27 January 2008
For the nine months ended September 30, 2007, Arabtec Holding (Arabtec) reported a jump of 115.8% in net profit to Dh343.29 million from Dh159.05 million in 9M 2006. Earnings per share (EPS) reached Dh0.57 from Dh0.27 a year ago. The company's total revenues grew by Dh812.46 million to touch Dh2.87 billion, while direct costs rose 32.4% to Dh2.39 billion. Consequently, net profit margin improved to 11.9% from 7.7% in the corresponding period of 2006. Arabtec's other operating income improved significantly, registering an upsurge of 166.7% to Dh75.30 million. Meanwhile, general & administrative expenses soared 52.3% to Dh185.04 million and finance costs climbed more than five times to Dh3.05 million as against Dh0.59 million in 9M 2006.
During 9M 2007, Arabtec's assets grew 68.4% to Dh3.44 billion, while shareholders' equity increased 45.2% to Dh1.06 billion. The company's annualised return on assets stood at 13.3% and annualised return on equity at 43.3%, as against 10.4% and 29.2%, respectively, in the year ago period. For the year 2006, Arabtec declared cash dividend and a bonus issue of 15% each.
In a Press release on January 20, 2008, Arabtec announced that its unaudited financial results for the year 2007 showed a consolidated profit of Dh494 million as against Dh217 million in 2006, an increase of 127% reflecting an EPS of Dh0.82.
Arabtec Holding (ARTC) traces its roots to the Arab Technical Construction Co. (ATCC) that was established to facilitate investment in the construction sector, through the acquisition of stakes in existing companies in the UAE. Within a month of establishment, it sold 55% of its shares in a public issue. Subsequently, in January 2005, ATCC acquired Arabtec Construction, a leading construction company in the UAE, for a total value of Dh400 million. In May 2006, it rebranded itself as Arabtec Holding and listed on the DFM.
Today, Arabtec is not only the largest contractor and Construction Company by market value in Dubai, but also one of the biggest construction companies in the Middle East. It is primarily engaged in the construction of high-rise towers, buildings, and residential villas. In addition, it executes various related services through its three wholly- owned subsidiaries - Arabtec Construction, Austrian-Arabian Ready Mix Concrete, and Arabtec Precast. In December 2007, it had won the "Company of the Year" award.
The construction sector has been the primary benefactor of the oil surplus and the subsequent surge in investment in the UAE. Many new and ongoing large-scale projects suggest that the sector is likely to be on a high growth trajectory for several years more. A large number of these projects are in the services sector, including the expansion and refurbishment of the country's airports and sea ports, and the construction of new hotels and commercial buildings. There are also quite a few massive infrastructure projects under construction such as the Dubai metro, and a range of industrial developments.
It is noteworthy that UAE alone accounts for 39.4% of the total construction projects in the GCC region. On-going projects in the UAE are estimated to exceed Dh1.83 trillion, registering a growth rate of 83.4% over 2006. Additionally, the UAE has also allocated over Dh454 billion to develop 325 natural and man-made islands, including Al Saadiyat in Abu Dhabi, the Lagoons in Dubai, Jebel Ali Palm, Deira Palm, Umm Al Shauoom, Sayara, Mangrove, and Fujairah Islands. According to a report published by the Abu Dhabi Chamber of Commerce & Industry, the emirate's booming construction and building sector is projected to establish itself as the most magnetic business sector, with total inward investment growing by 346% to Dh580 billion against the previous figure of Dh130 billion. In 2007, total investments by Saudi companies in the UAE's construction sector reached Dh29.4 billion. Finally, with over $1 trillion slated to be pumped into leisure projects across the Middle East, regional developers stand to enjoy immense opportunities.
In September 2007, the Abu Dhabi Urban Planning Council (UPC) was established to lay down comprehensive plans, policies, regulations, licenses, procedures & controls for urban development, and planning of remote areas. It will also be responsible for procedures for approval of public and private urban development projects. Additionally, verification and revocation of construction licences and permissions issued by municipal departments of the emirate will fall within the purview of this council. It will be the sole body to issue construction licenses for projects that are deemed strategic, or have an impact on the emirate's urban development policies.
In January 2008, Arabtec announced that its joint venture with Arabian Construction Co. had bagged an Dh152 million contract from Emaar IGO to carry out construction work on the Eighth Gate Development project in Damascus, Syria, over a period of 20 months. On January 08, 2008, its subsidiary Arabtec Engineering Services LLC was granted an Dh54.5 million contract by Dubai Municipality to construct rain water drainage networks and sewage projects in Al Nahda and Al Mamzar areas. The projects are due for completion within the next 12 months. In the same month, it acquired 55% stake in Gulf Steel Industries (GSI).
In December 2007, Abraaj Capital sold its stake in Arabtec, through an orderly sale process on the Dubai Financial Market (DFM), generating an Internal Rate of Return (IRR) of 116% and returning 12 times the invested capital. In November 2007, the company acquired a 60% stake in Abu Dhabi-based Target Engineering Construction Co. (TECC), a leading contracting company that specializes in civil,electro-mechanical, marine, and oil and gas projects. Earlier, in October 2007, Arabtec awarded Multiforms, an architectural facade specialist and a subsidiary of Emaar Industries & Investments, a contract worth Dh175 million for the supply and installation of the external cladding for Tiara United, a two-tower project on Sheikh Zayed Road, Dubai. In September 2007, Arabtec/WCT Joint Venture received a letter of acceptance from Meydan LLC to carry out construction works at Nad Al Sheba area in Dubai, for a total value of Dh4.6 billion. It consists of constructing a 60,000 seat outdoor stadium and is set for completion in two years.
In November 2007, around forty-thousand employees of Arabtec went on a strike demanding a pay hike of $55 per month. As a result, various projects around the city, including the Burj Dubai, were held-up.
Historically, labour costs account for nearly 10% of Arabtec's total costs, and a settlement would further increase its costs by 1%. Frequent labor unrest and the consequent increase in wages would affect the company's margins as well as hamper project completion schedule. Arabtec is the largest contractor in the UAE, with an order book of about Dh13 billion over the next three years. The company is involved in the construction of the world's tallest tower, the Burj Dubai, and a new racecourse to host the world's richest horse race. Historically it has been able to secure strong joint ventures with local and international contractors, giving it an edge over its competitors. During the 1H2007 alone, Arabtec bagged five contracts worth Dh3.6 billion, including its first project outside the UAE. It also enjoys a longer-term advantage as a pure play contractor, making it the contractor of choice for a number of leading property developers. Its numerous contracts with master developer Emaar Properties, is a case in point. Additionally, it benefits from the technical expertise acquired through building iconic projects. The Syrian project award is a noteworthy step for Arabtec as it further enhances the symbiotic relationship with Emaar. It also falls in line with the company's strategy of diversifying operations outside the UAE. Arabtec's recent acquisitions of TECC and GSI will help it to expand its market share by adding new segments like steel, oil, gas, and marine construction to its portfolio. Not only does it have plans to grow locally, but it also hopes to generate around 40% of its total revenues from its international operations by 2010.
As Arabtec continues to engineer a strong growth trajectory, we remain confident of its successful expansion. Arabtec's stock has gained 14.2% from the beginning of this year, compared to a fall of 6.3% in the DFM Index, outperforming the index. Moreover, the stock is trading at a P/E multiple of 13.91x its annualized 9M07 earnings, making it an attractive proposition. We believe that the region will continue to see strong growth in construction activities and Arabtec, with its expertise in the segment, will continue to benefit from this. Therefore, we reiterate our overweight opinion on the stock.
For the nine months ended September 30, 2007, Arabtec Holding (Arabtec) reported a jump of 115.8% in net profit to Dh343.29 million from Dh159.05 million in 9M 2006. Earnings per share (EPS) reached Dh0.57 from Dh0.27 a year ago. The company's total revenues grew by Dh812.46 million to touch Dh2.87 billion, while direct costs rose 32.4% to Dh2.39 billion. Consequently, net profit margin improved to 11.9% from 7.7% in the corresponding period of 2006. Arabtec's other operating income improved significantly, registering an upsurge of 166.7% to Dh75.30 million. Meanwhile, general & administrative expenses soared 52.3% to Dh185.04 million and finance costs climbed more than five times to Dh3.05 million as against Dh0.59 million in 9M 2006.
During 9M 2007, Arabtec's assets grew 68.4% to Dh3.44 billion, while shareholders' equity increased 45.2% to Dh1.06 billion. The company's annualised return on assets stood at 13.3% and annualised return on equity at 43.3%, as against 10.4% and 29.2%, respectively, in the year ago period. For the year 2006, Arabtec declared cash dividend and a bonus issue of 15% each.
In a Press release on January 20, 2008, Arabtec announced that its unaudited financial results for the year 2007 showed a consolidated profit of Dh494 million as against Dh217 million in 2006, an increase of 127% reflecting an EPS of Dh0.82.
Arabtec Holding (ARTC) traces its roots to the Arab Technical Construction Co. (ATCC) that was established to facilitate investment in the construction sector, through the acquisition of stakes in existing companies in the UAE. Within a month of establishment, it sold 55% of its shares in a public issue. Subsequently, in January 2005, ATCC acquired Arabtec Construction, a leading construction company in the UAE, for a total value of Dh400 million. In May 2006, it rebranded itself as Arabtec Holding and listed on the DFM.
Today, Arabtec is not only the largest contractor and Construction Company by market value in Dubai, but also one of the biggest construction companies in the Middle East. It is primarily engaged in the construction of high-rise towers, buildings, and residential villas. In addition, it executes various related services through its three wholly- owned subsidiaries - Arabtec Construction, Austrian-Arabian Ready Mix Concrete, and Arabtec Precast. In December 2007, it had won the "Company of the Year" award.
The construction sector has been the primary benefactor of the oil surplus and the subsequent surge in investment in the UAE. Many new and ongoing large-scale projects suggest that the sector is likely to be on a high growth trajectory for several years more. A large number of these projects are in the services sector, including the expansion and refurbishment of the country's airports and sea ports, and the construction of new hotels and commercial buildings. There are also quite a few massive infrastructure projects under construction such as the Dubai metro, and a range of industrial developments.
It is noteworthy that UAE alone accounts for 39.4% of the total construction projects in the GCC region. On-going projects in the UAE are estimated to exceed Dh1.83 trillion, registering a growth rate of 83.4% over 2006. Additionally, the UAE has also allocated over Dh454 billion to develop 325 natural and man-made islands, including Al Saadiyat in Abu Dhabi, the Lagoons in Dubai, Jebel Ali Palm, Deira Palm, Umm Al Shauoom, Sayara, Mangrove, and Fujairah Islands. According to a report published by the Abu Dhabi Chamber of Commerce & Industry, the emirate's booming construction and building sector is projected to establish itself as the most magnetic business sector, with total inward investment growing by 346% to Dh580 billion against the previous figure of Dh130 billion. In 2007, total investments by Saudi companies in the UAE's construction sector reached Dh29.4 billion. Finally, with over $1 trillion slated to be pumped into leisure projects across the Middle East, regional developers stand to enjoy immense opportunities.
In September 2007, the Abu Dhabi Urban Planning Council (UPC) was established to lay down comprehensive plans, policies, regulations, licenses, procedures & controls for urban development, and planning of remote areas. It will also be responsible for procedures for approval of public and private urban development projects. Additionally, verification and revocation of construction licences and permissions issued by municipal departments of the emirate will fall within the purview of this council. It will be the sole body to issue construction licenses for projects that are deemed strategic, or have an impact on the emirate's urban development policies.
In January 2008, Arabtec announced that its joint venture with Arabian Construction Co. had bagged an Dh152 million contract from Emaar IGO to carry out construction work on the Eighth Gate Development project in Damascus, Syria, over a period of 20 months. On January 08, 2008, its subsidiary Arabtec Engineering Services LLC was granted an Dh54.5 million contract by Dubai Municipality to construct rain water drainage networks and sewage projects in Al Nahda and Al Mamzar areas. The projects are due for completion within the next 12 months. In the same month, it acquired 55% stake in Gulf Steel Industries (GSI).
In December 2007, Abraaj Capital sold its stake in Arabtec, through an orderly sale process on the Dubai Financial Market (DFM), generating an Internal Rate of Return (IRR) of 116% and returning 12 times the invested capital. In November 2007, the company acquired a 60% stake in Abu Dhabi-based Target Engineering Construction Co. (TECC), a leading contracting company that specializes in civil,electro-mechanical, marine, and oil and gas projects. Earlier, in October 2007, Arabtec awarded Multiforms, an architectural facade specialist and a subsidiary of Emaar Industries & Investments, a contract worth Dh175 million for the supply and installation of the external cladding for Tiara United, a two-tower project on Sheikh Zayed Road, Dubai. In September 2007, Arabtec/WCT Joint Venture received a letter of acceptance from Meydan LLC to carry out construction works at Nad Al Sheba area in Dubai, for a total value of Dh4.6 billion. It consists of constructing a 60,000 seat outdoor stadium and is set for completion in two years.
In November 2007, around forty-thousand employees of Arabtec went on a strike demanding a pay hike of $55 per month. As a result, various projects around the city, including the Burj Dubai, were held-up.
Historically, labour costs account for nearly 10% of Arabtec's total costs, and a settlement would further increase its costs by 1%. Frequent labor unrest and the consequent increase in wages would affect the company's margins as well as hamper project completion schedule. Arabtec is the largest contractor in the UAE, with an order book of about Dh13 billion over the next three years. The company is involved in the construction of the world's tallest tower, the Burj Dubai, and a new racecourse to host the world's richest horse race. Historically it has been able to secure strong joint ventures with local and international contractors, giving it an edge over its competitors. During the 1H2007 alone, Arabtec bagged five contracts worth Dh3.6 billion, including its first project outside the UAE. It also enjoys a longer-term advantage as a pure play contractor, making it the contractor of choice for a number of leading property developers. Its numerous contracts with master developer Emaar Properties, is a case in point. Additionally, it benefits from the technical expertise acquired through building iconic projects. The Syrian project award is a noteworthy step for Arabtec as it further enhances the symbiotic relationship with Emaar. It also falls in line with the company's strategy of diversifying operations outside the UAE. Arabtec's recent acquisitions of TECC and GSI will help it to expand its market share by adding new segments like steel, oil, gas, and marine construction to its portfolio. Not only does it have plans to grow locally, but it also hopes to generate around 40% of its total revenues from its international operations by 2010.
As Arabtec continues to engineer a strong growth trajectory, we remain confident of its successful expansion. Arabtec's stock has gained 14.2% from the beginning of this year, compared to a fall of 6.3% in the DFM Index, outperforming the index. Moreover, the stock is trading at a P/E multiple of 13.91x its annualized 9M07 earnings, making it an attractive proposition. We believe that the region will continue to see strong growth in construction activities and Arabtec, with its expertise in the segment, will continue to benefit from this. Therefore, we reiterate our overweight opinion on the stock.
© Bahrain Tribune 2008
