Investor sees value in Dubai fit-out contractor Depa’s future

Depa announced that Dubai-based Union Insurance had increased its holding in the business by buying 28,934,000 shares at $0.45 per share, increasing its stake to 11.41 per cent from 6.71 per cent.

The recent travails of Dubai-based fit-out contractor Depa have not deterred one investor from buying its stock, with Union Insurance recently upping its investment in the company.

Depa announced on Wednesday that Dubai-based Union Insurance had increased its holding in the business by buying 28,934,000 shares. This has increased its stake to 11.41 per cent of the company — up from 6.71 per cent previously.

Over the past 12 months, Depa’s shares have dropped by 24 per cent to US$0.45 per share at the close of last week, giving it a market capitalisation of $276.6 million (Dh1bn). Its most recent filed accounts for the year to June 30 showed that the firm had net assets of just over $405m (Dh1.49bn).

Explaining Union Insurance’s purchase, Hari Prasad, chief financial officer for Union Insurance, said: “We saw value for money in Depa shares, It’s also fitting our investment strategy where we wanted to diversify our real estate assets into equities.”

He said that the company’s investment committee “had the opinion that the company has a good future, particularly in terms of gearing up for Expo 2020 and this being a company doing interiors and fit-outs.”

Depa declared a 44 per cent decline in net profit in the first half of 2015 to Dh15m, which it blamed on cost revisions at a few major projects, as well as extra costs incurred due to project delays. Revenue was also 4 per cent lower, which the then-chief executive Nadim Akhras said was due to a strategy of targeting higher-margin work. About 57 per cent of its backlog of Dh2.3bn was for hospitality fit-out projects, including a Dh188m fit-out of the Fairmont Abu Dhabi hotel and serviced apartments and a Dh178m fit-out contract for the new W Hotel Dubai.

The company has endured a couple of rollercoaster years since its joint venture with German company Lindner was removed from a $245m contract to fit-out Hamad International Airport in June 2012. It later filed a counter-claim for $250m for money it said it is owed for the project.

Arabtec became Depa’s biggest shareholder in November 2012 when it bought a 24.33 per cent stake in the company for $65.8m. Four of its board members were voted onto Depa’s board at Depa’s subsequent AGM in May 2014, and Arabtec’s former chief executive Hasan Ismaik became chairman of the company in September 2013. A month later, Depa’s co-founder and chief executive Mohannad Sweid left the company. He was replaced by Nadim Akhras.

Further boardroom shake-ups took place last year following Hasan Ismaik’s departure from Arabtec and Mr Sweid returned to Depa’s board in July. He and fellow board director are now running Depa after Mr Akhras stepped down from his role as chief executive last month, but a search for a permanent chief executive is underway.

Other major shareholders in Depa include Al Futtaim Capital with a stake of 13.92 per cent, and Drake & Scull chief executive Khladoun Tabari, who holds 7.7 per cent.

Union Insurance said its decision to invest was not influenced by management changes.

“We look at the book value of the company and how it compares with the market value,” said Mr Prasad. “It’s an investment decision, rather than a strategic decision.”

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