MSM index edges higher

21/08/2011 00:00 AST

Market breadth was positive as 38 stocks advanced while 16 stocks declined.

The financial index rallied 4.63 per cent. Market turnover was 0.3 per cent lower compared to that in the previous week.

Key factors that influenced market movement in the previous week include:

Equity volatility reduced in global and regional markets as investors picked stocks again in the United States after a sharp sell-off. Japan’s gross domestic product (GDP) decline in first half of 2011 was lower than anticipated while the German growth stalled in second quarter of 2011. Germany and France are working towards a better integration of the Euro zone and stop providing rescue funds to the bloc’s indebted nations forever.

Galfar reported a 46 per cent year-on-year decline in net profit in the second quarter of 2011 at RO1.30 million while total revenues increased 0.5 per cent year-on-year.

Sequentially, net profit declined 5.8 per cent quarter-on-quarter while total revenues were higher by 9.8 per cent.

The company continues to operate on a thin margin with a net margin of 1.61 per cent in first half of 2011 Renaissance reported a 77 per cent year-on-year decline in net profit in first half of 2011 at RO2.26 million mainly due to lower utilisation in its marine segment, operating losses in its engineering segment and cost inflation in its contract services segment. Finance charges almost doubled to RO8.36 million.

One-off charges for contract cancellation and a higher tax provision also contributed to a lower net profit in first half of 2011.

The company also warned of a potential $30 million negative impact going forward in its engineering segment though the likelihood of it happening was not ascertainable. Its stock ended the week 16 per cent lower.

Among the top gainers of the week, we find Ominvest (OMVS) attractive in the medium-term. Our sum-of-the parts valuation of its holdings (adjusted for holding company discount) works out to around RO0.585.

The implied P/BV multiple of its subsidiary Oman Arab Bank (OAB) in the current market price of OMVS is cheap compared to other listed banks. Oman Arab Bank may be publicly listed in the next six to 12 months. OMVS reported a 19 per cent year-on-year decline in net profit at RO4.6 million in first half of 2011 mainly due to higher operating expenses and a higher credit provision.

Oman Four Mills (OFMI) is a cash rich and well managed company having around 65 per cent market share of flour in Oman. The company is gradually liquidating its portfolio investments focusing on growing its food business organically by launching value added products such as breads, frozen snacks and poultry.

Oman Four Mills reported a 35 per cent year-on-year drop in net profit in FY2010-11 at RO5.22 million mainly due to higher wheat price of stocks procured at the beginning of the year.

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Times of Oman