DOHA:The GCC companies’ aggregate 3Q16 profits are expected to remain flat year-on-year as gains in banking and real estate sector should get largely offset by weak performance in petrochemical, building material and logistics- transportation sector, while telecom sector earnings are expected to be mute.
The SICO Investment bank’s third quarter preview of GCC equities that covered top listed companies in the region, expects Qatari banks’ earnings may get marred by higher provisioning charges, despite strong top-line growth. Saudi banks are forecast to report strong core-income growth supported by NIM expansion, contrary to UAE banks which will continue to witness NIM contraction.
In Qatar, QIB’s strong balance sheet growth is expected to continue, however SICO analysts expect NIM to contract and provisioning charges to rise YoY. The 2016 first half earnings of Finansbank was consolidated with 2Q16 of QNB, hence both YoY and QoQ comparison is futile in 3Q16. Lower provisioning charges will help to offset higher operating expenses of Doha Bank. On an aggregate, SICO forecast GCC petrochemicals’ earnings to decline 13 percent for the third quarter on year-on-year basis by lower product prices and rising feedstock cost after lifting of energy subsidies. Lower Urea, Steel and Commodity chemical prices are expected to to impact earnings of Industries Qatar (IQ).
GCC’s telecoms sector earnings are expected to be flat at aggregate level. Ooredoo’s earnings are to be impacted from depreciation of Myanmar Kyat, competition in Kuwait and higher finance cost. Saudi Telecom’s earnings are projected to impact on year-on-year due to impact from MTR cut. Etisalat’s UAE operations are expected to drive earnings.
Real estate sector is expecting a pickup in revenue recognition from properties under development for both Emaar and Aldar to boost core earnings YoY. Aldar can surprise by recognizing Dh 900m Al Raha land plot sale.
GCC’s building materials sector is expected to witness a steep 24 percent year-on-year decline in Saudi cement coverage earnings following drop in volumes/prices and higher costs. Yet, valuations almost at historical lows pricing in the weakness.
Due to lower subsidies Consumers sector is expected to witness a slowdown in discretionary sales and margin compression. Jarir will be impacted by lower office supply sales. Al Marai is to benefit from lower priced inventory. Strong growth in water business will help Agthia to some extent offset the adverse impact of the subsidy removal in Agri business.
In the Logistics and Transportation sector Aramex sequential earnings is to be lower as 2Q16 earnings were lifted by one-off FV revaluation gain. Agility core earnings is to rise year-on-year on improving margins. Both airlines (Air Arabia and Jazeera) are expected to have a lower YoY earnings due to yield pressure.
