Muscat: Major Omani firms that constitute the MSM 30 Index are expected to post a 0.7 per cent fall in profit at OMR633.8 million for 2015, compared to the previous year. However, the revenues of these companies are estimated to edge up by 1.9 per cent to OMR3.72 billion for 2015, over the previous year, according to a research note prepared by Gulf Baader Capital Markets.
The decline is mainly due to a slowdown in demand and subdued performance of investment firms following a sluggish trend on the Muscat Securities Market (MSM), which declined by 14.77 per cent last year.
Revenue of MSM index firms, including investment holding companies, for the fourth quarter alone are estimated at OMR925.16 million, a marginal rise of 0.8 per cent on year-on-year and a fall of 3.2 per cent on quarter-on-quarter basis.
However, the revenue of MSM 30 Index companies, excluding investment holding firms for the fourth quarter of 2015 is estimated to decline by 2.6 per cent year-over-year and 3.2 per cent on quarter-on- quarter basis to OMR881.26 million amid the estimated lower demand, subdued investment sector performance and also on seasonality among the services sector companies.
The earnings of index firms, excluding investment holding companies, for the fourth quarter of 2015 is projected at OMR132.981 million, showing an increase of 1.6 per cent year on year and a decline of 17.4 per cent on sequential basis.
“We expect the banking sector performance to reveal relative weakness during the fourth quarter amid tightened market liquidity, possibility of increase in funding costs, slowdown in credit off-take along with the estimated increase in cost of risk. Banking sector earnings for the fourth quarter of 2015 is estimated to increase by 6.2 per cent year-on-year and sharply decline by 12.6 per cent quarter on quarter basis to OMR77.5 million,” noted the research report.
In the third quarter of 2015, banking sector credit (conventional and Islamic combined) increased OMR468 million in absolute terms, reporting steady growth of 2.4 per cent quarter on quarter amid few government related project draw-downs and growth in personal credit.
According to the latest Central Bank of Oman (CBO) monthly report, the total credit growth in banking sector remained strong during the year, increasing by 10.8 per cent for the first ten months driven by project lending, quasi-government project drawdown and higher personal credit demand.
The investment holding companies earnings for the fourth quarter is estimated at OMR4.37 million, reporting a decline of 32 per cent sequentially, due to the negative impact of the overall secondary market performance in Oman and the GCC region.
For industrial sector, total revenue is expected to decline by 12.6 per cent year-on-year and to rise by 4.6 per cent quarter on quarter basis amid estimated lower performance from construction and building materials sector companies. Services sector revenue is estimated to fall by 1.3 per cent year on year and to decline by 7.1 per cent quarter on quarter.
The tepid performance of the industrial sector is likely to continue during the fourth quarter of 2015 and further impact to be seen over the coming quarters. The expected fiscal consolidation and subsidy reform measures in the form of increase in fuel and utilities costs to have negative impact on the performance of Industrial sector companies during 2016, which needs to be watched out.
During the fourth quarter of 2015, the estimated decline in capital expenditures by regional governments adjusting to the prevailing low oil price environment to have an impact on the performance of construction, building materials and allied sectors, under the industry sector.
Investments related to economic zones, sea ports, airports and other industrial clusters to drive growth. Support from regional governments and grants to assist in specific infrastructure projects. Market activity to remain muted for the first half of 2016 amid weak fundamentals and the negative impact seen in corporate performance.