MSM: Accelerating events broke the calm

Despite calm trading, which dominated trading activities, most of the previous week reflecting investors’ anticipation for more signs and developments such as second-quarter corporate results and the impact of the holy month. Yet some updates have resulted in better activities afterwards. Those updates include deals on selected stocks, the announcement of cash dividends by some companies and the CMA approval of increasing Dr Omar al Zawawi and his subsidiaries’ ownership in HSBC Oman. Consequently, we have seen a good level of activities on the last trading day.

The MSM30 closed down by 0.22 per cent at 4,596.51. The Financial sub index was the only survivor as it closed up by 0.45 per cent at 7,216.48. Both the Industrial and Services indices went down by 1.1 per cent and 1 per cent respectively. The MSM Shariah Index also closed also down by 0.36 per cent. The Oman International Investment and Development Company (Ominvest) said in an update disclosure about its unsecured perpetual subordinated bond issue that the issue date was on June 6 and the interest payment dates shall be June 6 and December 6 each year. Further, the first interest payment date shall be December 6, 2018 and the second interest payment date shall be June 6, 2019. Key companies’ disclosures during the week about impact of Cyclone Mekunu include:

 Dhofar Insurance: Conservative estimates indicate that the Company’s exposure net of reinsurance will not exceed RO 1m.

 Arabia Falcon Insurance: The company said that it is adequately protected against these losses through extensive and robust reinsurance arrangements supported by well rated reinsurers. The net impact to AFIC from accumulation of all such claims is not expected to exceed RO 240k.

 Renaissance Services: The estimate of asset damage is not material and not more than RO 10k, most of this is also covered by insurance.

Oman’s contracting sector, which has had to endure lengthy delays in payments on government contracts owing to the challenging economic environment, has broadly welcomed moves by Sharakah to ensure that such companies are suitably compensated for payment delays. The Implementation Support and Follow-up Unit (ISFU), tasked with monitoring the timely execution of initiatives proposed by Sharakah, Tanfeedh, and other economic agencies, announced recently that companies — contractors, vendors and service providers alike — will be eligible for compensation against delays in settlements in government contracts. We believe such news is pretty health for construction contractors of Oman whose receivables rose to alarming level. Sharakah is a closed joint stock company which specifically encourages and supports the development of entrepreneurs and SMEs in the Sultanate.

Last week it was reported that, a strategy for the privatisation of a number of government-owned enterprises (GOEs) is expected to raise around RO 700m over the next four years, according to the Implementation Support & Follow-Up Unit (ISFU). Identified for initial privatisation are entities or subsidiaries that belong to GOEs such as Oman Tourism Development Company, Oman Food Investment Holding Company (SAOC), Electricity Holding Company (Nama Group), Oman Global Logistics Group (ASYAD) and Oman Oil Company (OOC). They are among some 70 government owned enterprises distributed across a number of economic sectors, some of which are deeded candidates for privatisation as part of a strategy to “improve their value creation for the national economy”.

In the weekly technical analysis, the support level at 4,560 points remains very important, which will determine the trend of the MSM30 index where closing the index below this level will affect it to reach the second support level at 4,500 points in the coming period. In the technical analysis, the market is still in the downward channel.

The MSM30 ended May 2018 down by 2.59 per cent at 4,606.68 on foreign selling pressures, Omantel results, cautious sentiment and other pressures on stocks that represent companies which were impacted by the recent cyclone.

Foreign institutional investments movement analysis indicate a combined net sell of RO 104.5m during Jan-May 2018 compared with a net sell of RO 17.48m within the same period last year. In May 2018 alone, the net sell posted by the Foreign institutional investments stood at RO 66.4m mainly due to special deal on Bank Muscat.

Locally, last week, the Central Bank of Oman (CBO) announced a new issue of government development bond (issue 57) which is the second in this year. The size is RO 100m with a maturity period of five years and will carry a coupon rate of 4.75 per cent per annum. As per Oman News Agency, the issue will be open for subscription from June 10 to 25, 2018, while the auction will be held on June 26. The issue settlement date will be on June 28 and the maturity date on June 28, 2023. Available data showed that latest government development bonds with maturity of five years was issued in February of 2016 (issue 48) and carried a coupon rate of 3.5 per cent and an average accepted yield of 4.32 per cent.

Oman Public Finance for 1Q 2018 showed a decline of 51.7 per cent in the deficit on yearly basis at RO 751m. This was mainly due to better revenue and lower expenditure. According to the CBO latest monthly bulletin, total revenues went up by 23.5 per cent to RO 2.1bn supported by higher earnings from all segments i.e. net oil revenue (+28.9 per cent), gas revenue (+19 per cent) and other revenue (+9.9 per cent). Net oil revenues to total revenue stood at 64.7 per cent in 1Q 2018 versus 62 per cent in 1Q 2017. On the other hand, total expenditures dropped by 12.8 per cent on yearly basis to RO 2.8bn largely due to lower actual expenses under settlement (61.3 per cent) and lower investment expenditure (-16.9 per cent). Current expenditures formed 71.1 per cent of the total expenditures up from 56.8 per cent in 1Q 2017 due to higher interest on loans (+168.5 per cent). Total oil and gas production expenditures (current and investment) saw a rise of 1 per cent on yearly basis at RO 379m for 1Q 2018. [Courtesy: U Capital]