MSM firms to see 2.4 per cent fall in revenue

SAMUEL KUTTY –
MUSCAT, JULY 8 –
The revenue of MSM Index companies during the first half of the current year is estimated to witness a decline of 2.4 per cent to reach RO 1.519 billion.
However, the banking sector performance during the period is expected to reveal a marginal revenue decline of one per cent year on year basis.
While the MSM30 Index registered a slump of 11.5 per cent on year to date till June 30 this year, the drop was 7.8 per cent during the first half alone.
The index earnings during the first six months may fall to RO 278.666 million, declining by 19.8 per cent year on year.
“We believe the earnings season will reveal the effects of the demand slowdown in local and regional economies on prevailing low oil prices”, say analysts at Gulf Baader Capital Market (GBCM) in a report.
According to the report, the revenue, excluding investment holding companies, will further narrow to 2.3 per cent year over year to RO 1.390 billion amid decline in growth seen from the Industrial and Services sector companies.
“The earnings decline is mainly on the back of increase in operating expenses, higher corporate taxes and royalty charges for telecom companies”, points out the report.
During the first quarter of the current year, the power companies had reported higher losses due to the one off deferred tax liability following the recent corporate tax increase.
The banking sector earnings for the first half, according to the report, will be RO 172.273 million at a decline of one per cent year on year.
Earnings of investment holding companies are anticipated to decline sharply by 38.5 per cent to RO 15.896 million amid subdued equity market performance in Oman and the GCC region.
“The banks remain selective in looking at growth opportunities and are taking measures to diversify their funding mix.
The liquidity situation has improved to an extent during the quarter on government external borrowing programme, while the cost of funding still remain high for select banks, impacting the net interest margins”, opines the GBCM report .
The overall financial sector first half earnings is estimated to decline 6.5 per cent year on year to reach RO 190.281 million. Total revenue of the Industrial sector is expected to decline by 4.9 per cent year on year amid prevailing slowdown in construction, cement and building materials sector.
“We have seen considerable cut in the government tenders during the period”, says the report. The earnings may decline by 34.8 per cent year on year to RO 23.3 million amid prevailing margin pressure”, says the report.
The services sector revenue is estimated to decline 1.1 per cent year on year, while the sector earnings is expected to fall by 39.8 per cent year on year due to higher royalty charges seen in telecom companies and the earnings of utility companies impacted on the back of one‐off deferred tax liability charges.
However, the report expects the 2017 earnings in Oman to reflect the economic slowdown and the austerity majors taken.