Drake & Scull Price Estimate Cut at NBK Capital on Revenue Drop

Drake & Scull International PJSC (DSI), a supplier of engineering services to the construction industry, had its price estimate lowered 12 percent to 76 fils at NBK Capital after third-quarter revenue was lower than expected.

Dubai-based Drake & Scull’s quarterly revenue, which fell 26 percent, was a fifth below NBK Capital’s forecast due to slow execution of projects in Abu Dhabi, Egypt and Algeria, analysts Lois Pelichet and Samah Ragab said in an e-mailed note dated yesterday, maintaining a hold recommendation on the stock.

“We have cut our forecasts and valuation to reflect our concerns about both execution capacity and the cash flow situation,” NBK, a unit of National Bank of Kuwait (NBK), said. Drake & Scull’s “working capital requirements continued deteriorating in real terms,” it said.

Third-quarter profit tumbled 93 percent to 3.9 million dirhams ($1.1 million) following declines of 53 percent and 26 percent in the first and second quarters, respectively, data compiled by Bloomberg show. Profit for the three months ended Sept. 30 missed the 38 million-dirham median estimate of four analysts on Bloomberg. Cash flow in the quarter was negative 167 million dirhams, data compiled by Bloomberg show.

Drake & Scull’s shares have declined 4.5 percent in 2012, compared with a rally of 19 percent for the benchmark DFM General Index (DFMGI) and a surge of 46 percent for Emaar Properties PJSC, (EMAAR) developer of the world’s tallest skyscraper. NBK’s price estimate is a 6 percent premium to Drake & Scull’s 71.7 fils closing price today.

The company’s full-year profit may drop 26 percent to 162 million dirhams, according to the mean estimate of 12 analysts compiled by Bloomberg. Four analysts have a buy rating on the stock, while eight say to hold it and one recommends selling, according to data compiled by Bloomberg.

To contact the reporters on this story: Dahlia Kholaif in Kuwait at dkholaif@bloomberg.net; Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net

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