Weekly Market Report
The Qatar Exchange (QE) Index gained 69.02 points, or 0.78%, during the week, to close at 8,916.90 points. Market capitalisation rose by 0.84% to reach QR498.1 billion (bn) as compared to QR493.9bn at the end of the previous week. Of the 42 listed companies, 28 companies ended the week higher, 11 fell and 3 remained unchanged. Islamic Holding Group (IHGS) was the best performing stock with a gain of 10.29%; the stock is still down 1.32% year-to-date (YTD). Qatar General Insurance & Reinsurance Co. (QGRI) was the top decliner, down 1.96%; the stock is down 2.17% YTD.
During the week, we initiated coverage on two mid-cap stocks, Qatar National Cement Co (QNCD) and Al Khalij Commercial Bank (KCBK). We believe these two stocks exhibit attractive long-term profiles along with compelling dividend yields of around 6%. QNCD is the market leader in the Qatari cement industry. QNCD’s focus on Qatar makes it one of the pure infrastructure/construction plays on the Qatar growth story; we initiated coverage with an Accumulate rating and a target price of QR116.25. The firm plans to embark on (debt-financed) expansions that will increase its capacity by 7,500 tonnes per day, leading to a bottom-line compound annual growth rate (CAGR) of 12.6% (2014-17). However, until the expansion, investors will have to be content with an attractive dividend yield of 6.1% for the next two years (as the firm operates at near full capacity). KCBK is a young and growing bank. We initiated coverage with a target price of QR18.40 and an Accumulate rating. In terms of loans (approximately, 2.8% market share), KCBK is the smallest of the five-listed conventional banks (8th among the eight-listed banks). Focused on Qatar, KCBK’s management has set forth a 3-year strategy (2013-15) that would improve the bank’s market share and boost its return on average equity (RoAE) to 15%, catching up to that of its peers. The bank has a very liquid balance sheet (liquid assets-to-total assets of 52%) and a low loan-to-deposit ratio (March 2013: 81.3%), enabling management to redeploy funds into lucrative infrastructure/construction deals. Thus, we estimate loans and earnings to expand at CAGRs of 16.2% and 17.3% over 2012-17, respectively.
Equity trading value during the week increased by 1.26% to reach QR1,748.9 million (mn), as compared to QR1,727.2mn in the prior week. The Banks & Financial Services sector led the trading value during the week, accounting for 37.95% of the total equity trading value.
Equity trading volume decreased by 4.62% to reach 50.8 million shares, as against 53.3 million shares in the prior week. The number of transactions rose by 1.56% to reach 22.673 transactions versus 22,324 transactions in the prior week. The Real Estate sector led the trading volume, accounting for 29.75% of the total volume.
Foreign institutions remained bullish for the week with overall net buying of QR296.3mn (including t-bills) vs QR247.9 million (including t-bills) in the prior week. Foreign individuals sold QR39.5mn (net) versus net selling of QR29.2mn in the prior week. Qatari institutions remained bearish with net selling of QR100.7mn (including t-bills) versus net selling of QR208.5mn (including t-bills) in the prior week. Qatari individuals remained sellers with net selling of QR155.8mn as compared to QR10.4mn in the prior week.