As indicated in our previous report, the MSM started last week (September 5-8) with slight day-on-day gains of 0.44 per cent, continuing on its upward trend which started before the Eid holidays.
ht day-on-day gains of 0.44 per cent, continuing on its upward trend which started before the Eid holidays. The trend was interrupted by profit-booking in the next two sessions, especially in blue chips such as BankMuscat and Renaissance Services, before recovering in the last session. The index finished the week down 0.53 per cent to close at 5,736.77 as all sectors came under pressure and turnover retreated.
The Industrial Index declined the most among the sub-indices and fell 0.89 per cent week-on-week to 6,269.88 after Oman Cables, Oman Fisheries, Dhofar Cattle Feed and Voltamp Energy registered losses. The Financial Index was the second-worst performer, declining 0.62 per cent w-o-w to 6,403.28 on the back of selling pressure due to profit-booking in investment and holding companies as well as some banks.
Ominvest (the parent company of Oman Arab Bank) witnessed active trading at the start of the week (September 5) and the stock gained 4.45 per cent on the day, the highest daily gain in more than four months. Ominvest posted a trading value of RO723,000 (highest in more than three months).
This came on the back of news that the company has received a letter from the Capital Market Authority (CMA) advising that the esteemed Council of Ministers have agreed to exempt Oman Arab Bank from Article (61) of the Commercial Companies Law for offering 25 per cent of its shares for public subscription, instead of 40 per cent. This is in accordance with the prospective law prepared by the Capital Market Authority (CMA) aiming at allowing public shareholding companies to reduce its IPO shares to 25 per cent of total shares, in an objective to increase market activity, according to CMA officials.
We believe these IPOs will contribute to more market turnover through the injection of additional liquidity and will support the market.
The Services Index lost the least, supporting our view, and slipped 0.41 per cent on a weekly basis to close at 2,467.6 after pressure on some leading stocks such as Omantel (-1.19% w-o-w) and Renaissance Services (-0.57% w-o-w). The latter topped the most active shares' list contributing to 13.79 per cent and 23.97 per cent of the total volume and turnover, respectively, after profit-booking. Al Maha Petroleum also registered a drop, putting more pressure on the Services Index.
Week-on-week comparisons of volumes and turnover is not possible due to the market closure for the Eid holidays. However, average daily volume and turnover declined despite attractive stock price levels, with some stocks trading below their book values. This reflects those investors who are looking forward to more local news and disclosures, especially those related to companies' performance, projects and upcoming initial public offerings (IPOs). Volumes for the week touched 32.2mn shares resulting in a turnover of RO12.97mn.
During last week we noticed a continuous participation by Omani institutions who emerged as net buyers. Omani institutions were picking stocks at attractive levels and absorbing selling pressure imposed by both local individuals and GCC institutions who together posted a net selling of RO1.5mn.
The IPO of SMN Power Holding (which holds SMN Barka and Al Rusail Power Company making it the largest power generating company in Oman) will commence subscription on September 11, 2011, making it the first IPO this year on the Muscat Securities Market.
It is proposed to list the company's shares on October 25, 2011. This is expected to gain investors' focus in the short-term and enhance liquidity and market activity. The offer price as per the prospectus is fixed at RO3.52 (comprising a nominal value of RO1, premium of RO2.50 and issue expense of 20bz per share). The company will be offering 6,987,246 shares to the public, representing 35 per cent of the total outstanding shares, with a total value of RO24.6mn. The IPO will be open for both Omani and non-Omani individuals and juristic persons, and Oman Arab Bank will be one of the subscription banks. For more details about the prospectus, visit the Oman Arab Bank - Investment Management group website. It is worth mentioning that the last IPO on the MSM was in late 2010, when Nawras offered 40 per cent of its shares to the public.
In other corporate news, BOD of Gulf Hotels (Oman) held a meeting on September 7, 2011, reporting net profit attributable to shareholders of parent company of RO1.34mn in the first half of 2011 compared with RO1.5mn in the year-ago period, a decline of 11.4 per cent. The decline in net profit is attributed to higher expenses. The board also proposed interim cash dividend of 40 per cent (400bz per share) of the paid-up capital, subject to the approval of shareholders in forthcoming general meeting.
Locally, the finance minister of Oman said he expected government spending to rise to RO9.2bn this year compared to RO8.3bn in its original 2011 budget, up by 13.2 per cent, which will contribute to expanding economic growth. In the same context, statistics of expenses of Ministry of Transport and Communication in civil aviation and meteorology sectors indicate that during the 8th-Fifth Plan, there are many projects at a total cost of RO2.35bn in which RO606mn are specified for new projects and RO1.75bn for ongoing projects.
Last week, Moody's issued a stable outlook on Omani banks and forecast that Oman's real GDP would likely expand by 2.9 per cent in 2011.
Recommendation:
With commencement of the SMN Power IPO and with investors focus on the listing in the following month in addition to the other expected IPOs, we expect market depth as well as the liquidity to improve and lead to increased secondary market activity on their listing. The prospective adjustments to reduce the minimum percentage of shares offered via IPOs will also encourage privately held companies to go public and hence improve market sentiment. Also, regular and efficient corporate disclosures will support the market.
As mentioned in our previous reports, we advise investors to study investment opportunities and benefit from opportunities. Investors should maintain some liquidity to cope with market fluctuations like the broad profit booking scenario that the market witnessed last week. We believe the current price levels of several blue chip companies are still attractive, which should continue to attract more investors.
By special arrangement with Oman Arab Bank- Investment Management Group
© Muscat Daily 2011
