Arabtec Falls Most in Year on Dilution Concern: Dubai Mover

Arabtec Holding Co. slumped the most in nearly a year on investor concern the Dubai builder’s capital increase plans may dilute the shares given the conversion price and as full-year profit missed estimates.

Shares of the United Arab Emirates’ biggest construction company by market value dropped 9.8 percent, the most since March 7, to 2.67 dirhams at the close in Dubai. The stock was the biggest decliner on Dubai’s benchmark DFM General Index, which slipped 0.6 percent. About 3.2 million shares of Arabtec were traded, less than a third of the three-month daily average.

The builder said yesterday it plans to raise $1.74 billion through a rights issue and convertible bonds to fund internal growth, acquisitions and joint ventures. Arabtec, which said it won’t pay a dividend for 2012 to “preserve the net cash position,” plans to issue 3.18 billion shares at 1.5 dirhams each and will sell $450 million in convertible bonds. Full-year net income decreased 37 percent, missing estimates.

“The convertible bond may have a dilutive effect,” according to Yazan Abdeen, who helps oversee about $300 million as ING Investment Management’s Middle East and North Africa fund manager in Dubai. “There is a lot of uncertainty about the conversion price and the future backlog of the company, which can surprise on the upside or the downside.”

Arabtec’s fundraising comes as Abu Dhabi-based Aabar Investments plays a bigger role in the company after last year raising its stake to 21.6 percent. Arabtec has won large projects in Abu Dhabi in the past year, including construction of a branch of the Louvre museum and the midfield terminal at Abu Dhabi airport.

The company, which mainly builds homes and offices, plans to expand to oil, gas and power infrastructure. Hasan Ismaik was appointed chief executive officer, replacing Riad Kamal, the company said yesterday.

Four analysts have a hold rating on Arabtec shares, while nine say sell, according to data compiled by Bloomberg. Arabtec’s profit may more than double this year to 286 million dirhams ($77.9 million), according to the mean estimate of 11 analysts on Bloomberg. The company’s shares have dropped 9.8 percent this month after rallying 32 percent in January.