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HSBC Maintains Rating for Arabtec

HSBC also maintained its target price of Dh2.4 for Arabtec. This week, the company posted a hefty Dh945 million in net profit for 2008, will continue to generate revenue from on-site mobilisation for projects in backlog where construction has yet to start, said HSBC.

These include the Cleveland Clinic in Abu Dhabi, new construction contracts from Saudi Arabia, Abu Dhabi and Qatar, as well as payment of work already done on the cancelled $1.3 billion Meydan racecourse track. HSBC said that Arabtec’s current backlog is Dh39.2 billion of which 50 per cent will be coming from Dubai, 24 per cent from Russsia, 20 per cent from Abu Dhabi, 10 per cent from Qatar.

The balance is split between operations in Jordan, Syria and Pakistan. The bank said however, that it is keeping its forecast of a Dh17 billion backlog till it sees signs of stability and timely project execution in the Dubai market. HSBC said the outlook on Arabtec for 2009 which is projecting revenue of between Dh9 billion and Dh9.6 billion is ahead of its own estimates.

“We think our forecasts reasonably account for potential cancellations of projects in backlog, in addition to late client payments and the market price reflects a more dire situation,” said HSBC analyst Alia El Mehelmy in the research note. While Arabtec’s full year 2008 net profit rose, its fourth quarter net income fell Dh184.84 million, lower compared to Dh191.9 million from a year ago.

“Overall, it seems to us that the company is comfortable with its working capital cycle and cash position, with no major resort to debt financing,” said El Mehelmy. Arabtec shares on Wednesday surged 14.7 per cent to Dh1.17, stretching gains for a third session.

rocel@khaleejtimes.com