Led by petrochemicals, the earnings of GCC-listed companies are projected to record an aggregate 12 percent growth on year-on-year for the fourth quarter of 2016 (Q4,16).
GCC banks are expected to report a modest core earnings performance, investment bank SICO noted in its “GCC equities-quarterly result preview”. The SICO covered a total of 70 listed companies in the region, including four Qatari banks.
Declining interbank rate would stabilise funding cost and support the Saudi banks’ net interest margins (NIMs), in contrast to UAE banks who are likely to witness NIM pressure on rising competition. SICO analysts expect to see provisioning charges continue to rise for Qatari banks, from their construction sector exposure.
The report forecast an overall weak quarter for the banks with high provisioning charges and NIM compression, to be partially offset by higher non-interest income growth of Commercial Bank.
Lower provisioning charges will help to offset weaker non-interest income Doha Bank. QIB’s strong balance sheet growth is expected to continue, however SICO expects NIM to contract and provisioning charges to rise YoY. On a QoQ basis QNB’s higher provisions is to offset net interest income.
On an aggregate, SICO forecasts the Petrochemicals earnings to double (+114 percent) YoY owing to lower base and remain flat QoQ led by higher crude and stronger product prices.
Sipchem is pricing in strong 4Q numbers led by higher methanol prices. Real estate cmpanies Aldar and Emaar earnings will continue to benefit from pick up in revenue recognition from properties under development. Emaar could surprise with booking of insurance claim income relating to the Address Hotel fire incident.
The building materials sector is expected to witness 26 percent YoY drop in net earnings due to prevailing pressure on demand and pricing. Operating costs would be the key factor to watch this quarter after the big slump in some companies’ 3Q16 costs to all-time lows. For now, sector is fairly valued post rally.
Telecom earnings are forecast to be weak for diversified telco players due to currency hit. Saudi telcos also to report lower YoY earnings led by macro weakness. Results will drag for Mobily and Zain. On the consumers sector the report noted discretionary players such as Jarir will see a slowdown in their topline due to lower disposal income.
Overall retail players’ margins are under pressure led by rising government fees and higher marketing expenses.
Logistics and Transportation expect some YoY margin contraction for Aramex on consolidation of relatively lower margin Fastway subsidiary. Agility’s earnings to be lifted by growing contribution from higher margin ‘Infrastructure’ segment.
Air Arabia is to benefit from absence of derivative loss. The results of Air Arabia will be boosted. In the health care sector, A YoY earnings growth is expected in Mouwasat, Dallah and decline in Hammadi, Middle East Healthcare.
