Cash dividends show rising trend in MSM

07/01/2012 08:14 AST

The cash dividend to be paid by MSM30 Index constituents this year is expected to rise about 12.3 per cent touching RO 262.559 million on year on year basis. A total of five companies in MSM provide a dividend yield of above 10 per cent. Among the relatively liquid counters, Port Services give the highest dividend yield of 10.5 per cent at the current levels.

Around nine companies will pay zero dividends due to the estimated loss in FY11E. A total of six companies in the Index pay a dividend yield of above 6 per cent at the current levels. The dividend season will start at the beginning of March 2012. According to Gulf Baader Capital Markets (GBCM) research estimates, Omantel has the highest dividend yield of about 7.6 per cent at the current level while National Aluminium Products and Al Jazeera steel provide a dividend yield of about 7.4 per cent and 7.3 per cent respectively.

Gulf International Chemicals, Raysut Cement and Voltamp Energy pay above 6 per cent. Oman Cement and Nawras pay a dividend of about 5.9 per cent respectively; while banking sector players Bank Sohar, National Bank of Oman and Oman International Bank provide yield of over 5 per cent levels. Shell Oman provides 5.2 per cent, while the banking sector major BankMuscat give a dividend yield of 4.6 per cent at the current levels, which is an attractive bet, according to the report.

“The payment of half yearly dividends in MSM is prevalent in most of the utilities sector players. On this pack, we estimate United Power to provide highest dividend yield of about 12.5 per cent at the current levels”, adds the report. At the same time, the GBCM research expects the MSM performance over the short term to look for drivers in the form of improved liquidity guided by new fund allocations in equities by local institutions along with the buildup towards FY11E corporate earnings and dividend announcement.

“Overall, FY12E corporate earnings in MSM is estimated to show an increasing pattern on the back of expectations of growth in local demand and improvement of operating margins during H2 FY12E, which is on a positive note.”, adds the report. The revenue of the banking sector is estimated at RO 587.8 million, an increase of 13.9 per cent on year on year basis. This is owing to the revival in credit growth, maintenance of higher margins and the stable asset quality during the year. For the year, the net profit of the banking sector is estimated to grow by 9.7 per cent to RO 223.685 million.

Total revenue of the industry sector for FY11E is anticipated at RO 934.156 million, an increase of 9.9 per cent which is possible on the back of high commodity prices and steady performance of companies with exposure to local market demand. Whereas net profit of the sector is estimated to decline by 30.2 per cent year on year to RO 54.875 million due to higher operating costs, subdued export demand and tough competition.

The services sector is estimated to reveal a total revenue growth of 6.4 per cent on year on year basis to RO 1,292 million led by incremental growth in topline of sector majors. The FY11E earnings is expected to decline by 18.6 per cent on a year on year basis to RO 168.659 million. “This is due to the lower than expected earnings performance from the sector major, Renaissance and also the operating margin pressure seen in other companies”, says the report.

Stable economic growth, government spending towards project development along with the focus on human resources progress is anticipated to aid the earnings growth of services sector players during the year.

Oman Daily Observer