Dubai builder Arabtec has played down its 24 percent share slump this week amid speculation that Abu Dhabi's Aabar Investments was to cut its stake, saying the price drop had nothing to do with its financial position and prospects.
Arabtec, which had more than tripled in value this year, spearheaded a pull-back on Dubai's stock market this week and dropped by its daily 10 percent limit in the last two sessions. The stock is still up 138 percent year-to-date.
“The widespread rumors are that Aabar is selling its stake,” Wadah Al Taha, chief investment officer of Dubai-based Al Zarooni Group, told Bloomberg. “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.
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, Bloomberg reported.
On Wednesday, Arabtec chief executive Hasan Ismaik said Arabtec was determined to continue with its ambitious expansion plans, Reuters reported.
“Ismaik said rumours spread about changed in the share price during the last two days, which are influenced by the conditions of supply and demand, should not affect investors and shareholders' confidence in the company, which must depend basically on Arabtec's strong performance and financial position,” it said in a statement.
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 rumours in the market are igniting the sell off,” Taher Safieddine, an analyst at Shuaa Capital PSC in Dubai, told Bloomberg.
Of the 14 analysts who cover Arabtec, none recommend investors buy the shares and their average 12-month price target is AED4.52 ($1.23), the financial news agency reported.