Construction

UAE construction industry set to pick up this year

Conclusions based on performance of some of region’s largest construction companies

?The UAE construction industry is starting to capture investors’ attention, according to industry analysts.

After a “dreadful third quarter”, Deutsche Bank expected the sector to pick up in the weeks ahead, based on seasonal increases in business.

“Overall, we expect the MENA contractors under our coverage to post an 18% quarter-on-quarter increase in earnings,” the bank’s analysts Nabil Ahmed and Athmane Benzerroug wrote in a report.

For its top pick Deutsche Bank singled out Drake & Scull International (DSI), which yesterday announced a two billion Saudi riyal deal with Saudi Aramco to help build the King Abdullah Petroleum Studies and Research Centre project in Riyadh.

Last year DSI won deals worth AED1.2 billion in Saudi Arabia and the company expects further business from its largest market in the region. Last month, DSI said it was bidding on AED 4 billion worth of projects in Qatar. Khaldoun Tabari, the DSI chief executive, said at the time the company was also planning to expand through acquisitions, according to reports in The National newspaper.

Deutsche Bank predicted Drake & Scull would post a 15% increase in its backlog in the coming quarter, and an estimated 7% for Arabtec Holding, the largest construction company in the UAE. Arabtec secured more than AED 2.6 billion in contracts last quarter, its best performance since the second quarter of 2009, Deutsche Bank estimated.

Last week Alembic HC Securities singled out Depa, the Dubai interior contractor, for an upgrade.

Its analyst Majed Azzam cited the company’s diversification away from Dubai, low exposure to payment delays and ability to cover many sectors as among the company’s positive attributes, continued the newspaper report.

Depa is 36% undervalued, according to Alembic but it downgraded DSI from “overweight” to “neutral”, saying “fierce competition and tight liquidity raise concerns about margin compression and working capital deterioration”. The company maintained a “neutral” rating on Arabtec.

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