Doha, Qatar: Qatari companies enjoy robust balance sheets backed by low leverage and decent Return on Equities (RoEs), while Qatari banks stand out with their exceptional capital adequacy ratios, strong provision coverage and high profitability.

“We expect second quarter (Q2) 2024 earnings to continue building on the Year-on-Year (YoY) positive momentum seen since Q4 2023 and project stocks under coverage growing the aggregate bottom-line by 6 percent YoY,” QNB Financial Services (QNBFS) said in its latest report.

Overall earnings, however, should decline 4.3 percent QoQ. This follows a positive Q1 2024 for the Qatar Stock Exchange (QSE) where aggregate earnings rose YoY and QoQ 5.8 percent and 30.7 percent respectively.

The report further stated, “We see most of the YoY growth in Q2 2024 coming from banks, which are expected to book lower provisions along with some margin improvement, while Industries Qatar (IQCD) weighs down on earnings sequentially. We remain constructive on Qatari equities, which have seen a recovery in the past few weeks, including a 20-day winning streak (last seen in 2006).”

Overall, the LNG augmented by ramping up of the North Field project and the recently upgraded capacity expansion target – a significant portion of Qatar’s expected annual LNG capacity increase is already signed-off in long-term supply contracts.

The continued government efforts to grow and diversify the non-oil/gas economy provide another platform for broad-based company earnings growth. In the near term, “we note the non-oil/gas sector continues to expand with the latest June PMI at 55.9, demonstrating a strong resurgence in activity as output rose to 61.8 versus 57.1 in May, the highest reading since December 2022 and the sixth consecutive month of expansion.”

The tourism sector stands out as the government’s strategy to make it another pillar of the economy bears fruit with the country attracting record visitors since the beginning of the year. The latest announcement of a QR20bn theme park (Simaisma project) solidifies the tourism strategy.

Other initiatives, such as the recent slashing of industrial plots rentals by 90 percent by the Ministry of Municipality could see growth filtering to more sectors of the economy.

New rules allowing the distribution of interim dividends by QSE-listed firms brings the local market in-line with global trends and could further enhance Qatar’s appeal to foreign investors that have been selling down since the beginning of the year.

Several companies have indicated that they are considering distributing interim dividends related to the just-ended Q2 2024.

The supply-demand dynamics of oil/gas remain attractive. Also, with the successful hosting of the World Cup, perceived as one of the best editions and putting Qatar in the global spotlight, we are of the view that pockets of the Qatari stock market should benefit from this success, specifically tourism.

Qatar has continued to grow its sports tourism brand: It has since hosted other notable events building on this success, including the Expo 2023 Doha, the AFC Asian Cup Qatar 2023, the World Aquatics Championships Doha 2024, the AFC U23 Asian Cup Qatar 2024, etc. The impact has been immediate, with Qatar registering record visitor arrivals since the beginning of the year.

Over the medium- to long-term, the ‘upgraded’ North Field Gas Expansion, a nascent but growing tourism/sporting sector and Qatar National Vision 2030 investments will continue to be major growth drivers for our companies.

The demand for Qatar’s gas should remain strong for the foreseeable future on the back of geopolitical developments, specifically in Europe, with demand for LNG expected to peak between mid-2030s and mid-2040s. Meanwhile, the government allocated $58.6bn (2023: $63.9bn) towards major projects in the Budget for the fiscal year 2024.

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