” the spokesperson said in an emailed statement. “Both the DFM and SCA, as the main regulatory bodies, are as committed as Arabtec to ensuring false markets do not persist in the UAE.”

Analysts who cover the company say they would welcome more disclosure from Arabtec, as it would limit the number of speculators trading the stock and encourage more fundamental investors to buy it.

A majority of investors trading Arabtec shares are focused on short-term gains as of now, says Nishit Lakhotia, head of research at Bahrain-based Securities & Investment Company (SICO).

“The company is still in a transitional phase as it gets a stable management team in place. Until that happens, it would be premature for any long-term investors to consider the stock,” Lakhotia said.

Last week, Arabtec’s shares soared to their highest level in more than a year, after its former chief executive Hasan Ismaik raised his stake in the company to 11.91 percent from 11.81 percent. The builder’s shares, however, plunged by nearly 6 percent earlier this week after it denied rumors that Ismaik would be joining its board.

“The adjustment in the stake was hardly an increase, and the stock was up 60 percent in just days. You definitely need more of a balance, as the entire market can get end up getting influenced,” Lakhotia added.

The construction firm is also prone to speculation because it is known to have high trading liquidity. In 2014, the stock surged and fell to a fraction of its high point during 2015. 

Arabtec posted losses for five consecutive quarters and swung to its first annual loss of AED 2.35 billion in fiscal year 2015 amid a slowdown in the UAE’s construction sector. The company said last month it would focus on cost-cutting this year and take a more selective approach to project tendering.

“When risk is perceived to be relatively low, active traders trade Arabtec,” says Sanyalaksna Manibhandu, director and head of research at NBAD Securities. “The present low level relative to the high is encouraging short term traders back into the stock.” 

Write to Joumana Saad at joumana.saad@argaamplus.com