MSM30 firms set to see revenue growth in the first quarter

12/04/2015 09:01 AST

Revenue of MSM30 Index companies, excluding investment holdings, for the first quarter of 2015 is estimated to increase by 4.0 per cent year on year thanks to the strong performance by banking sector majors. The companies are expected to benefit from investments in economic zones, sea ports, airports, Batinah Expressway and other industrial clusters. Index earnings for the quarter are anticipated at RO 155.912 million, a decline of 8.3 per cent on year on year basis due to dismal earnings estimates from investment holding companies and certain industry and services sector majors.

On sequential basis this is likely to increase by 15.6 per cent.

“Despite fall in crude oil prices and volatile secondary market, we estimate the banking sector to report stable performance during first quarter amid steady credit growth, maintenance of margins and estimated lower cost of risk”, says research report prepared by Gulf Baader Capital Markets.

At the same time, primary market activity is expected to become more vibrant with the listing of Phoenix Power Co and Truckoman in the coming months. Currently, Bank Sohar and BankDhofar are in the process for raising Tier 1 capital by means of rights issue.

“During the fourth quarter of 2014, Oman banking sector credit had increased by RO 387 million in absolute terms, reporting stronger growth of 2.3 per cent amid project draw-downs and incremental private sector demand”, the report points out.

Islamic financing has increased RO 145 million during the same period.

“During first quarter the current year, we estimate banking sector credit addition to be at RO 350 million, an increase of 2 per cent on a quarter to quarter basis”, says the report.

It may be recalled that the Central Bank of Oman said in January that the total credit growth remained relatively lower during the first month increasing by 0.6 per cent.

“As per our interactions, we estimate the banking sector credit growth will be at 8 per cent levels with the government spending commitments and estimated mid-single digit growth in retail demand”, says the report.

The first quarter total revenue of the banking sector is estimated to increase by 9.2 per cent year on the back of incremental credit growth, lesser margin pressure and also maintaining low cost of risk.

For Industrial sector, total revenue is expected to decline by 2.5 per cent year on year and 6.9 per cent on quarter to quarter amid estimated lower performance from construction and cement sector players.

Services sector revenue is estimated to surge 5 per cent year on year and fall 1.2 per cent on quarter to quarter.

Industry sector earnings for the quarter are estimated to decline by 7 5 per cent year on year due to increase in the gas prices came into effect on January 1, 2015 and also the 7.5 per cent estimated dismal performance from Galfar and Raysut Cement.

“At this moment, demand outlook in the local market seems to intact with the government commitment in project spending to remain strong, this would in turn keep up the numbers”, says the report.

At the same time, the service sector revenue is expected to increase 5 per cent year on year TO P18.

Oman Daily Observer