Drake and Scull gets buyback approval

The Dubai-based construction company believes is share price is below fair market value.

Drake and Scull International, the Dubai-based construction company, received regulatory approval to buy back up to 10 per cent of its shares on Monday. The company is also planning to start operations in Libya and Jordan, according to a statement on the Dubai Financial Market's web site. "They are sending a positive message to the market that their shares have more value to offer and that they have cash available," said Mala Pancholia, an equity analyst at Al Mal Capital, who covers the stock.

"Since they have the cash and don't plan to use it for other purposes at the moment, such as acquisitions to grow the business, then it is a good way to return value to the company." Buy backs reduce the number of shares available on the market and usually increase the value of shares still available. "The strategy seems to be to return value at the moment, as acquisitions by the company will not happen until at least the third quarter of 2009," said Ms Pancholia.

Drake and Scull's shares closed 1.1 per cent lower at Dh0.86 on Monday. The company, which specialises in electrical, mechanical and plumbing contract, sold shares at Dh1 each in an initial public offering worth Dh1.2 billion in July 2008. [e-mail]