Middle East markets: profit hopes push Industries Qatar to 28-month high

Bullish earnings and dividend expectations pushed Industries Qatar to a 28-month high on Thursday, helping Doha's Index reach a similar milestone. IQ rose 2 percent to 151.90 riyals, its highest finish since September 8, 2008. "We are bullish on the stock in the near-term as we expect earnings will grow sequentially by 15 percent in the fourth-quarter," said Ankit Gupta, senior analyst at Securities & Investment Company (Sico), in Bahrain.
"IQ is likely to disburse good dividends as underscored by its robust operational cash flows, under-leveraged balance sheet and limited committed capital expenditure over the next two years. IQ still has further upside." Sico's fair value for the stock is 162 riyals.
IQ is forecast to make a fourth-quarter profit of 1.65 billion riyals, according to analysts polled by Reuters. Doha's index rose 0.2 percent to its highest close since September 29, 2008. It is up 13 percent since a December 2 FIFA vote chose the gas exporter to host the 2022 soccer World Cup. "Investors are very bullish on Qatar," added Gupta. "It's premature, but many people think Qatar will be upgraded by MSCI, which would lead to a re-rating of the whole market."
Qatar, along with the United Arab Emirates, is on watch to be upgraded by MSCI to emerging market status, with the next review slated for June. MSCI currently classifies both countries as frontier markets. In Kuwait, telecoms operator Zain rose 1.4 percent. Turkey's Cukurova Holding is in talks to buy 29.9 percent of Zain for $7.89 billion, CNBC Arabiya reported on Wednesday, just days before the deadline for a 46 percent stake sale to Abu Dhabi's Etisalat.
Abu Dhabi's Aldar Properties rose 0.4 percent. The company's board will meet late Thursday to discuss plans to ask shareholders to approve asset sales and a convertible bond. The indebted developer is forecast to make a fourth-quarter loss of 446 million dirhams, according to a Reuters poll, in what would be its fifth straight quarterly loss.
"It is the funding gap that matters," said Ahmed Badr, Credit Suisse research analyst. He estimates this gap will be 11 billion dirhams in 2011.
"I'm neutral on Aldar - it has a short-term funding problem, plus long-term weak prospects in the Abu Dhabi property market," added Badr. Dubai builder Arabtec fell 2.6 percent to a six-week low, continuing its slide since it announced plans to launch a $108.5 million rights issue and $150 million convertible bond. "In the near term the potential earnings dilution is likely to impact the stock price negatively," NBK Capital wrote in a note to clients.