Arabtec Holding Co. headed for its biggest three-day rout since March 2013 as some investors speculated Aabar Investments PJSC, its second-largest investor, is cutting its stake in the Dubai builder.
The shares slid 10 percent, the maximum allowed in one day, to 4.88 dirhams at the close in Dubai, the lowest in more than two months. Dubai’s DFM General Index dropped 1.6 percent to 4,693.20, the lowest since May 20. Arabtec doesn’t comment on market rumors, its public relations department said by text message. An Aabar spokesman didn’t reply to a phone call and an e-mailed request for comment.
“The widespread rumors are that Aabar is selling its stake,” Wadah Al Taha, chief investment officer of Dubai-based Al Zarooni Group, said by phone. “There’s intense pressure on the stock.”
Abu Dhabi-controlled Aabar owns 21.57 percent of Arabtec through its energy, petroleum and real estate investment units, according to data compiled by Bloomberg. The current decline began June 8 after the United Arab Emirates’ central bank said rental yields in Dubai and Abu Dhabi had fallen below historical averages as real estate prices rose, indicating the market may be imbalanced.
The company is trading at an estimated price-to-earnings ratio of 38-times, compared with 16-times for Dubai’s index. Chief Executive Officer Hasan Ismaik tripled his holding to 28.84 percent, data compiled by Bloomberg show, helping the shares rally 138 percent so far this year.
“The retail investors took the stock to a very high level so now, with a correction in the overall market, Arabtec will definitely be affected, and rumors in the market are igniting the sell off,” Taher Safieddine, an analyst at Shuaa Capital PSC in Dubai whose price expectations for Arabtec are under review, said by phone.
Of the 14 analysts who cover Arabtec, none recommend investors buy the shares and their average 12-month price target is 4.52 dirhams.
This week’s decline has pushed Arabtec’s 14-day relative strength index to 32.8, the lowest reading since March 2013, data compiled by Bloomberg show. Some investors see readings below 30 as a signal a stock is oversold.
Aabar Investments in 2010 canceled a plan to buy most of Arabtec for an estimated $1.7 billion, saying they would work instead on a “strategic partnership.” Aabar delisted from Abu Dhabi’s exchange the same year.