MSM Index firms to see 4.7pc rise in 2016 revenue

By Samuel Kutty — MUSCAT: Jan 7: The total revenue of MSM30 Index companies for 2016 fiscal year is estimated to increase 4.7 per cent year on year to reach RO 4.064 billion while the earnings are expected to grow by 23.7 per cent to RO 673.579 million.
At the same time, revenue of the companies for the fourth quarter, excluding investment holdings, is estimated to remain almost flat on a year over year basis and to decline 4.2 per cent quarter on quarter to RO 938.42 million.
“The sequential decline in the revenue is mainly due to the seasonality weakness in the services sector companies especially the utilities”, said analysts at Gulf Baader Capital Markets (GBCM), in an earnings preview report on the performance of companies on the Muscat Securities Market.
The total revenue of the index companies in 2016, excluding investment holdings, is estimated to grow by 2.7 per cent year over year to reach RO 3.829 billion in the year, while earnings are estimated to increase by 22.9 per cent year on year to RO 641.624 million.
“The estimated higher earnings growth is mainly due to the prevailing low base”, the report said.
According to the report, the analysts have not assumed any impairment charges pertaining to the fourth quarter in their earnings models.
In this context, the report cites the example of Renaissance Services, which had mentioned about asset impairment charges similar to last year (RO 27 million in the fourth quarter 2015) during its third quarter 2016 earnings conference call.
Galfar has also stated a contract delay penalty worth RO 3.1 million which would be booked during the fourth quarter.
In the third quarter, according to the report, most of the companies witnessed a slowdown in their growth prospects with pressure from rising operating costs.
“Post weak third quarter earnings season, we do anticipate the prevailing economic slowdown to imply further pressure on the upcoming earnings”, points out the report.
In the financial sector, select banks would continue to face margin pressure and also expect higher provisioning to impact the earnings during the quarter.
While in the industrial sector earnings are estimated to report sequential decline of 10 per cent, the services sector is likely to witness a sharp decline in earnings on quarter on quarter basis due to prevailing high base in the power sector companies due to seasonality impact.
Index earnings, excluding investment holdings, for the fourth quarter are estimated at RO 130.9 million as compared to RO 32.7 million, extremely low due to non-recurring items, in the same period.
“We estimate a steep increase in year on year earnings growth mainly due to several one-off provisions reported in the same period last year”, adds the report.
While on a quarter on quarter basis, the earnings are estimated to decline by 23 per cent due to overall weakness in the economic environment which would reflect in the corporate performance.