MSM30: Recovery in performance, overall good results

Improvement was seen in trading activities in the past week as value and volume went up by 84.62 per cent and 127.1 per cent. However, the prevailing impression is caution, despite overall good results of many companies, especially the banking sector. Perhaps external factors such as trade tensions between China and the United States, drop in oil prices and the summer period have played a part in the subdued trade.
The MSM30 ended the week up by 0.17 per cent on weekly basis joined by the Financial Index (+1.12 per cent) and the Services Index (+0.36 per cent) while the Industrial Index closed down by 1.33 per cent. The MSM Shariah Index closed down by 0.43 per cent.
In the weekly technical analysis, the market index is characterised by positive technical patterns and indicators that will lead the way upwards. At present, all these indicators are eligible to advance towards the first target (23.6 per cent Fibonacci level) at 4,475 points. The nearest level is to support the index at 4,432 points. While the weekly RSI and RSI remained at their positive levels.
Ominvest, one of the largest investment companies in Oman and the MENA region, has successfully raised a total funding of over RO 250 million at attractive terms from leading local and international banks and prominent Omani Institutional investors. The total funding comprises 1) a long-term facility of RO 120 million from a leading local bank, 2) a perpetual bond issue of RO 61 million from Omani institutional investors and ultra-high net worth clients and 3) a loan of RO 61.6 million from a leading international bank. In addition, Ominvest secured over RO 10 million in short term facilities from various local banks. The company will use the funds to allocate capital to its key non-banking subsidiaries in growth sectors like Insurance, Financial Investments and Real Estate with highest ROI potential. Ominvest’s net profit for 1H’18 rose by 13 per cent to RO 14.5 million.
Omantel disclosed an update about its earlier disclosure about the announcement made by Mobile Telecommunications Company (Zain) that the international arbitration tribunal in the proceedings against Saudi Plastic Factory (Respondent) being one of the founding shareholders in Saudi Mobile Telecommunication Company (Zain KSA) issued a final award against the Respondent in an amount slightly above $ 527 million to Zain. The company said that Zain made a further disclosure that the UK Supreme Court issued a decision allowing Zain to enforce the above referenced arbitration award inside the UK against the Respondent.
However, Omantel added that the court of first instance in the Kingdom of Saudi Arabia issued an appealable judgment against Zain on the same dispute and Zain believes that the verdict of the UK Supreme Court will strengthen Zain legal proceedings before the concerned courts in the UK and Kingdom of Saudi Arabia. Omantel owns (22 per cent) of Zain share capital and that, Zain owns 37 per cent of the share capital of Zain KSA. Zain Saudi KSA posted net loss of SAR 114.9 million for 1H’18 compared with net profit of SAR 53.2 million for 1H’17, which was attributed to factors such as higher depreciation on acquiring spectrum and additional property equipment, lower gross profit, and VAT impact, which was born by the company on behalf of the customers.
Total announced 1H’18 initial net earnings so far, as per MSM, for the companies whose year ends December (excluding Omantel, National Finance + ORIX) showed an increase by 8 per cent on yearly basis at RO 292.8 million. This comes despite Dhofar Int Dev & Inv Holding Co (DIDI) loss of RO 27 million. Excluding this, the total market net earnings would be higher by 19.7 per cent at RO 319.87m in 1H’18. DIDI loss is unrealised loss on financial assets at fair value through profit or loss. The company stated that it has opted for early adoption of IFRS 9 and changed its status to “Investment Entity” as per IFRS 10.
Sector wise, the Services Sector aggregated net earnings went up by 76.7 per cent YoY to RO 71.1 million on better performance by sub energy sector and Renaissance Service. On the other hand, total net earnings posted by the Industrial sector saw a drop of 23.2 per cent YoY for 1H’18 at RO 21.4 million due to weaker results by Raysut Cement, Voltamp Energy and Oman Cables. The Financial Sector total net earnings for 1H’18 stood at RO 200.2 million, down by 1.3 per cent YoY despite better performance by banks as the sector was victim of Dhofar Int Dev & Inv Holding Co (DIDI). Excluding this impact, net earnings will would be higher by 14.2 per cent at RO 227.3 million. Banks net earnings stood at RO 187.2 million for 1H’18, up by 13.8 per cent YoY with support of most of the banks. On quarterly basis, total market net earnings for 2Q’18 so far are RO 141million, down by 7.1 per cent YoY mainly due to weaker performance by DIDI, cement companies, Salalah Port Services, Phoenix Power and Al Jazeera Services. However, excluding results of DIDI alone would results in higher total earnings by 8.5 per cent YoY.
Locally, Capital Market Authority (CMA) is currently working with several government entities to create a plan for the implementation of compulsory health insurance following a decision taken earlier by the Council of Ministers to make health insurance compulsory for all residents and citizens in the country.
Foreign trade data indicates trade surplus of RO 2.48 billion during 2017, up by 78.3 per cent YoY but much below 10-year average of RO 5.7 billion. Total merchandise exports increased by 22.9 per cent YoY to RO 12.65 billion mainly on all categories i.e. oil and gas (+26.1 per cent), non-oil (+32.4 per cent) and re-exports (+2.6 per cent). On the other hand, total recorded merchandise imports came at RO 10.16 billion, an improvement of 14.2 per cent YoY due to Electrical Machinery and Mechanical Equipment and Parts and other items.
Oman public finance continued posting better performance as for 5M’18 data showed a decline of 46.2 per cent in the deficit on yearly basis at RO 1.09 billion. This was mainly due to better revenue and lower expenditure. According to the CBO latest monthly bulletin, total revenues went up by 23.2 per cent to RO 4.09 billion supported by higher earnings from all segments espeically net oil revenue which went up by 34.8 per cent on better oil price. Further, gas revenue went up by 17.4 per cent and other revenue by 5.5 per cent. Net oil revenues to total revenue stood at 58.2 per cent in 5M’18. On the other hand, total expenditures dropped by 3.2 per cent on yearly basis to RO 5.18 billion largely due to lower actual expenses under settlement (56.1 per cent) and lower participation and other expenses (40.7 per cent). Current expenditures formed 68.9 per cent of the total expenditures and interest on loans went up by 160.9 per cent to RO 180 million. Total oil and gas production expenditures (current and investment) saw a rise of 30.7 per cent on yearly basis at RO 802 million for 5M’18.
(Courtesy: U Capital)