Muscat shares edge lower

05/02/2012 08:20 AST

THE MSM 30 index declined 0.57 per cent in the week ended on February 2, 2012 closing at 5,564. The financial and industry sector indices also declined 0.86 per cent and 0.83 per cent respectively, while the services sector index gained 0.75 per cent for the week. Market turnover during the week was 22.7 per cent higher at RO13.3 million compared to the previous week.

Key factors that influenced market movement in the previous week include: The market continued to trade sideways despite strength in global equity markets. After active buying from pension funds in December, turnover again dropped as pension funds face restrictions in trading in companies where they hold board seats during earnings reporting periods.

The softness in oil prices over the past two months could be another factor for recent underperformance of GCC markets in a global context. Oil prices may head lower as the year progresses which can affect market sentiment. Al Anwar Ceramic Tiles (AACT) made a new 52 week high of RO0.350 on Thursday as its fourth production line is getting ready for commercial production.

The stock currently trades at 11x its FY12 EPS of 32 baizas. The market now seems to be giving a higher multiple to the stock compared to its historical P/E band owing its robust business model, strong cash flows and negligible debt.

Al Jazeera Services (AJSS) which holds a 37 per cent stake in AACT has been the best performing stock in the market year-to-date. Its investment portfolio also includes strong cash generating companies such as Qatar Fuel and Etihaad Etisalat along with 10.75 per cent Eurobond from Aldar properties. AJSS reported a 2.5 per cent year-on-year growth in book value in 2011 while its EPS declined 35 per cent to RO0.013.

The stock currently trades slightly above its adjusted book value per share after revaluing its investment portfolio to market prices.

Ahli Bank posted a net profit of RO18.2 million in 2011, 29 per cent higher year-on-year while net operating income rose 37 per cent year-on-year to RO35.3 million. Net loans and advances grew 17 per cent year-on-year while customer deposits recorded a 6.0 per cent year-on-year growth. The stock trades at 1.7 times its latest book value per share of RO0.150. The bank announced a RO25 million rights issue at par.

Oman International Bank (OIB) reported a net profit of RO18.0 million in 2011, 2.4 per cent higher year-on-year while net interest income rose 1.9 per cent year-on-year to RO30.3 million. Net loans and advances grew 8.0 per cent year-on-year while customer deposits recorded a 25 per cent year-on-year growth. The bank announced a lower dividend payout of 12.75 per cent cash and 1.25 per cent in the form of stock.

GCC market outlook The Saudi market advanced further to end the week with a year-to-date gain of 3.83 per cent. Sectors such as cement, building materials, food, insurance and real estate are driving the Saudi market higher while index- heavy sectors such as petrochemicals and banks continue to underperform.

The 2012 Saudi budget promises to give a major boost to civil, transportation and social infrastructure which should spur domestic growth in a weak export environment. Order backlog has seen a robust growth for material suppliers. The Qatar market recovered some of its recent losses helped by recovery in banks and industrials.

National Bank of Abu Dhabi reported a lower-than-estimated fourth quarter of 2011 net profit of 724 million dirhams owing to higher expenses and very conservative provisioning. But operating income growth has been healthy driven by loan book growth and non-interest income.

Disclaimer: This column expresses only the views of the contributor and investing in stocks carries risk of financial loss for which the contributor is in no way liable.

Times of Oman