“This profitability improvement was the highest for eight consecutive quarters. GCC-listed companies aggregate profits in 1Q/12 were also higher than forecast, after reporting disappointing profits for the previous two quarters in 2011,” the report added.
“GCC-listed companies’ performance in the first quarter of 2012 caught investors by surprise, with 56 per cent of companies surpassing analysts’ consensus profit estimates. Analysts’ estimates were available for 103 GCC-listed companies, of which 58 reported better-than-projected results,” the report added.
Bahraini, Kuwaiti and Omani companies reported strong year-on-year growth in the range of 20 to 28 per cent during the first quarter of the year, while Saudi and Emirati companies’ profits grew by 10 to 15 per cent. Qatari companies were the exception, reporting a year-on-year decline in profits of 2 per cent, led mainly by non-banks. Most UAE companies (15 out of 24) surprised investors with higher-than-expected profits for the quarter, while Saudi companies disappointed, with just fewer than 50 per cent of companies missing estimates.
GCC-listed companies’ aggregate revenues for the first quarter of 2012 increased 8 per cent year-on-year. Real estate, diversified financials, building materials and consumer companies’ revenues grew by double digits in the range of 14 to 30 per cent. Overall operating margins improved to 22 per cent in 1Q12 compared with 18 per cent in the first quarter of the previous year; however, operating margins were flat in comparison. Operating margins for banking and insurance institutions, and real estate and building materials companies improved in the first quarter of 2012 compared with quarter one 2011.
Despite ongoing concerns on the GCC real estate sector, 7 out of 9 real estate companies surpassed analysts’ estimates, making it the best performing sector for the quarter. Just over 50 per cent of banks beat estimates, while 71 per cent of companies in the ‘energy and basic materials’ sector missed analysts’ estimates.
SICO’s report also notes that the GCC markets average daily trading activity during 1Q12 was US$ 2.6 billion. However, this dropped by around 16 per cent to US$ 2.1 billion during the second quarter of the year, while volumes declined by 21 per cent. Overall, GCC markets are mixed year-to-date, with the Dubai and Saudi markets performing better, producing year-to-date gains of 7.5 per cent and 4.3 per cent respectively. After an increase of 15 per cent in the first quarter of 2012, the S&P and IFC Global GCC Price Index declined by 11 per cent for the second quarter.
“We believe that the recent correction in GCC markets offers attractive entry points, and investors should selectively start accumulating stocks with a long-term outlook,” Jithesh Gopi, Head of SICO Research, said.