Muscat - The benchmark MSM30 closed last week (February 17-21) at a ten-month high of 5,979.91, up 1.38 per cent week-on-week, on strong trading activity, as a result of strong foreign institutional presence and company disclosures, especially dividend announcements.
The index was supported by most banks, Nawras and Oman Cables Industry Co.
The Al Arabi Oman20 index gained 2.13 per cent to 1,069.75 as turnover amounted to RO29.26mn. The Al Arabi GCC50 index added 0.06 per cent, while the Al Arabi MENA200 index dropped 0.07 per cent to close at 963.61.
We still await more disclosures, especially corporate board recommendations on dividends, which in our opinion will attract more investors to the market.
At the same time, we expect companies which suffered previously from administrative and technical issues to undergo a restructuring process. We believe that those companies and/or companies which have underwent restructuring will provide attractive investment opportunities.
In the coming weeks we will provide a better view of those companies and their sectors taking into account the board of directors reports and discussions relating to them, which will be included in the financial reports.
An analysis of the sectoral indices reveals strong performances across-the-board, especially the Industrial index which increased 3.04 per cent w-o-w to close at its highest in more than three years, at 8,005.25, supported by A'Saffa Foods, National Aluminium Products, Oman Cables Industry and Al Jazeera Steel Products.
A'Saffa Foods announced its initial unaudited financial results for 2012, posting a six per cent year-on-year increase in net profit margin, from 18 per cent in 2011 to 24 per cent in 2012.
Revenue grew 21 per cent, with cost of sales increasing by a smaller percentage leading to gross profit margin growth of five per cent, from 35 per cent in 2011 to 40 per cent in 2012. Net profit was higher by 60 per cent from RO3.85mn in 2011 to RO6.15mn in 2012. Investors reacted positively to the news and the stock closed the week at 801bz, up 14.3 per cent on a weekly basis to top the gainers' list.
The Services index ended the week up 1.76 per cent closing at its highest level in more than four and half years at 3,030.95, backed by gains in Sohar Power, Nawras and OIFC.
Nawras announced a dividend, amounting to 67 per cent of the net profit for FY'12. This translates to 38bz per share and a dividend yield of 7.2 per cent, based on the price of the stock at the end of the week.
Additionally, the company announced that it had signed two additional bilateral revolving credit facility agreements totalling RO20mn, with three-year tenure, for capital expenditure and working capital purposes with two banks.
The Financial index closed the week up 1.11 per cent for its highest close in ten months at 7,076.19, supported by Bank Sohar, Ahlibank, bank muscat and other holding companies.
Ahlibank announced the conditional acquisition of Taageer Finance. A press release early last week indicated the acquisition price would range from 176bz to 177.5bz per Taageer share, implying a discount to the closing market price of the stock at the end of last week.
At the start of the week, Muscat Finance announced its decision to issue unsecured non-convertible bonds for a period of three years on a private placement basis for an amount of RO7mn, subject to approvals from Central Bank of Oman, Capital Market Authority and the shareholders at an extraordinary general meeting (EGM).
The company will also take the approval of shareholders at the EGM to issue unsecured non-convertible bonds worth RO20mn over a period of five years, subject to approvals.
Trade analysis, excluding special deals on Bank Sohar in the week earlier, shows a notable increase of 16.74 per cent and 26.4 per cent in both volumes and values to 161.4mn shares of RO45.9mn value. It is noteworthy that the average daily turnover of RO9.2mn the previous week is one of the best in years.
Foreign institutional investors continued to remain significant, registering a net buying activity of RO1.23mn.
So far 37 companies have announced dividends, and the total amount of cash dividends announced so far is RO200mn for 2012, which is 17 per cent higher than the total amount for the same companies in 2011, at RO171mn
Out of these 37 companies, 12 have announced both cash and stock dividends, with three companies having announced mandatory convertible bonds (MCBs). The total amount of earnings distributed in the form of stocks stands at about RO70mn in 2012.
Most GCC markets gained last week, except for the Saudi market, which was impacted by pressure from the petrochemical and telecom sectors, that led the biggest market in the region to drop by 0.4 per cent on a weekly basis.
Abu Dhabi Securities Market led the gainers and closed the week at its highest level since November 2009 crossing 3,000 backed by the telecom and banking sectors, which gained 4.72 per cent and 2.86 per cent, respectively
The MSM stood second, followed by the Dubai Financial Market which closed last week up 1.54 per cent, backed by the investment and financial and telecom sectors.
Leading shares included Dubai Financial Market Co and Al Deyaar. The Kuwaiti index continued its rally over the last eight weeks by ending the previous week up 0.18 per cent.
Recommendation
We expect the market to see movement towards restructuring portfolios and reshuffling positions depending on dividend announcements and company disclosures, especially by those known for their high dividends and yields.
We recommend that investors concentrate more on dividends of companies which usually see growth in the first quarter. We are bullish on regional and local markets.
© Muscat Daily 2013
