20/03/2016 16:58 AST
Arabtec Holding, the Dubai-based construction company, announced that its subsidiary, Arabtec Construction, was awarded a Dh1.7 billion contract to build 1,100 villas for Emiratis in Fujairah’s Mohammad Bin Zayed City.
The project, which was awarded by the Ministry of Presidential Affairs, comprises a total built up area of 430,000 square metres on a plot area of 215 hectares.
In a statement issued to the Dubai Financial Market (DFM), where Arabtec is listed, the company said construction will start imminently, with an expected duration of nearly two and a half years.
The announcement sent Arabtec’s share prices up 6.79 per cent to end at Dh1.73 — their highest closing price in two weeks. In terms of liquidity, however, just Dh192.8 million worth of Arabtec shares were traded, accounting for 19 per cent of the Dh1 billion traded on DFM.
Tariq Qaqish, managing director of asset management at Al Mal Capital, said it was important for Arabtec to be able to maintain a flow of new projects, especially considering the competitive nature of the construction market.
“Going forward, what investors need to focus on is the backlog, cash flow, and margins. If [Arabtec] manages to clean the books from 2015 and start 2016 with a clean balance sheet, and make money from the top line, then we would expect for the company to at least be able to recover …
For us, until we see a clean quarter, we will stay on the side, but again, investors who don’t have positions or want to build new positions in this company will look at it in a different way,” he said.
The contract marks Arabtec’s third announced project this year, bringing the total value of announced deals so far to Dh4.8 billion — roughly 66 per cent of the total revenues for 2015.
Earlier this month, Arabtec announced it was awarded a contract worth Dh1.1 billion to build a residential development of two 50-storey towers in central Dubai. Before that, in early January, the company announced it was awarded a Dh2 billion contract from Aldar Properties for the construction of 1,017 villas on Yas Island.
“The important thing for us is to see healthy margins in order to be able to turn around … Arabtec suffered from bad management and there are a lot of investors who aren’t happy, but there are new investors who look at the company going forward.
It’s still not clear what direction the company is taking because every time we think the losses are over, they come up with a surprise, but I think we’re very close to the bottom,” Qaqish said.
Arabtec reported Dh2.78 billion in net losses for 2015, marking a significant plunge from the Dh241.6 million in net profits recorded in 2014. The company attributed the losses to a “continuing difficult environment that the regional construction market is facing, and the challenging economic backdrop,” as well as number of poorly performing projects.
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