Shares in Dubai Investments (DIC) fell sharply on Sunday as the company announced a drop in fourth quarter (Q4) earnings for 2018.

DIC recorded a net loss of 72.9 million UAE dirhams ($19.8 million) for Q4 2018, compared to a net profit of 171.3 million UAE dirhams for Q4 2017, translating into a 142.6 percent drop.

“The company’s preliminary results were somewhat expected and yet not as bad as the public has received them so far,” Issam Kassabieh, senior financial analyst at Menacorp Financial Services, told Zawya by email.

Net profit for 2018 amounted to 651.4 million UAE dirhams, down 34.8 percent on the 1 billion dirhams profit for 2017.

Revenue for 2018 stood at 3.02 billion UAE dirhams, which was 8.6 percent higher than the  2.78 billion UAE dirhams revenue in 2017.

Kassabieh said that during the most recent recession, DIC had posted losses on revaluations of investments, only to reverse them later as the market and economy recovered.

“At this time this is exactly what we are seeing once again. There isn’t a recession but there seems to be an apparent slowdown in the market, especially in real estate, therefore for companies who are accustomed to constant quarterly and annual revaluations of assets and investment properties this was an expected scenario,” Kassabieh added.

DIC’s shares fell 6.4 percent on Sunday and were the second-most traded shares on the exchange in volume terms behind Gulf Finance House, dragging Dubai’s index to close 0.51 percent lower for the day. DIC’s shares have dropped 7.14 percent since the start of 2019.

The stock appears to be oversold after today’s session, according to the Relative Strength Index (RSI 14). The index is a measurement between zero and 100. Traditionally, the stock is considered overbought when RSI is above 70 and oversold when below 30.

Data from Eikon shows that the stock has a RSI of 29.242. At the end of the previous session, the stock’s RSI was 39.334. It closed Sunday's session at 1.17 UAE dirhams per share.

“Dubai Investments, in spite of this decline, is still strong and holds a book value above AED2.30 (book value per share) but I understand investors are concerned over how far these revaluations can deteriorate asset quality and this book value,” Kassabieh said.

According to data from Eikon, one analyst has a ‘strong buy' rating on the company's stock and one analyst has a ‘hold’ rating.

“Investors should wait to see the full financials to determine the exact cause of this profit decline, if core revenue streams are steady however, the company should be given some credit for manoeuvering this rough cycle,” he ended.

Elsewhere in the region, Abu Dhabi’s index dropped 0.59 percent on Sunday, Saudi Arabia’s index fell 0.46 percent, Qatar’s index dropped 0.61 percent, Kuwait’s premier market index ended the day mainly flat while Oman’s index rose 0.16 percent and Bahrain’s index dropped 0.6 percent.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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