Arabtec Gains as Builder Scraps Convertible Bonds: Dubai Mover

Arabtec Holding Co. rose the most in almost a week after the United Arab Emirates builder scrapped a plan to issue convertible bonds that had stoked concern among shareholders that their positions may be diluted.

Rather than selling convertible bonds, Arabtec plans to issue fixed-income notes this year or in 2014, according to a statement from the U.A.E. market regulator to the Dubai bourse yesterday. The stock slumped 30 percent through yesterday since Arabtec said Feb. 27 it will offer convertible bonds as part of a plan to raise capital by $1.74 billion to fund internal growth, acquisitions and joint ventures.

“The uncertainty related to the convertible bond and further dilution risks has been eliminated,” Julian Bruce, Dubai-based head of institutional trading at EFG-Hermes Holding SAE, said in an e-mailed note to clients yesterday. He says investors should buy the shares after yesterday’s announcement.

The stock gained 2.4 percent, the most since March 7, to 2.13 dirhams at the close in Dubai. Arabtec, which surged as much as 7.7 percent earlier, was the most traded on the benchmark DFM General Index, which fell 0.9 percent.

Arabtec will issue rights shares in two parts this year and in 2014, if needed, according to the statement. The builder will hold an annual general meeting and extraordinary general meeting for shareholders to vote on the proposals on April 7.

“Dividing the rights issue into two tranches could also reduce the anxiety of shareholders selling parts of their holdings in order to participate in the capital increase,” Bruce said.

The stock’s 10-day volatility, a measure of price swings, surged to 85 yesterday, the highest level since April 15.

Arabtec trades at a price-to-earnings ratio of 24 times, compared with 16 times for Emaar Properties PJSC, developer of the world’s tallest skyscraper in Dubai.