Major Omani firms expected to post 24 per cent growth in net profit

Muscat: Major Omani listed firms,which constitute the MSM 30 Index, are expected to post a 23.7 per cent year-on-year growth in net profit for 2016 at OMR673.58 million, mainly due to one-off provisions reported by several companies last year, and the consequent low base.
The combined revenues of MSM30 Index companies for 2016 were estimated to have grown by 4.7 per cent year-on-year to OMR4.06 billion, whiletotal earnings were projected to have grown by 23.7 per cent to OMR673.58 million, according to an estimate conducted by Gulf Baader Capital Markets.
“We estimate a steep increase in year-on-year earnings growth, mainly due to several one-off provisions reported in the same period last year. Galfar Engineering (receivable impairment of OMR30 million), Renaissance (asset impairment of OMR27 million) and Oman Telecommunications Company (WorldCall Telecom investment impairment of OMR72 million) reported significant losses during the fourth quarter of 2015,” Gulf Baader said in the report.
“While on a quarter-on-quarter basis the earnings were estimated to have declined by 23 per cent due to an overall weakness in the economic environment, which would reflect the corporate performances,” as noted in the report.
The total revenues of the index companies, excluding investment holding firms, were estimated to have grown by 2.7 per cent year-on-year to OMR3.83 billion. Similarly, total earnings of index companies, excluding investment holding firms, are estimated to have increased by 22.9 per cent year-on-year to OMR641.62 million.
“We have not assumed any impairment charges pertaining to the fourth quarter of 2016 in our earnings models,” said the Gulf Baader report.
“During the third quarter of 2016, about 50 per cent of the companies reported below our estimates. We saw signs of a deterioration in earnings for most of the companies under our coverage, with a slowdown in growth prospects (revenue decline), along with margin pressures (increase in operating costs). We see this impact continuing in the last quarter of 2016, as well,” noted the report.
Revenuesfrom the MSM30 Index companies, including investment holding firms, for the fourth quarter of 2016 alone are projected to remain almost flat on a year over year basis, and to decline 3.6 per cent quarter toquarter to OMR995.10 million. “The sequential decline in revenues is mainly due to the seasonality weakness in the services sector companies, especially the utilities,” said Gulf Baader.
Earnings of index firms for the quarter are estimated to increase sharply year-over-year,while declining by 21 per cent on a quarter to quarter basis to OMR136.7 million.
After third quarter results, Gulf Baader anticipates the prevailing economic slowdown to imply further pressure on upcoming fourth quarter earnings. Select banks will continue to face margin pressures and also expect higher provisioning to impact earnings during the quarter.
Further, industrial sector earnings are estimated to report a sequential decline of 10 per cent, while the services sector will report sharp declines in earnings on a quarter to quarter basis due to the prevailing high base in the power sector companies (seasonality impact).