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Mon 18 Oct 2010 04:01 PM

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Arabtec may mull funding for expansion

Firm has no immediate needs and could fund some of its projects, company's CFO says

Arabtec may mull funding for expansion
COMPANY CFO: Arabtecs Ziad Makhzoumi said the firm had no immediate needs and could fund some of its projects. (ITP Images)

Builder Arabtec, which is bidding for $8.17bn of work outside its local markets, may look at new funding sources for its expansion plans, its chief financial officer said on Monday, as investor appetite for debt issuance draws more players to the market.

Arabtec's Ziad Makhzoumi said the firm had no immediate needs and could fund some of its projects - including a push into Central Asian states like Kazakhstan and Uzbekistan - from internal resources. But the builder was watching capital raising activities with interest.

Earlier in October, developer Emaar Properties outlined plans for a $500m convertible bond issue, a move that came on the heels of a raft of bond issuance by Gulf Arab names including the Dubai government and Qatar Telecoms.

"At the moment, probably a convertible to any company that is listed is the most attractive because they are going to get a premium not a discount " Ziad Makhzoumi said at the Reuters Middle East Investment Summit in Dubai.

"That gives you confidence. I see possibly more coming to the market," he said, adding Arabtec had not reached any decision on an issue.

"Any new issue, any new bond or any convertible is a process which takes at least 4-5 months."

The developer, the UAE's largest builder by market capitalisation, is expanding abroad to diversify its portfolio from Dubai which has been hit by severe property downturn.

Arabtec's project backlog in Dubai currently represents just 20 percent of total current projects, down from 95 percent three years ago, Makhzoumi said.

The builder is among trade creditors being offered an Islamic bond, or sukuk, as repayment by state-linked developer Nakheel, which built palm shaped islands off the coast of Dubai.

Makhzoumi said he would not hesitate to sell the bond and cash out but only if it were trading at a premium.

Its total backlog is about 25 billion dirhams, he said, and is bidding for some 30 billion dirhams of work outside its local market of the Gulf region, Egypt, Pakistan and Russia.

It expects Saudi Arabia to be one of its largest markets by the end of 2011. Earlier in October, Arabtec won a $1.33 billion order for a four-year housing project in Saudi Arabia.

Meanwhile, the builder expects to see third quarter net profit in line with the second quarter and will not take provisions.

"The third quarter is always a bad quarter because of Ramadan and summer. The last quarter we reversed some provisions. Not this quarter and we are not taking any provisions," he said.

Topline for 2010 would be around 6 billion dirhams, rising to as much as 7.5 billion dirhams in 2012, he said. Arabtec had net profit of 111.1 million dirhams in the second quarter.

Analysts forecast average earnings of 94.8 million dirhams the third quarter, according to a Reuters survey in October.

In April, Arabtec and Aabar Investments called off a $1.7 billion agreement for Aabar to take over Arabtec.

"The door for future cooperation is still there. They had to restructure their own operation. We are looking at some projects together," Makhzoumi said.

Arabtec's shares were unchanged at 2.2 dirhams a share at 1036 GMT, slightly better than Dubai's benchmark DFM which was down 0.3 percent to 1,739 points. ($1=AED3.672) (Reuters)


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