Banks set to post double digit growth — By Samuel Kutty — MUSCAT — The total revenue of the industry sector firms in MSM 30 Index is estimated at RO 222.742 million for the first quarter of the financial year 2012, while the net profit is expected to increase sharply by 28.9 per cent to RO 20.156 million on year on year basis.
At the same time the earnings of the listed players of the banking sector is expected to see a double digit growth of 10.5 per cent at RO 62.450 million on year on year basis.
“Initial financial reports for the first quarter being released by some companies show that industry and banking sectors have weathered the slow
start in the beginning of the current year. March carried on with strong market performance”, says Kanaga Sundar, senior analyst at Gulf Baader Capital Market (GBCM).
In view of Oman’s economic growth at steady pace, analysts forecast further momentum in the equity performance at the Muscat Securities Market. They also expect activity in projects spending to remain strong.
Tenders worth RO 335 million for different projects have already been awarded.
According to a research report of GBCM, overall revenue of MSM 30 Index constituents excluding investment holding companies for the first quarter may touch RO 717.862 million, an increase of 1.8 per cent on year on year basis. This, they attribute to the continuing higher growth rates in banking and services sector with the full benefits of higher consumer spending.
“While industrial sector comprising cement, engineering and commodities is set to reap the benefits of the projects implementation stage, banking sector will have more edge from the revival of credit growth and presence of ample liquidity”, says the research report.
The revenue growth stood at about 2.1 per cent on a sequential basis, this is a positive development.
The cement sector players may show revival in earnings led by stronger operating performance along with the growth in the investment income.
According to industry estimates, the total ongoing projects in Oman is estimated to be around RO 33.5 billion, which is a clear indication to the prevailing stronger demand for cement in the domestic market.
Cement demand in Oman is estimated to grow by 7 per cent this year.
Till recently, the Omani cement manufacturers were victims of cheap inflow of cement from UAE due to slump in the real estate sector in the region.
Unlike 2008 levels, the cement manufacturers in Oman currently have ramped up their capacity to meet the domestic needs and are gearing up for the next cycle of growth.
“The overall activity in the domestic equities is expected to improve over the medium term with the anticipation of new equity allocations and enhanced market liquidity amid receding risk aversion”, says Kanaga Sundar.
The expected new equity issuance of Nizwa Bank and the upcoming rights issuances of BankMuscat, Bank Sohar and ahlibank are also expected to strengthen the performance of the local bourse. The combined size of the above mentioned issuances is estimated at about RO 200 million.
The services sector too is expected to report higher earnings growth thanks to better performance from the sector majors. It is estimated at RO 47.075 million, registering an increase of 7.2 per cent on year on year basis. The overall activity in the domestic equities is set for improvement over the medium term with the anticipation of new equity allocations and enhanced market liquidity amid receding risk aversion.
“Overall the corporate earnings in MSM in the current year are estimated to increase by 23 per cent on owing to continuance of local demand growth and improvement of operating margins during first half of 2012 along with the presence of low base through last fiscal.