Monday, December 20, 2010

RAK: Investors pour into RAK Cement stock



Investors looking to buy into cheaper stocks boosted Ras Al Khaimah Cement in trading yesterday, as its shares rose for the first time in a week. RAK Cement is trading at a "very much cheaper" price than its book value of Dh1.65, said Hettish Karmani, a senior analyst at Global Investment House in Kuwait.

The company gained 1.1 per cent to 86 fils and was the second-most actively traded stock on the Abu Dhabi Securities Exchange (ADX) General Index, with more than 17 million shares changing hands.

"The trigger… is that it is trading well below its book value, because from a financial perspective it is not as impressive as last year," said Mr Karmani. The company is expected to benefit from Qatar's spending spree on its infrastructure after it won the rights to host the 2022 FIFA World Cup, and from neighbouring Oman's cement deficit.

"It was a spontaneous event for the shares, all of a sudden the stock started getting traded heavily by the investors on the floor," said Sobhi Asim, a trader at the ADX.

"Within the UAE cement universe, RAK Cement remains our preferred stock," said Ankur Agarwal, an analyst at Nomura Securities in Dubai. "Compared with other peer firms, their management has remained conservative and they stay clear from investing in non-industrial sectors."

It is the season, Mr Agarwal said, to purchase shares of companies in anticipation of strong dividends. Last year, the cement firm provided a 10 fils dividend a share, which gave investors a yield higher than 10 per cent. "Shareholders in this region demand dividends and are more excited about it here than in places like Europe," Mr Agarwal said. Nomura anticipates a slimmer dividend this year, of 6 fils a share, providing a yield of 7 per cent, due to overcapacity in the sector. The company is expected to announce the dividend in March.

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