Dubai Exchange Error Fails to Mask Rush to Sell Arabtec

A Dubai exchange glitch that led investors to believe Arabtec Holding Co.’s (ARTC) second-biggest shareholder had cut its stake twice in a week may prove nothing more than a distraction as the stock extends its biggest weekly retreat in more than two years.

Arabtec shares fell 10 percent, the most allowed in a day for a second consequetive day to 4.05 dirhams at the close in Dubai. The Dubai Financial Market website showed yesterday Abu Dhabi-controlled Aabar Investments PJSC had reduced its holding in the company to 14.32 percent from 18.85 percent. The website later updated the stake to 18.94 percent and blamed a “temporary system glitch” for the error. Aabar last week cut its ownership from 21.57 percent.

Shares in the United Arab Emirates’ largest publicly-traded construction company began falling June 8 with other property-related stocks when the country’s central bank pointed to signs the real estate market may be overheating. A June 12 rebound wasn’t enough to stop Arabtec’s 22 percent slump in the biggest weekly drop since March 2012.

“Fundamentally, the stock is expensive and is trading at high multiples as well as at a premium to peers, so its growth prospects are already priced in,” Taher Safieddine, an equities analyst at Shuaa Capital PSC, said by phone from Dubai yesterday.

Arabtec is valued about 32-times earnings, compared with 11-times for the MSCI Emerging Market Index and 15-times for Dubai’s benchmark index, according to data compiled by Bloomberg. The company’s shares have almost doubled so far this year amid a real estate boom in Dubai.

No Delisting

Chief Executive Officer Hasan Ismaik told Al Arabiya Television today there are no disputes with Aabar’s management, and he has no plans to further raise his stake in the construction company. Ismaik tripled his holding in Arabtec to 28.84 percent this year, data compiled by Bloomberg show.

Arabtec is going ahead with “strategic expansion plans” and has held no talks to remove its shares from the Dubai exchange, it said last week. A spokesman declined to comment when contacted by telephone yesterday.

The stock has dropped 40 percent this month. The average 12-month price expectation of five analysts is for 4.52 dirhams, according to data compiled by Bloomberg.

“The sharp rise in the stock was driven largely by retail investors and it could come down just as quickly,” said Safieddine, who is revising his price expectations for the shares.

Arabtec is in talks to buy a large European company and may tap the bond market in the second half to pay for the deal, Ismaik said in April. The company may sell 40 percent of its construction unit in 2015, he said.

Arabtec will hold a meeting of its board of directors on June 18 to consider its projects, according to a statement to the bourse June 15.

“People are waiting for some kind of clarification,” Mohammed Ali Yasin, managing director at NBAD Securities LLC, said by phone today. “I hope Arabtec will come with something to clear up all of this.”

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net Dana El Baltaji, James Doran

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