Arabtec profit surges amid building boom

Dubai construction giant posts four-fold rise in earnings to $63mn, firm's third straight record profit.
Arabtec profit surges amid building boom
By Ola Galal
Mon 05 May 2008 05:30 PM

Dubai's Arabtec posted a near four-fold surge in first-quarter profit, benefiting from construction contracts in the UAE where the real estate industry is booming on record oil prices.

Net income in the three months to March 31 rose to 231.4 million dirhams ($63.02 million), compared with 60.1 million dirhams in the year-earlier period, the UAE's biggest construction company by market value said in a statement. It is the company's third consecutive record profit, beating analysts' expectations.

Revenue more than doubled to 1.9 billion dirhams, it said, without giving details.

"Revenue and profit increased significantly as a result of Arabtec's aggressive geographic expansion strategy and benefiting from business integration and economies of scale," Chairman Riad Kamal said in the statement.

Analysts' forecasts in a survey by newswire Reuters in March ranged from 170 million dirhams to 208.4 million dirhams, with the average at 185.5 million dirhams.

Arabtec expects revenue to soar 75% this year to $2 billion as its Saudi business grows, Kamal told Reuters last week. RELATED: Arabtec expects '08 revenue to hit $2.2bn

Shares of Arabtec ended up 2.9% on Monday, extending this year's gains to almost 70%, compared with a decline in Dubai's main stock index. The stock last traded at 16 dirhams.

The company has won 15.5 billion dirhams worth of projects so far this year, Kamal said, including a 10 billion dirham office and entertainment project in Russia.

RELATED: Arabtec lands $2.7bn Russian tower deal

In April, Arabtec said it won a 3-billion dirham contract to build almost 2,300 houses in Dubai, spurring the company's shares.

RELATED: Arabtec wins Dubai house building deal

The company wants to diversify abroad in order to spread risk and to capitalize on growth in other potential markets, Kamal said, adding Arabtec will focus on Saudi Arabia, Qatar and India. It hopes to enter India next year.

By 2010, at least 30% of the company's revenue will come from foreign operations, up from less than 10% now, Kamal said.

Morgan Stanley last month raised its price target on Arabtec to 18.87 dirhams, citing the company's acquisition of 60% of Abu-Dhabi-based contractor Target Engineering Construction, stronger-than-expected 2007 results and higher backlog estimates. The brokerage reiterated its "overweight" rating on Arabtec.

HSBC also last month raised its price target on Arabtec to 18 dirhams from 14.50 dirhams, and reiterated its "overweight" rating on the stock, saying it now expects 30% higher earnings for the next two years.

Arabtec heads into 2008 with a $4 billion backlog, 29% higher than the brokerage's estimate, and landed $790 million of new awards in the first quarter, HSBC said in a note to clients. (Reuters)

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