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MENAFN - Muscat Daily - 21/10/2012

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(MENAFN - Muscat Daily) Positive global and regional sentiment over the last week saw the Muscat Securities Market general index post solid gains due to continued institutional holdings, improved market depth and increasing investor appetite for risk assets.The benchmark ended the week (October 14“18 ) on a positive note atlevel of 5,713.47, gaining 1.22 per cent w-o-w supported by telecom companies, Renaissance Services and few banks shares. Observations during the week included improved depth that stabilised markets and delayed stock activity; post a calm period immediately after results. Further, banks also reported late relative to their past earnings announcements.During last week, the Al Arabi Oman 20 Index increased by two per cent to finish at 1,045.9 as turnover amounted to RO11.82mn. The Al Arabi GCC 50 Index decreased by 0.47 per cent to close at 973.2. The Al Arabi MENA200 Index registered increased of 0.38 per cent to close at 924.11.The analysis of the sub indices revealed that the Services index rose by 1.99 percent at 2,839.1 on the back of strong performances by, Oman Telecommunications Co (Omantel) & Oman Qatari Telecommunication (Nawras) both of which closed at seven and five months highs at RO1.404 per share and 546bz per share respectively.Renaissance Services also performed notably supporting gains in the Services index. We reiterate our belief that the Service sector will benefit from the rising spend by new entrant to the workforce.The Financial index, at the second place, gained 0.46 per cent week-to-week to close at 6,302.73, assisted by gains in ONIC, Bank Sohar, bank muscat and National Bank Of Oman. bank muscat reported robust earnings for the Q3'12. Net Income grew 20 per cent year-on-year on a nine month and quarterly basis to RO104 mn and RO35.8mn (2.4 per cent quarter-on-quarter) respectively as the bank continued to post high teen y-o-y net income growth rates this year.Overall profitability was aided by better cost management and healthier growth in net interest income relative to the first half of this year on account of higher LDR ratios relative to the last six quarters. While undisclosed we find it probable that existence of provisioning write backs might aided the banks' stellar earnings performance.We believe a continuance of higher LDRs in Q4'12 could act as a trigger for the stock price. We view bank muscat's ability to grow as best in the industry, given its scale and size.Ahlibank reported a set of weak results for Q3'12 with net income falling 13 per cent q-o-q on account of lackluster Net operating income growth which collapsed 18 per cent on a q-o-q basis - the largest q-o-q fall witnessed over the last five years.Continued earnings weakness in Q4'12 on a higher equity base may depress the markets' ROE expectations on the stock and weigh on the price near term.NBO net profit growth slowed to 2.4 per cent on a q-o-q basis in Q3'12 after registering an average growth of 22.8 per cent q-o-q in the first half of the year.Total operating expenses grew 3.6 per cent q-o-q after falling 0.8 per cent in Q1'12 and rising four per cent in Q2'12 resulting in a cost to income ratio of 51 per cent for the quarter. LDR fell to 99 per cent from 104 per cent relative to Q2'12 as deposit growth outpaced loan growth by approximately five per cent.Within the leasing sector, Muscat Finance posted a slight improvement in net interest income on quarterly basis (0.8 per cent) to RO 1.8mn in Q3'12 and 5.3 per cent on yearly basis.The increase in provision for impairment (59.2 per cent on q-o-q) affected the bottom line adversely which declined by 5.3 per cent q-o-q to RO 0.914mn in Q3'12.Net margins came slightly below full year FY'11 and stood at 38.7 per cent. Net investments in finance debtors registered its best level all time at around RO100mn, showing an increase of 7.3 per cent q-o-q and 16.6 per cent y-o-y in Q3'12.Initial results from Oman Orix Leasings were impressive as the company posted a 4.5 per cent q-o-q (19.5 per cent y-o-y) jump in net profit in Q3'12 at RO 0.82mn, boosted by a notable increase in net lease income. Net investments in leases stood out registering a healthy improvement on both quarterly and yearly basis at RO82.3mn in Q3'12, an increase of 24 per cent y-o-y (7.8 per cent q-o-q)The Industrial index increased by 0.33 per cent on a weekly basis to 7,233.64 due to the rise in cement shares, Al Anwar Ceramics Tiles and Galfar.Galfar Engineering & Contracting posted its initial results on the last trading day after the trades' hours. The results show a decline in contract other income by one per cent q-o-q (up by ten per cent y-o-y) to RO 81.2mn in Q3'12.The higher total expenses to contract and other Income on quarterly basis (from 97.7 per cent in Q2'12 to 98.6 per cent in Q3'12) led the net profit to register a drop of 48.5 per cent q-o-q to RO 0.774mn in Q3'12. (up by 20 per cent y-o-). However, the drop in Q3 numbers is in line with the historical trend for the company. The TTM P/E stood at 22.8x.Trading statistics show an increase in both in terms of total volume and traded value which were up by 2.62 per cent and 29.02 per cent respectively on weekly basis to 62.4mn shares with value of RO 17.4mn. Continuing strong presence of Institutional investors of all categories is observed in the market with net buying of RO 3.45mn.As noted in our prior reports, we believe tendering activity shall accelerate in the last quarter of the year in terms of volume and values especially related to vital sectors like infrastructure, resulting in more announcements from related companies.Better than expected industrial production & retail sales data from the worlds' largest economy and more .certainty that Spain may be getting ready to accept a formal sovereign bailout coupled with the near closure of a deal for Greece with international lenders for EUR 13.8 billion provided positive data points for investors to return to risk assets.Further, a surprise rebound in export growth from China, saw Asian markets shrug off loses earlier this week to post strong gains on Wednesday and Thursday. Investors shunned safety havens like the USD and the Japanese yen to move into equities and the Euro which returned to over 1.30 vis a vis the USD on Tuesday.RecommendationWe see a rise in trading volumes on a daily basis, providing investors with more depth in restructuring their portfolios effectively. We believe that increased disclosure and granularity combined with expeditious reporting, especially amongst large caps will enhance investor ability in making better and informed decisions.


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