Gulf News - UAE stocks under renewed pressure over new COVID-19 strain and de-list talk

Vijay Valecha, Special to Gulf News Dec 21 2020

Dubai: Will Damac now be the third?

One of Dubai’s Top 5 developers, Damac, could be vigorously pursuing going back to being a privately held company… and de-list from the local stock market. Since summer, speculation had been rife that this was the founder and Chairman Hussain Sajwani’s intent – and on ‘Panic Monday’ he had another reason to potentially make the switch.

Damac – in which Sajwani now has 72.22 per cent - shares dropped 5 per cent after trading commenced Monday (December 21), which set off the circuit-breaker and stopped the stock’s trading. (Circuit-breaker comes in when a stock rises or drops during a day to pre-set limits.

Sure, Damac wasn’t the only share to drop Monday as investors got spooked about new COVID-19 strains in the UK, severe measures imposed by multiple countries in response, and what this could all mean for the local economy. Plus, there were signs that investors were getting worried about individual sectors as well, with UAE real estate stocks coming under severe pressure. Even Aldar in Abu Dhabi – on track to record another sold growth year - felt the heat of investor jitters.

But amidst all of Monday’s headline grabbing dips, Damac stood out because the stock had been on a roll in recent days. On Sunday, it had shot up by as much as 14 per cent before setting down to a more solid 4.58 per cent for the day.

Back to private

It was in July that reports first emerged that Sajwani was thinking of a buyback and going private using his investment vehicle Maple Invest Co. And last week Damac issued a statement that foreign institutional investors (FII) who have been buying into the stock in recent times were related to the family or indirectly controlled by the Sajwani family.

33.7% is actually 3%

So, of the “foreign” shareholding of 33.7 per cent in Damac, nearly 37 per cent are affiliated to the family – and which only leaves 3 per cent with other foreign investors. All of which again raises the possibility – is Damac likely to go announce its privatization agenda shortly?

“After hitting a low of Dh0.36 in March, Damac shares have had a solid run this year with gains of more than 300 % until Monday (December 21). “At a fundamental level, the company had year-on-year growth in revenues for first nine months when compared to 2019 estimates (Dh3.65 billion as against 2019’s Dh2.76 billion,” said Vijay Valecha, Chief Investment Officer at Century Financial.

“However, this year’s net losses at Dh931.3 million are extremely high as compared to 2019’s profit of Dh132.6 million. This was primarily on account of impairment of various real estate projects currently in the portfolio. As a consequence, the company’s 9-month EPS (earnings per share) stands at - 0.1539 as against full-year 2019’s 0.0219.

“The company with its strong brand and portfolio will likely benefit from any future recovery in real estate demand. As such, it’s too early to say whether the company shares will be delisted or not.”

Sajwani might have other plans…

Ride’s over

For another Dubai heavyweight developer and destination creator, the stock market ride is over. DXB Entertainments will de-list with Meraas acquiring all outstanding stock as part of a re-capitalisation move.

A statement issued Sunday evening said that minority shareholders in DXBE will perforce have to sell their rights to Meraas “in accordance with applicable law and SCA (Securities and Commodities Authority) rules.

“The price per share that will be offered will be the same price paid under the original offer (Dh0.08).”

Quite a drop

On Monday, the stock went down by 5 per cent and setting off the circuit-breaker. On Thursday last, the stock had been at 12 fils.

“Over the last 2 years, DXBE share prices have declined by 50 per cent,” said Valecha. “Total outstanding shares stand at 7,999.9 million with free float of 2,938.4 million. The 52-week high and 52-week low for the company shares are Dh0.204 and 0.093, respectively.”

Will the coming days and weeks signify more thrills and spills for UAE stocks? Or will news of the second COVID-19 strain kill off the negative vibes from investor minds?

And just as pertinent, will there be another de-listing in the offing?