Arabtec the largest construction firm in the middle east has lost more than 16 billion AED in market value in the past three weeks. With its share price falling by nearly two thirds, and dropped by almost 10 per cent in the first 30 minutes of trading on the UAE on Monday. Its spectacular fall threatens to bring contagion to the whole of the Dubai markets.
It has now fired its chief operating officer, chief information officer, chief risk officer and head of mergers and acquisitions since the resignation last week of Hasan Ismaik, its chief executive.
What went wrong? Its strategy over the last few years has been to expand globally, with a series of eye catching deals like building 1/2 million homes in Egypt. However the announcemnt of these deals naturally boosted its shareprice, at the same time as its former CEO and largest shareholder was building up his own shareholding dramatically. The markets smelled a rat. These deals have yet to bear fruit and its shareprice did not reflect its fundmanetal value. Much the same could be said of the whole construction sector in the UAE boosted to share prices too high because of excessive exuberance following award of Expo 2020. Top housing rental yields have hot their peak and this is leading to a topping out of construction firms share prices. The risk is a full scale return to a bear market just at the point the industry had thought the recovery was finally settled. Watch this space.