HSBC says Arabtec has to hire 17,500 staff to clear Dh60bn backlog

Arabtec’s ability to meet its ambitious growth strategy could be seriously hampered by a lack of executive and middle-management talent in the wake of the crisis that has swept the contracting company in recent weeks, according to a new research report.

The report – sent by HSBC analysts to clients but as yet unpublished in media – says that the company needs to hire an additional 17,500 white-collar employees to execute its backlog until 2017, believed to be standing at more than Dh60 billion.

In the light of recent departures from the company after the chief executive Hasan Ismaik’s departure two weeks ago, “we believe it will be extremely difficult to ramp up the company in anticipation of the backlog execution it targets,” said HSBC’s analyst Nicholas Paton.

“Hiring senior managers in particular may prove problematic given the short tenure of the exiting group,” he added.

The report also says Arabtec would have to outsource as much as 25 per cent of its order backlog.

The hard-hitting analysis casts doubts on the future viability of the “new look” Arabtec, especially the international joint ventures it has signed, or is negotiating, with big conglomerates in South Korea, and over the $40bn project to build residential accommodation in Egypt.

According to one estimate, Arabtec’s share price would stand at Dh1.4 assuming “that the GS and Samsung joint ventures, future orders from Aabar [a major Arabtec shareholder itself owned by an Abu Dhabi government related company] and the Egypt affordable housing projects have no value”, the report says.

Arabtec shares have not touched those depths for more than a year. Yesterday they had another roller-coaster ride, losing about 10 per cent in early trading before recovering to end the day marginally ahead at Dh2.88 per share.

Uncertainty over the shares has been exacerbated by the presence of Mr Ismaik as a 28 per cent shareholder. “Should Mr Ismaik choose to sell his stake in the market, this would put significant pressure on the stock,” Mr Paton said.

However, HSBC also said it believed Arabtec had the support of Aabar as a “committed shareholder” mainly because the new chief executive, Mohammed Ali Al Fahim, is a board member of International Petroleum Investment Company, the government-owned group which owns Abaar.

Other experts echoed HSBC’s concerns and noted speculation Arabtec might want to buy another contractor.

“If they don’t acquire another company it will be tough for them to hire and have a senior team,” said Fathi Ben Grira, the chief executive at Mena Corp, an Abu Dhabi investment company. “But the first question is the projects they announced, do they still have them? What we would like to hear, is more comfort on the status of these projects.

“I think it can be challenging for them to hire seniors since there’s no clear visibility on the company now.”

Arabtec has called a press conference in Abu Dhabi today, the first since the company’s shares began their long decline from Dh 7.74 more than a month ago.

fkane@thenational.ae

halsayegh@thenational.ae

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