UAE stock market operator DFM profit surges 696% in the first quarter

The Dubai Financial Market General Index Dubai’s equity index surged 2.3 per cent to 5,134.95 points on April 23, 2014. Sarah Dea / The National

Dubai Financial Market, the only publicly listed stock exchange in the Arab world, reported a 696 per cent increase in first-quarter net profit amid a surge in trading volumes.

“DFM is witnessing thriving activity since the beginning of this year,” said the chairman Essa Kazim.

Net income for the period ended March 31 rocketed to Dh215.1 million, compared with Dh27m in the year earlier period. Revenue rose to Dh255.6m in the quarter, compared with Dh65.7m in the year earlier period.

Traded value jumped 428 per cent to Dh110 billion, compared with Dh20.8bn in the same period last year. Trading commissions are the bread and butter for the exchange.

“The business model of the DFM is pretty straight forward,” said Fathi Ben Grira, the chief executive at Mena Corp, an Abu Dhabi-based investment firm. “Higher volume equals higher commissions. It’s an easy one to predict.”

The company’s shares yesterday slipped 0.2 per cent to Dh3.80.

“DFM is trading 25 to 30 times earnings – its one of the higher ones,” said Mohammed Ali Yasin, the managing director at National Bank of Abu Dhabi’s brokerage arm. “But it’s the premium that you pay. There aren’t that many listed stock exchanges around the world and in this region.”

Dubai’s equity index surged 2.3 per cent to 5,134.95 points yesterday. Most of the trading was led by Arabtec whose market capitalisation is headed towards Dh25bn after it revealed intentions to acquire a company and spin off a unit.

Arabtec shares rose 10.6 per cent to close at Dh8.71 each, the highest closing price on record for the company.

“I am contemplating how long it will stay with this trend,” said Sebastien Henin, the head of asset management at The National Investor, an Abu Dhabi-based investment bank. “The market is just flying.”

On Tuesday, Dubai’s index crossed 5,000 for the first time since July 2008, providing encouragement to brokers that there was further upside to come.

“The markets moved into a new price range for trading,” Mr Yasin said. “Which means there might be more upside. It doesn’t mean we won’t go through profit-taking or a correction, but the bullish sentiment will continue for the short-term at least.”

Tariq Qaqish, the head of asset management at Al Mal Capital, said there will be investors who will be willing to take profit and sell in the next quarter.

“But depending on the second quarter results, I think we could build a new wave in the market.”

Equity markets got another boost from Emaar Properties after Dubai’s biggest developer on Tuesday reported a 55 per cent rise in quarterly profit to Dh863m, providing investors with validation that the stock’s recent gains were commensurate with the company’s performance.

“On fundamentals Emaar is showing strong growth,” Mr Yasin said. “That stock price includes the dividends for last year, cash and bonus shares.”

The Dubai Financial Market General Index has risen 52.38 per cent from January to March this year. By contrast, it rose 154.06 per cent in the last 12 months.

In June, the UAE bourses were upgraded to emerging-market status by MSCI from its previous frontier classification. And in November, Dubai won its bid to host the Expo 2020 – an event that kicked off a construction frenzy across logistics, transport, hospitality and property developments.

“The Expo has really helped in terms of opening up new businesses, population growth and demand for education and health care,” Mr Qaqish said.

The two events were driving catalysts that sustained a continuous bull-market rally.

“You have renewed confidence in the country and a lot of money coming over from neighbouring countries like Saudi Arabia,” said Mr Ben Grira. “On top of that you have better real estate, more room for the banks and the overall environment looks good.”

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