REUTERS, NBK RESEARCH, 23-08-2013 2Q2013 results in line at the operating level, net stronger than expected; weak cash flow performance. 12-month fair value: aed 1.81 recommendation: sell – risk level: 4 last close (15 august, 2013): aed 2.43 • Arabtec reported a set of 2Q2013 numbers which are operationally in line with our estimates, although the bottom line is stronger than expected by us or the consensus. • 2Q2013 revenues amounted to AED 1,597 million, exactly in line with the Bloomberg consensus and 3% below our forecast of AED 1,650 million. The gross profit came in at AED 181.5 million (margin 11.4%), 12% below our forecast of AED 206 million (margin 12.5%); however, SG&A of AED 109 million was 13% below our forecast of AED 125 million, and the company noted that the drop in SG&A spend was achieved in part by re-assigning some costs to projects (thereby making them appear in COGS and reducing the gross profit). As it were, the 2Q2012 EBITDA (our calculation) came in at AED 140.6 million, 3% below our forecast of AED 145.9 million and 1% below the consensus (which consisted of ourselves and one other house) of AED 142.5 million. We note that the company reported an EBITDA for the quarter of AED 187 million in its press release, but this seems to include “other revenues” which we consider non-operational in nature, and some of which we suspect are non-cash items (provisions write-backs). • Below the operating line, “other revenues” were much stronger than we anticipated (AED 38.6 million as against 12 million, again mainly due to provision reversals). Net financials were broadly as expected, leading to a group profit of AED 104.8 million, 7% ahead of our estimate of AED 98 million. However, minorities were much lower than expected (AED 12.4 million, as against our forecast of AED 34.4 million), leading to an attributable net profit for the quarter of AED 92.4 million, 46% ahead of our forecast of AED 63 million, and 74% ahead of the consensus estimate of AED 53 million. We note that our net profit was the highest in the consensus. We also note that minorities represented 12% of group gross profit for the quarter, whereas they had been consistently at or above 30% in the past eight quarters. This will obviously have to be clarified. • Bad news however on the cash flow front. Similarly to DSI, which had reported very strong cash from operations and free cash flow in 1Q2013, only to swing back into negative figures in 2Q2013, Arabtec reported a 2Q2013 cash from operations of AED -230 million, after a positive AED 327.7 million in 1Q2013. The strong improvement in Working Capital Requirements (WCR) seen in 1Q2013 went into reverse in 2Q2013, with a particularly sharp increase in receivables (from AED 4.2 billion at the end of 1Q2013 to AED 5.1 billion at the end of 2Q2013). Hence, free cash flow in 2Q2013 was a negative AED -300 million, after a positive AED 262.5 million in 1Q2013. • Thus, the balance sheet deteriorated slightly in the quarter, with net debt of AED 37.7 million (for a net gearing of 1.2%) as against net cash of AED 250 million at the end of 1Q2013. This is slightly academic at this point, given that the 2Q2013 balance sheet does not include the recently-concluded AED 2.4 billion rights issue. • The backlog at the end of 2Q2013, at AED 24.4 billion, was in line with our estimate. Overall, these results are in line with our estimates at the operating level, with net profit boosted by very low minorities and further provision write-backs. The cash flow nbkcapital
Posted on: Fri, 23 Aug 2013 09:57:15 +0000
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