Arabtec Slumps After Aabar Stake Boost Stems Rally: Dubai Mover

Arabtec Holding PJSC (ARTC) slumped the most in a year on investor speculation a rally was overdone and after data showed Aabar Investments PJSC (AABAR) raised its stake in the United Arab Emirates’ biggest construction company.

Shares of Dubai-based Arabtec, up 104 percent so far this year, tumbled 7.1 percent, the most since March 2011, to 3.25 dirhams at the 2 p.m. close in the emirate. The company was the biggest decliner on Dubai’s measure, which dropped 3.7 percent, the most in more than a year. It was the world’s worst- performing index today, among 93 benchmarks tracked by Bloomberg.

Arabtec had rallied amid bets the company will benefit from regional infrastructure spending and secure contracts in Abu Dhabi, which said in January it plans to resume real-estate projects after reviewing their viability. Aabar, the Abu Dhabi government company which owns a stake in Daimler AG (DAI), increased its ownership to 5.28 percent, according to data posted on Dubai’s stock exchange.

“We had a lot of rumors surrounding Arabtec, some of them were related to potential orders it could win from Abu Dhabi, and at the end of the day that wasn’t the case,” said Sebastien Henin, who helps oversee $100 million at The National Investor in Abu Dhabi. “We ended up with the usual suspect buying only five percent in the stock. Some investors were disappointed and started to book profits. We could see some more profit-taking because it’s such a disappointment.’

Arabtec shares are trading at 33 times estimated earnings compared with 10 times for Dubai’s benchmark. Six analysts recommend investors sell Arabtec shares, while nine have a hold rating on the stock, according to Bloomberg data. Two recommend investors buy the shares.

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The builder, whose board meets tomorrow to discuss financial results, may post a 57 percent drop in full-year profit to 133 million dirhams ($36 million), according to the average estimate of 12 analysts on Bloomberg.

Arabtec has been eying opportunities outside its home market after construction work slowed in Dubai. The company said in November the value of a contract it won in Saudi Arabia (SABIC) may rise to 1.5 billion riyals ($400 million).

A unit of Arabtec, a builder of the world’s tallest tower in Dubai, in January won a 561 million-dirham contract for the Dubai International Airport’s expansion. One of its units also won 256 million dirhams in contracts in Abu Dhabi this year.

Aabar offered in 2010 to buy 70 percent of Arabtec through the purchase of bonds that would be exchanged for shares for 2.3 dirhams each. After the deal fell through, Arabtec and Aabar said they planned a ‘‘strategic partnership” instead. Arabtec Chief Financial Officer Ziad Makhzoumi couldn’t be reached for comment.

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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