Qatar: Distribution of interim dividends to attract foreign investors

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Doha, Qatar: New rules allowing the distribution of interim dividends by Qatar Stock Exchange (QSE) listed firms brings the local market in-line with global trends and could further enhance Qatar’s appeal to foreign investors that have been selling down since the beginning of the year.

Several companies have indicated that they are considering distributing interim dividends related to the just-ended second quarter (Q2) of 2024, including QNB, QIB, QIIB and QE-privatised companies (Industries Qatar, MPHC, QAMC, QFLS, Qatar Electricity and Water and Qatar Gas and Transport, said QNB Financial Services (QNBFS) in its latest report.

Qatari companies enjoy robust balance sheets backed by low leverage and decent Return on Equities (RoEs), while Qatari banks stand out with their exceptional capital adequacy ratios, strong provision coverage and high profitability.

The report noted, “We are of the view that a positive outlook on 2024 asset quality could serve as a catalyst as asset quality remains a concern for investors, especially for mid-sized banks as NPLs have spiked along with Stage 2 loans.”

“We expect second quarter of 2024 earnings to continue building on the Year-on-Year (YoY) positive momentum seen since the fourth quarter of 2023 and project stocks under coverage growing the aggregate bottom-line by 6 percent YoY,” it added.

Overall earnings, however, should decline 4.3 percent QoQ. This follows a positive Q1 2024 for the QSE where aggregate earnings rose YoY and QoQ 5.8 percent and 30.7 percent respectively.

The report further stated, “We see most of the YoY growth in Q2 2024 coming from banks, which are expected to book lower provisions along with some margin improvement, while Industries Qatar (IQCD) weighs down on earnings sequentially. We remain constructive on Qatari equities, which have seen a recovery in the past few weeks, including a 20-day winning streak (last seen in 2006).”

Overall, the LNG augmented by ramping up of the North Field project and the recently upgraded capacity expansion target – a significant portion of Qatar’s expected annual LNG capacity increase is already signed-off in long-term supply contracts.

Over the medium- to long-term, the ‘upgraded’ North Field Gas Expansion, a nascent but growing tourism/sporting sector and Qatar National Vision 2030 investments will continue to be major growth drivers for our companies. The demand for Qatar’s gas should remain strong for the foreseeable future on the back of geopolitical developments, specifically in Europe, with demand for LNG expected to peak between mid-2030s and mid-2040s.

Anchoring our overall convictions are Qatari valuations, looking attractive historically and relative to peers, especially given that “we see earnings recovering on the horizon. We stay bullish longer term on Qatari equities given their defensive characteristics backed by their strong fundamentals,” the report stated.