Jan 02 2013

Best and worst performing stocks

Regional markets enjoyed a respectable 2012 as many markets emerged from negative territory to launch a smart rally. Here is a look at the best and worst performing regional stocks and markets.

Bahrain's Ithmaar Bank emerged as the best performing stock among major Gulf listed companies in 2012, rising 161.5% in the year.

The retail Islamic bank which went through a significant reorganization in 2010, merged with First Leasing Bank in October, and hopes to tap into the nascent retail market in Bahrain.

While its witnessed a strong rally in its stock price, the bank still has some way to go before it can claim a full recovery. The company posted a USD15.6-million loss in the first nine months of the year.

"In the nine month period ended 30 September 2012, Ithmaar took significant net impairment provisions of $23.9million, compared to a provision write back of $22.5 million during the same period last year," said Chairman His Royal Highness Prince Amr Mohamed Al Faisal.

"The provisions are due, in part, to Ithmaar's efforts to reflect the decline in fair value of certain investment assets and to build adequate provisions on its financing portfolio," he said.

Oman's Raysut Cement emerged as the second best performing stock among major Gulf stocks, rising nearly 90% during the year, as the construction sector showed signs of improvement.

However, export revenues to volatile markets such as Yemen and East Africa declined in the last year, as did the average selling price.

National Bank of Kuwait analyst Loic Pelichet said in a November note that the stock is currently over-valued.

"We remain concerned about the company's high exposure to its volatile export markets, as well as the situation of the UAE cement market."

Bahrain's investment bank Esterad Investment Company was the third best performing stock, while Kuwait's civil and electromechanical contractor was fourth.

No less than three UAE listed companies were among the 10 best performing Gulf stocks last year. Abu Dhabi-based First Gulf Bank rose 50% last year, as the country's economy showed signs of improvement.

"We raise our sum-of-parts fair value for FGB to AED13.20 from AED12.90 as we tweak our estimates and roll forward our valuation model," said EFG-Hermes analyst Shabbir Malik in a December note.

"We forecast FGB to generate an ROE of 19% on a sustainable basis, as loan growth outpaces sector average growth and management remains committed to optimising the capital base. The selective recovery in Dubai's real estate market is also positive for FGB 's property portfolio, currently valued at a 40% discount in our valuation. The stock's valuations - 2013e P/E of 7.6x and P/B of 1.2x are compelling, in our view, in context of FGB 's ROE potential. We maintain our Buy rating on the stock."

The presence of two UAE real estate companies - Sorouh Real Estate and Emaar Properties - also highlights the improved prospects of the country's property market.

Sorouh rose throughout the year in the hopes that the Abu Dhabi real estate company will secure a merger with Aldar Properties. Abu Dhabi is looking to rationalise and restructure its depressed real estate market and Sorouh is expected to be one of the major beneficiaries of the restructuring.

Meanwhile, Emaar Properties mirrored Dubai's fast improving real estate market.

"We expect Emaar to continue with small project launches in Dubai over the next twelve months, after two successful launches to date this year," said Shaza El Kady, an analyst at EFG-Hermes in a note after the company announced its third-quarter results. "We currently see no alternative that is as attractive as Emaar for those seeking to gain exposure to the UAE real estate, hospitality and retail market."

Meanwhile, Mashreq Bank was the worst performing stock among major Gulf stocks, while Bahrain's aluminium giant Alba and Oman's Nawras Telecom also fared poorly.

Many regional markets also staged a smart recovery. While Egypt was by far the best performing Middle East Gulf market, rising nearly 51% in the year, Dubai led the Gulf rally, up nearly 20% in the year.

Still, the rally needs to be put in perspective. The Dubai market had fallen 73% in 2008, and had also recorded double-digit declines in 2010 and 2011.

Abu Dhabi also staged a smart rally, rising nearly 10% last year, after falling steadily in previous years.

Saudi Arabia, the region's largest stock market, rose nearly 6%, although the index failed to mirror the robust economic activity in the country and the record crude output the Kingdom pumped up at triple-digit Brent prices in the year.

Going forward, the 2013 budget should provide a much-needed fillip for the Saudi economy and Tadawul.

"The budget highlights again the government's intention to continue to stimulate the economy," said Jadwa Investment analysts. "Budgeted investment spending, raised by 28 percent to an all-time high of SR285 billion, will support healthy economic growth and provide encouragement and opportunities for the private sector at a time of global and regional uncertainty."

At the other end of the spectrum, Bahrain was the worst performing Gulf market, falling nearly 7% as the Kingdom's economy continued to falter in the wake of political tensions. The Bahrain Stock Exchange Index has been in negative territory for four consecutive years, according to Zawya.com data.

© alifarabia.com 2013

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