Arabtec Slumps to One-Year Low on Dilution Concern: Dubai Mover

Arabtec Holding Co. slumped to the lowest level in more than a year on investor concern the United Arab Emirates builder’s plan to raise capital via convertible bonds may dilute the positions of shareholders.

Shares of the country’s biggest construction company by market value fell 3.2 percent to 2.10 dirhams, the lowest level since February 2012, at the close in Dubai. Arabtec was the most traded and the biggest decliner on Dubai’s benchmark DFM General Index, which slumped 1.2 percent. Some 50 million Arabtec shares were traded, more than four times the three-month daily average.

Arabtec has lost 29 percent since the company said Feb. 27 it is seeking to raise $1.74 billion to fund internal growth, acquisitions and joint ventures. The plan includes the issuance of 3.18 billion rights shares at 1.5 dirhams each as well as the sale of $450 million in convertible bonds.

Technical analysts believe the share is targeting 1.90 dirhams, said Talal Touqan, head of research at Al Ramz Securities LLC in Abu Dhabi. “This will be coupled with even lower valuations due to dilution and a bigger capital base.”

Reviewing Options

The capital increase plans come after 2012 results tumbled 37 percent, missing analyst estimates. Arabtec is reviewing financing options and “will decide upon the right structure in due course,” newly appointed Chief Executive Officer Hasan Ismaik said this week. The builder’s 14-day relative strength index tumbled from 71 on Feb. 25 to 18 today. A reading below 30 indicates to some investors a security is poised to rise.

Abu Dhabi-based Aabar Investments has played a bigger role in the builder 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 a terminal at Abu Dhabi airport.

Arabtec is committed to remaining publicly listed, Ismaik, who replaced Riad Kamal, said March 3. Aabar, an Abu Dhabi government-controlled company, delisted from the emirate’s stock exchange in 2010.

Three analysts have a hold rating on Arabtec shares, while 10 advise selling, according to data compiled by Bloomberg. The stock, which dropped 9.8 percent last month after rallying 32 percent in January, trades at a price-to-earnings ratio of 24 times. That compares with 15 times for Emaar Properties PJSC, developer of the world’s tallest skyscraper in Dubai.