Industries Qatar fell the most in 11 months after the Middle East’s second-biggest petrochemicals maker was cut to sell at VTB Capital Plc, which said a rally this year is overdone given downside risks to fertilizer prices.
The stock tumbled 2.5 percent, the most since March 20, to 168.6 riyals at the close in Doha. About 1.1 million shares were traded, almost six times the three-month daily average, according to data compiled by Bloomberg. The stock was the biggest decliner on the Bloomberg GCC 200 Index and the most traded by value on Qatar’s benchmark QE Index today.
VTB Capital’s Dubai-based Digvijay Singh, who lowered the shares from hold, is the only analyst to recommend investors sell the stock compared with 13 who advise on buying, according to data compiled by Bloomberg. VTB Capital, the investment banking unit of Russia’s second-largest lender, has a 135 riyal price estimate on the stock, which rallied 12 percent in 2013 through yesterday. That outpaced gains of 5.6 percent for the QE Index in the period and 4.2 percent for Saudi Basic Industries Corp., the region’s biggest petrochemicals maker.
Doha-based Industries Qatar’s fertilizer unit is “likely to provide a potential negative surprise and we advise investors to book profits in IQ at prevailing price levels,” Singh wrote in a research report dated yesterday. The company may report a 41 percent increase in fourth-quarter profit next week, according to the average estimate of six analysts on Bloomberg. Industries Qatar said today it delayed a board meeting to Feb. 21 from Feb. 18 to approve financial results.
The earnings projection is an “optimistic scenario” given “medium-term fertilizer price risks,” Singh wrote in the report. “Although Industries Qatar is a great industrial asset, has very respectable cash flow yields and a robust earnings outlook, the recent price action is based on questionable earnings assumptions.”
Sabic, which has an estimated 2013 price-to-earnings ratio of 9.9 times according to data compiled by Bloomberg, offers more value than Industries Qatar, whose shares trade at 11.2 times projected profit, according to VTB Capital. The Qatari company’s 26 percent jump in third-quarter profit was a “one off,” according to the report.
Industries Qatar’s 14-day relative strength index fell to 56 today from 76, having breached 70 in January. A rise above that level indicates to some analysts that a security is poised to decline.