Abu Dhabi's Sorouh Real Estate plunged to a five-year low on Monday after swinging to a fourth-quarter loss, the latest UAE developer to miss forecasts because of continued provisions and impairments. Sorouh fell 3.7 percent to 1.32 dirhams, its lowest finish since at least December 2005.
The developer said it would need extra funds this year after making a fourth-quarter loss of 199 million dirhams ($54.18 million), compared with a profit of 28.1 million dirhams in the year-earlier period. In January, rival Aldar Properties reported a record quarterly loss as it booked massive writedowns on its assets and has made losses for five straight quarters, while Dubai's Emaar Properties also missed profit forecasts as impairments ate into its bottom line.
"The reaction to Sorouh's results was justified and I expect the stock to trade around 1.30 to 1.40 dirhams until its first-quarter results," said Samer al-Jaouni, General Manager of Middle East Financial Brokerage Co. "What happened with Aldar was a signal to expect something similar from Sorouh, with impairments affecting all UAE developers. Investors will differentiate between real estate companies. Emaar was able to generate good operating profits, so it doesn't deserve to be put in the same bracket as Aldar."
Aldar rose 1.1 percent, trimming its year-to-date drop to 20 percent, but Emaar dipped 0.3 percent. UAE property values face further double-digit declines and Dubai house prices are about 60 percent below a 2008 peak as over-supply and a lack of demand weigh, spurring local builders and contractors to shift to other Middle East markets.
Drake & Scull rose 4.6 percent to a 15-month high after it won a $533 million Saudi contract. Kuwait Finance House fell 4.9 percent, its largest drop in a year, after the Islamic lender's fourth-quarter net fell 29 percent, missing forecasts. Kuwait's bank index dropped 2.3 percent, trimming its 12-month gains to 39 percent. Bank rose on bets a $104 billion state development plan, slated to be part-financed by listed lenders, would provide risk-free profits.
"Kuwait's spending plan has yet to lead to anything concrete on the ground," added Ahmed. "If it does happen, then we will revise our assumptions and valuations, more possibly in a favourable manner, but for now we don't see value in Kuwait banks - some are over-valued, others fairly priced." Kuwait's index dropped 0.8 percent to a 24-week low.
Zain Saudi Arabia rose 0.6 percent, having hit a intraday month high, after a newspaper said a consortium led by Al Riyadh Group had become the third bidder for Zain's 25 percent stake in its Saudi unit.