Saudi Arabia’s index TASI hit a three-month high, led by petrochemical stocks, with the market buoyed by higher oil prices in the absence of a local catalyst.

“Petrochemicals are currently the most favored by investors with heightened oil prices keeping the sector over a solid floor despite some stock specific profit taking activity,” said Amro Halwani, a senior trader at Shuaa Capital in Riyadh.

The petrochemical index was up 1.1 percent, with Rabigh Refining and Petrochemical Co up 5.3 percent, the largest gainer. It rose for a third day since Credit Suisse upgraded it to “outperform” from “neutral.”

Large cap Saudi Basic Industries Corp (SABIC) added 1.1 percent while Al Rajhi Bank rose 1.3 percent.

Oil rose above $124 a barrel on Monday, pushed higher by an escalation of violence in the oil-producing Middle East and post-election unrest in OPEC member Nigeria.

In a fourth straight gain, the main benchmark ended 1.1 percent up at 6,685 points, its highest close since Jan 26.

Qatar’s index QSI fell to a monthly low as investors pulled back in absence of catalysts.

“There is weakness in liquidity – we don’t have any news, no support,” said Hani Girgis, assistant chief dealer at Dlala brokerage.

The country’s largest bank by market cap Qatar National Bank fell 1.1 percent and Masraf Al Rayan dropped 1.8 percent.

But Qatar’s moves to make itself more attractive to the MSCI when it undergoes a second review to obtain emerging market status will likely provide a boost to the market going forward, Girgis said.

Qatar’s bourse moved to Deliver Versus Payment (DvP) system on April 11 to bolster the country’s chances.

The bourse’s expected decision to increase foreign ownership in companies from 25 percent to 49 percent will also help lift investor sentiment, if enacted, said Girgis.

The index ended 0.5 percent lower at 8,459 to its lowest close since March 31. Further selling pressure is forecast with the index closing between 8,300 and 8,500 points by April-end, he said.

Real estate stocks were under pressure in the UAE after bellwether Emaar Properties first-quarter results fell short of analyst expectations.

The developer behind the world’s tallest tower Burj Khalifa, fell 2.9 percent after saying net profit dropped 45 percent due to losses from associate firms.

But one trader said that the market should look at property companies focused solely on real estate, rather than hospitality, as a better benchmark by which to gauge Dubai’s recovery.

“Real estate companies will be interesting to look at and their performance will be more indicative of the sector’s situation and give a sense on whether we are really recovering,” said Marwan Shurrab, vice-president and chief trader at Gulfmena Alternative Investments.

Dubai’s index DFM ended 1.6 percent lower to 1,638 points, slipping from Thursday’s yearly high.

In heavy trading, developer Arabtec tumbled 4.6 percent.

Abu Dhabi’s index ADI ended 0.8 percent lower at 2,691 points, with six of its top 10 largest stocks falling. The benchmark slipped to a 12-day low.

Aldar Properties dropped 3 percent, accounting for a quarter of shares traded on the index.

Oman’s index MSI slipped to a two-week low as bluechips weighed and interest remained muted.

“Investors are sitting on the sidelines, waiting for any new results disclosure thereby pulling down market activity,” said Osama Ibrahim al-Qinna, head of brokerage at Oman Arab.

Bank Muscat and Bank Dhofar fell 0.5 and 1.2 respectively.

The benchmark fell 0.3 percent to 6,325 points, its lowest close since April 7.

A strong support level near 6,314 point should temporarily halt any further downward attempts, Al Qinna said.

Renaissance Services slipped 1 percent on selling pressure from foreign investors. Losers outweighed gainers 16 to five.

Saudi Arabia’s market TASI edged slightly higher in thin trade with stocks tracking oil prices in the absence of any catalysts to drive the index upwards, analysts say.

“The major catalyst of earnings announcements is behind us so we would expect the market to re-align with international market performances and economic catalysts,” said Amro Halwani, a senior trader at Shuaa Capital in Riyadh.

The petrochemicals index TPISI was almost flat but Rabigh Refining and Petrochemical Co led on volumes and shares rose 2.5 percent. Sipchem added 0.2 percent.

Brent crude futures rose above $124 a barrel on Monday after violence in Syria and Yemen escalated over the weekend, adding to fears that unrest may disrupt more oil supplies in the Middle East and North Africa.

The index rose 0.1 percent to 6,623 points.

There’s plenty of ammunition for taking cheap shots at Aldar Properties. For a start, the company lost more than AED1bn every month last year after a massive writedown of property assets. There’s the continued weakness of the Abu Dhabi property market. Then there’s Ferrari World. Aldar’s flagship theme park was barely a quarter full last Saturday when I took my 11-year-old nephew, who was bored within an hour.

But at the knock-down share price of AED1.66, brave investors with a long-term view might be willing to overlook these blemishes.

First, I like the bullish comments from CEO Sami Asad this week. Speaking at Citiscape on Sunday, he told Reuters that Aldar will make a profit this year. He fell short of a forecast, but said he hopes to sell 2,000 villas and apartments.

Second, the Abu Dhabi office market is picking up, according to a new report from CB Richard Eliis. That’s good news for Aldar’s rental income because its swanky new buildings – such as the giant Frisbee near the airport – are just what big international oil companies want.

Third, there’s the AED19bn bailout from the government, announced earlier this year. It was kinder to shareholders than many had feared. Yes, there’ll be some dilution from a convertible bond issued to the Sovereign Wealth Fund Mubadala. But much of the help came in cash, with the government buying assets on Aldar’s flagship Yas Island development (they’re even taking the disappointing Ferrari World off Aldar’s hands).

Finally, Aldar is winning over analysts, including Jad Abbas and Ahmed Gad at EFG-Hermes, who issued a ‘buy’ note last week. “Our concerns regarding shareholder value destruction from dilution/impairment are now priced in by the market,” they wrote. EFG expects Aldar to hand over plenty of apartments and villas from its Raha Beach project this year, and predicts a “growing and maturing recurring income stream” from renting offices, hotels and shopping malls. Their target price for the stock: AED1.84.

Irfan Ellam at Al Mal also rates Aldar a ‘buy’. Back in March he pointed out that Aldar had a price/book ratio of just 0.23 – less than half the average for regional developers, and tiny compared to the Asian average of 1.6. Aldar stock has jumped a bit since then, but the basic argument still holds – it’s cheap.

(Of course, analysts aren’t always right. While doing my homework for this column, I came across an old Aldar tip from analysts at EFG Hermes. Dated June 2008, it had a Long-Term Fair Value target – wait for it – AED44.90!)

More broadly, it’s worth thinking about the bigger picture in Abu Dhabi. If you buy into the government’s grand Vision 2030 plan – and I do – then there’s an awful lot of work to be done to transform Abu Dhabi from a sleepy oil town into a glittering 21 century metropolis. Who’s the biggest state-backed builder in Abu Dhabi? Aldar Properties. The stock is down some 80 percent from its peak in 2008, with a market value today of just over $1 billion. In the context of Abu Dhabi’s trillion dollar ambitions, that could prove a bargain.

Armchair Insight: Turnarounds are inherently risky. But if you believe in the Abu Dhabi story, Aldar shares are worth a look at this price.

Tuesday April 19: Getafe? Get real

Royal Emirates Group certainly made headlines when it announced plans to buy a Spanish football club: the story was the ‘most read’ on ArabianBusiness.com for much of the week. But can the Group makemoney? Surely not if the target is lowly Getafe, for a reported price of €90m.

We’ll get to the challenges, but first let’s look at the potential upside. Getafe plays in La Liga, the top flight of Spanish football that’s home to the world’s two richest clubs, Real Madrid and Barcelona. Each has annual revenue of more than €400m, according to the Deloitte Football Money League. Buying either of these giants is out of the question. On the surface, then, perhaps it makes sense to buy a second tier club at a knockdown price and nurture it into a top team.

In theory yes, in practice near impossible. The stadium has just 14,000 seats, which Getafe doesn’t always fill, so matchday revenue is small. Ditto commercial revenue from sponsorship and shirt sales. Then there’s TV money.

For small clubs in the lucrative English Premier League, this is a honeypot. That’s because the league negotiates one deal, then shares the cash equally among all 20 clubs – champions Chelsea get the same as minnows Stoke City. Not so in Spain, where clubs do individual TV deals. This is great for Real and Barca, with a global TV fan base, but tough on the Getafes of this world.

Finally, there’s the small matter of playing football. Getafe aren’t very good at it, and never have been. They haven’t won a trophy of note, and were only founded in 1983 from the merger of two smaller clubs. When investors from Abu Dhabi bought Manchester City, they bought a sleeping giant with a rich (albeit 40-year-old) heritage of winning, a new stadium, and 40,000 loyal fans. That’s proving tough enough. Getafe will be an even bigger call.

Armchair Insight: How do you make a small fortune a football club? Start with a large fortune.

Wednesday April 20: Tamweel returns

Mortgage lender Tamweel will need a strong investor relations team when it returns to the Dubai Financial Market. Investors will have so many questions before they buy shares in the company that suspended trading in late 2008, after the credit crunch and Dubai property market conspired against it.

On the plus side, Dubai Islamic Bank is now a strong parent, having taken a majority stake in Tamweel for AED375m. So it will have access to funds that it can lend to new homebuyers.

But I want answers to a number of questions before I buy Tamweel. More clarity on the balance sheet: the DIB deal valued Tamweel at about AED1 per share, yet Tamweel puts is book value at more than AED2 per share. Just how much are those big home loans – granted at the peak of the market – worth today?

Other questions include: exactly where will Tamweel get its funding, and at what cost? What’s the quality of the management team? What corporate governance structures are in place to make sure we don’t see any more mishaps?

Armchair Insight: Long-term, mortgage lending in the UAE and the Gulf is a surefire winner. But we need transparency.

Aldar Properties, Abu Dhabi’s biggest property developer, will build 2,600 homes in two projects on Al Raha Beach, Chief Financial Officer Shafqat Malik said in a phone interview late Monday.

The townhouses and apartments are part of the Al Zeina and Al Muneera projects on Al Raha beach, he said.

The developer, which is building thousands of homes and offices in the UAE’s capital, was hurt when the financial crisis caused property prices to drop by more than 30 percent as banks tightened lending and speculative demand evaporated.

Aldar said on January 13 it had agreed to sell real-estate assets, including a Ferrari theme park and convertible bonds, to the government for AED19.2bn dirhams ($5.2bn) to reduce its debt.

The company is currently focusing on completing its projects and expects to end 2011 with a profit, Malik said.

Aldar Properties reported its third consecutive quarterly loss as the biggest real-estate developer in Abu Dhabi suffered from lower sales.

Second-quarter loss was AED475.3m ($129.4m), according to Bloomberg calculations based on half-yearly data provided by the company on Thursday. The average estimate of seven analysts was for a loss of AED210m for the quarter, according to data compiled by Bloomberg.

The company said first-half loss was AED789.5m after a profit of AED1.14bn a year earlier.

“The decrease was principally due to lower property sales recognised,” Aldar said in an e-mailed statement. “The second half of this financial year is expected to be different due to the revenue generated from the delivery of Aldar’s projects at Al Raha Beach and Al Gurm.”

Property prices in Abu Dhabi have declined by more than 30 percent from their peak in mid 2008 even as a housing shortage in the capital persists, according to Jones Lang LaSalle estimates published in February.

Aldar’s first-half revenue more than halved to AED427m from AED1bn a year earlier, while sales valued at AED695m made in the first half will be included in future income, the company said.

“We expect revenue and earnings to remain muted due to lack of land sales and large-scale unit deliveries,” most of which are scheduled for the second half, Deutsche Bank’s analyst Nabil Ahmed wrote in a note to clients on July 7. The investment bank expects the company’s recurring revenues from rentals and hotels “to ramp up.”

Aldar, which is building thousands of homes, offices and hotels in the United Arab Emirates’ capital, plans to build 272 apartments and 75 villas and townhouses in the emirate’s capital, all of which have been presold to an unidentified buyer, Chief Executive Officer John Bullough said on April 20. The following day, the company said it won a 730 million-dirham order from Abu Dhabi’s government to build infrastructure for a project in Al Ain city.

Sorouh Real Estate Co., Abu Dhabi’s second-biggest property developer by market value, this week reported a 79 percent decline in second-quarter profit after land sales evaporated.

Aldar shares rose 0.4 percent to close at AED2.46 in Abu Dhabi trading today before the earnings were released. The shares slumped 51 percent this year, giving the company a market value of AED6.3bn. (Bloomberg)

British construction firm Laing O’Rourke, which worked on the Atlantis Hotel in Dubai, is to shut its Middle East operations, it was reported at the weekend.

A source within Laing O’Rourke told the Building.co.uk trade website that Laing O’Rourke was cutting its global workforce from 35,753 to around 20,000.

The firm is the UK’s third largest contractor and began its operations in the Middle East in 2006.

“It’s been a nightmare for my family and hundreds of former colleagues who are out of work. The firm can’t employ more than 4,500 workers and 900 professional staff in the Middle East now, which is down from about 16,000 and 5,000 during the boom – a fall of about three-quarters,” the source told the website.

The closure also affects the firm’s south Asian operations and follows the end of a joint venture in India with Indian firm DLF.

Last year, Aldar Laing O’Rourke, a joint venture between the Abu Dhabi property developer and the UK construction company, told Arabian Business it was cutting 320 jobs.

However, it was confirmed that Laing O’Rourke will maintain its relationship with Aldar, with whom it is working on the AED54bn ($14.7bn) Al Raha beach project.

The firm’s turnover in the region in 2009 doubled to £829m ($225m), the report added.