Shareholders at Arabtec wonder what next after Hasan Ismaik’s departure

Arabtec shareholders were left guessing yesterday how the abrupt departure of the company’s chief executive would affect the company’s expansion plans.

Company shares closed down 0.9 per cent at Dh4.26 each as investors tried to make sense of a dramatic week in the company’s history after Hasan Ismaik was replaced by the Ipic head of finance, Mohamed Ali Al Fahim, as acting chief executive on Wednesday.

Said one analyst who asked not to be named: "Arabtec has not made a statement about the company's future strategy – quite possibly because the company itself doesn't know what it's future strategy will be at the moment.

“We believe that there could be more management changes to come.”

Arabtec published an official statement that appeared on the DFM website yesterday saying that Mr Ismaik had resigned “due to his personal work and investment preoccupations”.

“The board … confirmed its full support to the company and expressed its positive aspirations for a bright future and continuing to make more achievements, which aim to protect the rights of all shareholders and to maintain and achieve the best interests of the company and its shareholders and investors,” Wassel Al Fakhoury, Arabtec Group general counsel said in the statement.

An Arabtec spokesman declined to specify how the company hoped to achieve this.

Mr Ismaik had pursued a policy of aggressive expansion. He pledged to transform the company into one of the world’s biggest builders, signed a US$40 billion contract with the Egyptian government to build a million affordable houses and built up a Dh215bn backlog of orders.

However, his decision to increase his shareholding in the company to 28.85 per cent in early June from just 8.03 per cent in late May, coupled with an abrupt sell-down of shares by Abu Dhabi government-owned Aabar Investments to 18.85 per cent from 21.57 per cent, sent share prices tumbling.

Arabtec is one of nine UAE equities included in MSCI’s Emerging Markets Index. An MSCI official said yesterday that companies selected for its indexes are reviewed twice a year.

Since hitting a 2014 high close of Dh7.40 on May 15, Arabtec shares have lost more than 40 per cent of their value as investors feared that the government backing of Aabar could disappear.

A lack of any further information from Arabtec yesterday did little to boost investor confidence as analysts pondered who really held power now at the UAE’s largest listed contractor and whether the company would cut back on its ambitious goals.

Speaking to Bloomberg on Wednesday, Mr Ismaik said he would consider selling his personal stake in Arabtec “if approached by any government entity” approached him to buy it – raising speculation that other public or semi-public bodies could be looking to invest in the company.

“A company that is changing its management leaves equity investors concerned with execution and strategy risks,” said Sanyalak Manibhandu, a research manager at NBAD Securities. At the same time, he said, “The events of the last two weeks or so do not give us occasion to change our earnings forecast”.

Other analysts, convinced that the company would continue to enjoy state backing, emphasised the share price slump as a buying opportunity.

“The near-term uncertainty concerning Arabtec produced a buying opportunity in recent weeks,” said Mohammed Kamal, equity research director at Arqaam Capital. “We believe that the long-term fundamentals of the company are unaltered.”

Mr Ismaik is the second Arabtec chief executive to quit in 16 months. The company’s founder, Palestinian-born Riad Kamal, resigned in February 2013 as Aabar increased its control.

lbarnard@thenational.ae

Follow us on Twitter @Ind_Insights