GCC companies reported an aggregate first-quarter profit of $14.1 billion, which was a 12 per cent year-on-year increase compared with a profit of $12.6 billion for the first quarter of 2011, according to research by Bahrain-based Securities and Investment Company (Sico).
“This profitability improvement was the highest for eight consecutive quarters,” the report said.
“GCC-listed companies’ aggregate profits in the first quarter were also higher than forecast, after reporting disappointing profits for the previous two quarters in 2011.”
These findings were in Sico’s research the “GCC Equities Results Snapshot — June 2012” report.
A recent research by the Kuwait-based Global Investment House shows that the net profit of the UAE corporates surged 11.5 per cent to $3.01 billion in the first quarter as the total net income of GCC companies for the same period rose 12.9 per cent to $14.5 billion.
According to Global’s study that covers 543 GCC listed companies, all GCC stock markets managed to enhance their bottom lines by the end of March 2012, barring the Bahrain bourse, with its corporate profitability declining by 0.9 per cent year on year.
According to Sico research, Bahraini, Kuwaiti and Omani companies reported strong year-on-year growth in the range of 20 per cent to 28 per cent during the first quarter of the year, while Saudi and UAE companies’ profits grew by 10 per cent to 15 per cent.
Qatari companies were the exception, reporting a year-on-year decline in profits of two per cent led mainly by non-banks. Most UAE companies surprised investors with higher-than-expected profits for the quarter, while Saudi companies disappointed, with just fewer than 50 per cent of companies missing estimates.
The GCC-listed companies’ aggregate revenues for the first quarter of 2012 increased eight per cent year-on-year.
Real estate, diversified financials, building materials and consumer companies’ revenues grew by double digits in the range of 14 per cent to 30 per cent.
Overall operating margins improved to 22 per cent compared with 18 per cent in the first quarter of the previous year. However, operating margins were flat in comparison.
Operating margins for banking and insurance institutions, and real estate and building materials companies improved in the first quarter of 2012 compared with the same period in 2011.
Despite ongoing concerns on the GCC real estate sector, seven out of nine real estate companies surpassed analysts’ estimates, making it the best performing sector for the quarter.
Just over 50 per cent of banks beat estimates, while 71 per cent of companies in the energy and basic materials sector missed analysts’ estimates.
Sico’s report also notes that the GCC markets average daily trading activity during the first quarter was $2.6 billion. This dropped by around 16 per cent to $2.1bn during the second quarter of the year, while volumes declined by 21 per cent.
“We believe that the recent correction in GCC markets offers attractive entry points, and investors should selectively start accumulating stocks with a long-term outlook,” said Sico head of research Jitesh Gopi.