By: Thabet Shehata

Dubai – Mubasher: A third of UAE companies’ stocks listed on the Dubai Financial Market (DFM) have fallen below their fair value (FV) following the recent declines that hit the market on the backdrop of plunging oil prices.

A total of 13 DFM-listed local stocks, representing 28% of the market’s 46 companies, ended Wednesday below their FV of AED 1.

Analysts believe that this fall below a stock’s FV will pressure companies in the event they seek to increase their capital through public subscription, which may prompt some companies to request to purchase their own stocks. On the other hand, some analysts believe that this fall below the FV will not represent pressure.

It is not necessary that these stocks will pressure their respective companies as these firms have not announced seeking capital increases, Kefah Moharama, General Manager at Aldar Securities told Mubasher in a comment.

Union Properties’ share was the most recent addition to the list, after ending Wednesday at 8.9% drop to AED 0.820, registering its seventh decline in December. The stock entered the list of stocks falling below their FV on Tuesday, December 16.

Union Properties had announced its third quarter financials on November 11, reporting a 25.6% profit fall, whereas profits for the first nine months of the years leaped by 171.6%, supported by real estate valuation profits.

Companies that submit a request to purchase their stocks are companies that have a cash surplus, Moharama noted, adding that this is unlikely to be done for many companies, which prefer to maintain their liquidity to be used in their various operations.

Some firms on the UAE stock markets had received approvals to buy their stocks during the global financial crisis in 2008 and 2009, however they did not commence buying, he revealed.

Amongst the stocks that fell below their FV were the newly-listed Amanat and Dubai Parks & Resorts, the two most recently-listed stocks on the DFM.

Amanat ended Wednesday at AED 0.761, after shedding 0.78%, its tenth decline since its listing. The stock lost an overall 24%.

Amanat Holdings, a company under incorporation, commenced trading on the DFM on Sunday, November 30, 2014. The healthcare and education company offered 55% of its capital in an initial public offering (IPO) amounting to AED 1.375 billion of the Company’s total capital of AED 2.5 billion. The IPO was ten times oversubscribed.

Meanwhile, Dubai Parks & Resorts retreated by 6.4% on Wednesday to AED 0.645, registering a total loss by 36%. Since listing the stock closed in the red for six sessions against only one in the green.

Dubai Parks & Resorts, a subsidiary of Meraas Holding, commenced listing on Wednesday, December 10. The listing coincided with the recent wave of successive declines that hit the DFM.

Meanwhile, Gulf Navigation, the stock which currently has the lowest closing amongst DFM-listed companies, ended Wednesday at a four percent decline to AED 0.353, registering its sixth successive fall.

The Company’s extraordinary general meeting (EGM) had decided earlier this year, on Sunday, January 5, 2014, to allow the Company to continue its operations and to not be liquidated. Gulf Navigation has suffered capital losses amounting to AED 1.1 billion. Following the reduction, the Company’s capital amounted to AED 551.67 million.

Similarly, Gulf General Investments Co. (GGICO), one of the lowest stocks on the list, after plunging on Wednesday by 9.8% to AED 0.422, registering its eighth decline this month. The stock incurred massive pressures lately particularly on the backdrop of news that Jordan’s Anti-Corruption Authority was investigating an allegation against the company. The Authority believed that GGICO was promoting a real estate and gem investment fund company that is said to be non-existent.

GGICO had announced in a filing to the DFM on Tuesday, December 9, that it had not received any official communications from any body regarding this matter.

Translated by: Nada Adel Sobhi

Photo Credit: Arabianeye-Reuters