Zawya – The series of events that led to DSI's meeting on Thursday

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Analyst says Drake and Scull International’s decision on dissolution or not “looks more of a formality as business will likely continue as usual”


Zawya has compiled a timeline of events that led to Drake and Scull’s (DSI) shares drop during the year 2018 and to the calling of Thursday’s general assembly meeting:
January

  • Stock price starts the year at 2.29 dirhams ($0.62)
  • Company completes the restructuring of its corporate general bank debt in the United Arab Emirates (UAE)
  • Tabarak Investment announces continued support for DSI to achieve full operational recovery
  • Stock price ends the month at 2.14 dirhams

February

  • Company posts a yearly net loss of 1.40 billion dirhams versus a net loss of 815.3 million dirhams for the previous year
  • Yearly revenue was at 2.70 billion dirhams, compared to 3.26 billion dirhams a year ago
  • Stock price ends the month at 1.84 dirhams

March

  • Resignation of Saad Mohammad Sharif Albastaki from his position as member of the board of directors
  • Company announces the issuance of convertible sukuk in the second quarter of 2018
  • Company appoints Fadi Feghali as group CEO
  • Stock price ends the month at 1.73 dirhams

April

  • Shares rebound early in the month
  • Tabarak Investment transfers 57.1 million shares of its ownership shares in DSI to Emirates Investment Bank, retains actual ownership rights as beneficiary owner of shares.
  • Annual General Assembly Meeting approves capital increase by 500 million dirhams or issue of convertible bonds with a value not exceeding 1 billion dirhams, decides to refer the matter to the Board of Directors to decide on one of the listed options
  • Stock price drops on capital increase proposal
  • Board approves up to 1 billion dirhams sukuk issue, does not approve capital increase
  • Stock price regains some of the losses on sukuk issuance news
  • Stock price ends the month at 1.22 dirhams

May

  • Shares drop on rumours that some large investors had sold the stock
  • Tabarak reaffirms support to DSI
  • DSI posts first quarter net profit attributable to shareholders of 16.2 million dirhams compared to a loss of 722.5 million dirhams for the year earlier
  • First quarter contract revenue was of 693.4 million dirhams versus 795.8 million dirhams year ago
  • Stock price ends the month at 1.17 dirhams

June

  • Company says it has completed the investigation into the practices of the previous management, upon the request of shareholders, and has delivered all violations to the designated authorities in the UAE
  • Company says Tabarak transfers shares in DSI From Emirates Islamic Bank to another financial institution. Tabarak retains actual ownership rights as beneficiary owner of shares
  • Shares hit new all-time low, breaching  support barrier
  • DSI says no material information impacting recent trading activity, operational progress on current projects is on track
  • DSI confirms non-exposure to Abraaj
  • Stock price ends the month at 0.753 dirhams

July

  • DSI appoints new CFO for restructuring role
  • DSI confirms existence of financial violations from previous management, says violations are currently investigated by UAE authorities
  • DSI confirms that Tabarak will continue to be a strategic investor in the company
  • Stock price ends the month at 0.651 dirhams

August

  • DSI appoints Yousef Al Mulla as CEO
  • DSI posts second quarter net loss attributable to shareholders of 181.1 million dirhams versus a loss of 182.7 million dirhams year ago
  • Second quarter contract revenue was of 350 million dirhams versus 660.3 million dirhams year earlier
  • Stock price ends at 0.44 dirhams

September

  • DSI calls for a General Assembly Meeting on Thursday September 27th to take a special resolution to continue carrying out the activity of the company or to take a special resolution to dissolve the company prior to the expiry of its term, as accumulated losses exceeded 50 percent of issued share capital
  • Stock price falls again to new record low
  • DSI says that the inclusion in the agenda of the item relating to the special resolution is a mere legal requirement and doesn’t mean there is an intent to dissolve the company prior to the expiry of its term
  • Company says Tabarak has increased its stake in DSI to 13.73 percent from 13.26 percent
  • Stock price before Thursday’s General Assembly Meeting was last at 0.357 dirhams
  • Stock price has so far lost 84.2 percent of its value in 2018

Analysts’ comments to Zawya
Nishit Lakhotia, Head of Research at SICO:
“Fundamentally, the company’s balance sheet is at a precarious level with short term liabilities significantly higher than its equity and cash balance. Accordingly, there is a real risk of the contractor defaulting on its obligations in the near term unless its principal shareholder, Tabarak Investments, can infuse more cash into the entity.”
“Tomorrow’s AGM will be watched on what measures the key shareholders plan to take to turnaround the operations and address near term liquidity and capital issues. Whether they will disclose a detailed action plan or just provide a brief update will be interesting to watch.”

“Also decision on dissolution, which is required as a legal requirement for DSI, given the situation the company is in, will be taken and it looks more of a formality as business will likely continue as usual for it.”
Issam Kassabieh, Senior Financial Analyst – Research Department at Menacorp
“For DSI, although I believe it is time for Tabarak to call it quits and shut down all operations, I doubt this will be the case.”
“Nevertheless regardless of the outcome, I still believe there are growing concerns regarding the sustainability and continuity of this business especially under current market conditions where margins have shrunk rapidly and the firm has definitely run out of room for cost cutting.”

Yogesh Khairajani, Investment Research Analyst, Century Financial
“DSI’s AGM on dissolution of the company is likely to be a non-affair as it is a mere procedural requirement.”
“Anyway, a special resolution can be adopted only If three quarter of the shareholders approve and in this case major institutions like Tabarak Investment have reiterated their commitment to revival of the company under a new management team.”
“In fact, there is a possibility that Tabarak might actually award Dh 1 billion worth of projects to the beleaguered company. With liquidity issues still remaining, we would not recommend investors to buy the shares but it is a bad idea to bet on the dissolution of the company as well.”

Source: Zawya
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