By: Mahmoud Gamal
Dubai – Mubasher: Arabtec Holding has garnered significant attention lately after it reported widening its losses and announced plans to hold a shareholder meeting to determine whether or not the company will continue its operations.
Arabtec called for a shareholder meeting on Wednesday, 18 April, to discuss the newest updates regarding its restructure programme and the continuity of the company.
The Dubai-listed construction firm last reported accumulated losses of AED 4.66 billion ($1.27 billion), representing 101% of capital, while total liabilities exceeded total assets by AED 250.7 million.
On Thursday, the company detailed a rescue scheme involving a capital top-up through a rights offering by issuing 1.5 billion new shares at AED 1 per share, bringing its capital to AED 6.115 billion from its current AED 4.615 billion.
Arabtec said its new capital will be used to meet financial obligations such as financing the completion of ongoing projects, supporting the management’s business plan, and providing “financial flexibility to pursue growth opportunities”.
Afterwards, Arabtec is planning to cancel up to 4.615 billion shares on a pro rata basis to reduce its accumulated losses, bringing the capital to AED 1.5 billion, according to a statement released Thursday.
The capital cut will not have a material impact on the company’s market value, Arabtec said, noting that the Dubai Financial Market (DFM) will amend the share’s price after the capital reduction.
Analyst views
Arabtec’s biggest problem lies in its currently targeted projects, which will either result in losses or have significantly lower profits compared to costs, commented Fady El-Ghattis, CEO of Topsy Turvy Consultations.
He told Mubasher that this problem between costs and profits was the main reason behind the company’s accumulated losses.
At present, Arabtec must notify its investors whether or not it plans to amend its project bids for low-profit-generating or loss-generating projects, the analyst stated.
Bringing in new management to the company may be one of the solutions that can open the door to investment from outside the UAE, El-Ghattis said, indicating that such a solution should be considered by the company at the present time.
Arabtec market cap losses exceed AED 1bn
The Dubai-listed firm suffered significant market losses on increased investor concern, since announcing widening its losses.
Since 13 February, Arabtec’s stock suffered AED 1.35 billion in market losses.
Buying Arabtec’s stock at this time is highly risky for investors, as it may threaten nearly 75% of their capital, market analyst Amin El Hennawy told Mubasher.
Everyone is awaiting the company’s return to profitability, which is far more important than simply announcing a restructure programme, he added.
Statistics by Mubasher show that Arabtec’s market value dropped to AED 4.14 billion ($1.13 billion) until 13 April, compared to AED 5.49 billion ($1.49 billion) by the end of trading on 13 February, which is when the company reported widening its annual losses.
Arabtec’s stock plunged 24.5% between 13 February and 13 April to 898 fils from AED 1.19.
Meanwhile, analyst Ramy Al Sidany noted that Arabtec’s losses and announced restructure programme have created a certain “psychological state” that has strongly impacted the company’s stock on the DFM and prompted its plunge.
The market needs assurances and more information concerning the restructure programme that Arabtec seeks to implement to avoid bankruptcy, the analyst told Mubasher.
Translated by: Nada Adel Sobhi
