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Muscat - On the back of steady performance by financial and services sector companies, revenue of MSM30 Index companies is estimated at RO 1.978 billion, an increase of 4.6 per cent, in the first half of 2016. Index earnings are seen at RO 357.136 million, an increase of 7.3 per cent year on year. The revenue, excluding investment holding companies, for the period is estimated to increase only by 1 per cent year over year to RO 1.854 billion. "We believe the upcoming earnings season would reveal the initial effects of the demand slowdown in the local and regional economies on low oil prices", analysts at Gulf Baader Capital Market (GBCM) said in a report.
Amid continued growth in credit, banking sector may have a revenue rise of 5.9 per cent on year on year basis, while the sector earnings are estimated to reveal flattish trend on a year on year basis at RO 170.639 million. "The impact of the increase in funding costs (tighten liquidity) will be revealed in the form of pressure on net interest margin", the report said. Overall credit demand could continue to remain stable. "We estimate the impact of tighten liquidity and increase in funding costs to be seen in the form of pressure on net interest margins. Lower non-interest income will also have its impact during the quarter", the report said.
Earnings of Investment holding companies are anticipated at RO 22.594 million, an increase of 43.9 per cent on year on year basis owing to improved equity market performance in Oman and the GCC region during the second quarter. "We do see strong earnings growth in Ominvest post the completion of the ONIC integration which was not prevailing during last year comparable period", the report said. For the Industrial sector, total revenue is expected to decline by 6.6 per cent year on year amid low commodity prices and also prevailing slowdown in certain industries like construction and building materials sector.
"We expect the industrial sector companies to report a mixed set of numbers amid lower commodity prices and also due to the cautious stance on the regional economic growth prospects", the report said.
Industry sector earnings for the second quarter are estimated to increase 29.3 per cent year on low base and decline 12.5 per cent on a sequential basis.
The slowdown could be visible in the form of low new order additions and declining growth in sales volumes.
On the other hand, analysts at GBCM said, "most of the management we met remain cautious in terms of expansion and also planning for efficient working capital management including lower inventory and improved collection policies". The services sector earnings, according to the report, may increase by 9.4 per cent year on year amid steady performance from the telecom sector players.
"We estimate Omantel earnings to increase 6.7 per cent year on year and Ooredoo profits to gain 6 per cent year on year during the quarter. The seasonality factor prevailing in the utilities sector companies especially during summer season to positively impact the quarterly earnings, the report said. "We see the earnings of oil marketing companies to remain under pressure and need to adjust to the changing market environment post deregulation. Shell Oman earnings to decline by 8.4 per cent, while Al Maha Petrol to report 21 per cent decline in earnings for the period", the report added. During the quarters under review, most of the listed companies accounted for 12 per cent corporate tax rate only. The tax law is still awaiting the issuance of the Royal Decree.
© Oman Daily Observer 2016
