KUALA LUMPUR (June 7): Malaysian companies which have business links with Qatar such as Serba Dinamik Holdings Bhd, Muhibbah Engineering (M) Bhd, WCT Holdings Bhd and Eversendai Corp Bhd saw a decline in their share prices yesterday.
This follows the announcement on Monday by Saudi Arabia, Egypt, the United Arab Emirates and Bahrain — followed by Yemen, Libya and the Maldives — that they are severing ties with Qatar, accusing it of supporting terrorism.
Serba Dinamik, which on Monday registered its highest closing price of RM2.25 since its initial public offering in February, retreated 17 sen or 7.6% to RM2.08 yesterday, wiping out a market capitalisation of some RM227 million. It was the sixth-biggest decliner on Bursa Malaysia yesterday, with a trading volume of 24.13 million shares.
In Qatar, the group is involved in operations and maintenance (O&M) work such as the provision of topside maintenance service, as well as the maintenance, repair and overhaul of pressure testing and crude oil transfer pumps. The Qatar business contributes 16% of the group’s revenue.
Serba Dinamik group chief executive officer Datuk Karim Abdullah said all of the group’s operations in Qatar remain active. “We provide O&M services, unaffected by the current matter. In fact, we are gearing up for opportunities to possibly provide our support to gas producers in Qatar, due to a vacuum of contractors from the countries pulling out of Qatar.
“On another note, the delivery of oil and gas, particularly liquefied natural gas, will not be interrupted as there are different shipping routes through Oman and Iran still accessible for [the] delivery to its major buyers — Japan, South Korea, India and China. Hence, our O&M services will not be affected as production is still ongoing,” he added in a statement.
Muhibbah Engineering shares fell nine sen or 3.23% yesterday to RM2.70. Compared with its closing price of RM2.98 on May 8, its highest in the past 12 months, the group’s market capitalisation has declined by RM134 million.
In January, the group’s 49%-owned subsidiary Muhibbah Engineering Middle East LLC bagged a contract worth 356.7 million Qatari riyals (RM438.1 million) from the Economic Zones Company of Qatar (Manateq) for the construction of roads and infrastructure works for the Um Alhoul Economic Zone (QEZ-3).
In a note yesterday, CIMB Research said the project is Muhibbah’s only exposure to Qatar, and makes up 10% of its RM2.1 billion outstanding order book. The contract is expected to be completed in the second quarter of 2018.
“The group’s bidding book worth RM7 billion includes potential new contracts in Qatar. We believe these may include an extension of [the] contract for a completed building or infra facility and the likely new phases of the QEZ-3,” it said.
“We view Muhibbah’s drop in share price as a buying opportunity ahead of domestic wins and potential strong quarterly numbers,” CIMB Research added.
Etiqa Insurance and Takaful head of research Chris Eng Poh Yoon said the decline in Serba Dinamik’s and Muhibbah’s share price could be a result of profit-taking activities.
“It’s not so much of ‘is there a fundamental issue’. I think it’s more a case of profit-taking by investors due to uncertainty surrounding the situation in Qatar, as the two counters had run up quite a bit prior to this (Qatar issue),” he told The Edge Financial Daily.
WCT shares were down six sen or 2.8% yesterday to RM2.10. Compared with its 12-month high of RM2.31 on May 16, the group’s market capitalisation has come down by RM295 million.
In March 2015, WCT’s joint venture with Qatar-based Al-Ali Projects Co clinched a 1.22 billion riyals (RM1.21 billion) real estate construction project from Lusail Real Estate Development Co.
“For WCT, the Lusail development project in Doha represents the only Qatar-based contract. The outstanding RM545 million value accounts for 11% of the group’s RM4.8 billion outstanding order book, and is targeted to be completed by [year end],” said CIMB Research.
“Also, about 68% of WCT’s trade receivables of RM790 million for the first quarter ended March 31, 2017 are related to contracts in the Gulf region. About 5% or RM40 million of total receivables are related to the Lusail project which has been receiving timely payments from the client,” it added.
WCT deputy managing director Goh Chin Liong said the group is closely monitoring the developments in Qatar. “In light of the current developments in the Middle East and WCT’s business presence in Qatar, we are currently keeping a close watch on the political situation and we will take appropriate actions to safeguard and minimise any operational risks,” he said in a statement.
Eversendai’s share price fell 1.5 sen or 1.5% to 99.5 sen yesterday. Compared with its 12-month high of RM1.02 on May 4, the group’s market capitalisation has fallen by RM19 million.
Eversendai executive chairman and group managing director Tan Sri A K Nathan said it is business as usual at the group’s fabrication facility in Qatar, as its operations there do not have any dealings with the other countries that have cut off ties with Qatar.
“The Qatar fabrication facility executes projects for the Qatar market and not for exports, so there is no impact to our businesses there as it is pretty much centralised.
“We also view it as an advantage — we could bid for jobs given to one of the countries that have cut ties with Qatar, since we have a factory there,” he told The Edge Financial Daily.
Hong Leong Investment Bank research analyst Jeremy Goh said Eversendai’s exposure to Qatar is minimal. “Eversendai’s exposure to Qatar is not too significant. About RM140 million of its RM3.2 billion or 4% [of its] order book is based in Qatar. Generally, while there is exposure in Qatar, it is not concentrated there per se in the bigger scheme of things,” he told The Edge Financial Daily.
This article first appeared in The Edge Financial Daily, on June 7, 2017.