Dilution, valuation fears send Aldar to 5mth low

Reuters/Dubai

These are part of a restructuring plan for the state-linked firm, which has made losses for four straight quarters and faces an estimated $3bn funding gap in 2011. Abu Dhabi’s government will pay Aldar $4.5bn for various assets.

"Equity holders suffer immediate equity impairment and future dilution, but solvency is now assured,” Nomura wrote in a research note. "The stock now looks expensive relative to its peers and that will likely take some time to correct.”

Aldar fell 7.1% to its lowest close since August 12.

The firm’s sukuk holders, plus local bank and trade creditors were the winners from Aldar’s restructuring, said Akram Annous, Mena strategist at Al Mal Capital.

"There is a good reason most banks and real estate companies trade at huge discounts to book,” said Annous. "Their financials don’t reflect reality. Nobody believes them. After this restructuring, you won’t be able to say that about Aldar. I expect the equity market to slowly warm to this news.”

Abu’s Dhabi’s index fell 0.9%, while Dubai slumped to a four-month low as property stocks headed losers.

Abu Dhabi’s benchmark fell 0.9% 2,713 points. Dubai’s measure dropped 1.5% to 1,601 points.

Kuwait’s index fell 0.2% to 6,923 points.

Saudi Arabia’s benchmark rose 0.1% to 6,788 points.

Oman’s index edged up 0.01% to 7,027 points. Bahrain’s measure rose 0.3% to 1,436 points.

"Aldar is a drag on sentiment - it’s not always rational, but this is how the market operates,” said Tarik Lotfy, Arqaam Capital Head of Mena equities.

Kuwait’s Zain ended flat, with investors little moved by a delay in a $12bn stake sale to Abu Dhabi’s Etisalat. The latter fell 0.9%.

"Etisalat has made a generous offer and has the ability to finance the transaction, so for minority shareholders it’s worth waiting for,” said Irfan Ellam, Vice President, and Al Mal Capital telecoms analyst.

Saudi Arabia’s bank index rose 0.3% to a 15-week high after more above-forecast results from lenders.

"Banks’ Q4 results have come in better than expected, but that’s because they’ve taken less provisions, not because operating profits have increased,” said a Riyadh-based trader who asked not to be identified. "Banks will have to take more provisions sooner or later, so it’s not really good news and I don’t think we’ll see bank shares taking off because people know there’s more pain to come.”

Saudi Investment Bank (SAIB) rose 2.2%.