Dubai International Jewellery Week - Millions of dirhams in sales reported during the show

The 16th edition of Dubai International Jewellery Week which ran from 10-13 November at the Dubai International Convention and Exhibition Centre dazzled visitors with its extensive display of rare gemstones, stunning jewellery collections, and lavish luxury lifestyle accessories from the world’s leading brands. 

The region’s largest and most influential jewellery show demonstrated its international standing with more than 270 exhibitors from over 25 countries showcasing the latest designs and trends to a discerning targeted audience of jewellery lovers and trade professionals.  Millions of dirhams in sales, confirmed orders and key business opportunities were reported during the four day show.

Many exhibitors showcased show-stopping luxury lifestyle accessories and unique objets d’art, including a AED6.4 million precious CAIJOU healing gemstone bathtub, two of which sold on the opening day of the show and another two which booked later the same day, a dazzling AED14 million ‘Mouawad’s 1001 Nights diamond purse’ created by Mouawad Jewellers as well as the USD10,000 gold sheesha from MSL Gold, who sold numerous pieces during the show.

“Dubai International Jewellery Week has consistently been a pivotal event for the jewellery and precious metals market in the Middle East,” said Trixee Loh, Senior Vice President of Dubai World Trade Centre, organiser of the event. “The high calibre suppliers combined with the high net worth buyers provides excellent return on investment for the exhibitors, and with local consumer confidence at an all-time high, Dubai International Jewellery Week has once again provided the best opportunities for both companies and consumers.”

 

Hammer Group, the largest multi-national German jewellery group in the world conducted sales with customers from all over the MENA region.  Marketing Manager, Ghassan Oueini, said:  “This year’s show has been even more successful than last year. We are thrilled to have achieved a number of sales and enquiries and were impressed by the quality and quantity of visitors from around the world. We received customers from Lebanon, Egypt, Jordan and Russia at our stand, highlighting the international reputation that the show holds.”

Commenting on the business opportunities enjoyed by exhibitor Dhamani Jewellers, who sold tens of millions of dirhams worth of jewellery during the show, Rohit Dhamani, Director said:  “We have witnessed unprecedented levels of business at the show this year and are grateful for the support received from the show organisers from top to bottom. We have seen a big jump in visitor numbers across all segments - wholesale and private. Overall a number of deals have been signed and contacts have been made with our target customers, so we are very happy.”

The importance of Dubai International Jewellery Week as a platform to present the latest trends and designs to the region and the world was further demonstrated at the third Dubai International Jewellery Design Awards. A much anticipated annual feature at the show, this year saw an exceptionally high standard of entrants across all segments. The designs of the top finalists in each themed category were crafted by the National Institute for Vocational Education and were on display at the show. The winners also won an online jewellery design course relevant to their level, run by the Gemological Institute of America (GIA).

GCC Petrochemical Sector Quarterly - 2Q11

·         QoQ growth witnessed in benchmark crude oil prices in 2Q11.

·         QoQ growth of 6.5% in 2Q11 profits; indicating satisfactory financial performance.

·         Western economies unrest continue to threaten prices & regional sector in 3Q11.

·         ‘Neutral’ stance on the sector.

Regional unrest & European economic worries lead upward movement in 2Q11 prices

During the quarter under review, international oil market and regional petrochemical sector mainly remained under the influence of two factors (i) ongoing turbulence in Libya, Yemen & Syria, which raised the average prices of benchmark oil to higher levels and (ii) economic fears in the European economies, which led minimal QoQ volumetric growth in regional petrochemical production. The average prices of OPEC, WTI and UK Brent indicated QoQ growth of 6.5%, 9.1% and 13.5%, respectively, in 2Q11. On the other hand, the average prices of ethylene, propylene, ammonia, urea and DAP registered QoQ increase of 3.5%, 6.8%, 11%, 8.3% and 6.8%, respectively, in 2Q11.  

Financial performance

In 2Q11, the regional sales revenue (based on our GCC petrochemical coverage) registered QoQ growth of 9.8%, whereas the bottom line witnessed QoQ gain of 6.4% and recorded at USD3.3bn. We believe, the growth in the regional sector in 2Q11 was mainly associated with QoQ increase in the average prices of related products (as per our estimations for 2Q11). However, during 1H11, the regional petrochemical sector’s sales and net profitability registered YoY growth of 31.8% and 52.1%, respectively. In addition, the remarkable YoY growth during 1H11 was mainly associated with notable increase in the average prices of related products and production growth. Growth in production was mainly based on the improvement in capacity utilization and  start of production from new expansions.

European debt crisis & aftermath of US debt-ceiling lead decline in 3Q11 prices

Global research believes the signing of US debt-ceiling negotiation to avert US from default is portraying additional challenges to oil market  in 3Q11, including the potential cut in (i) government spending and (ii) the US ratings downgraded to AA+ from AAA by S&P. On the other hand, the ongoing European crisis will further deteriorate EUR from current levels in 3Q11. Hence, we believe the combined impact of these expected events will lead the prices of all benchmark oil to retreat from current levels; where the average prices of OPEC crude oil is expected to remain in a range of USD98/bbl - USD102/bbl in 3Q11. In addition, we are not expecting any notable impact of ongoing regional political unrest on crude oil prices in international market, during 3Q11. 

Outlook for 3Q11

We expect the sector’s sales and net profitability will show limited QoQ growth of 0.2% & 1.1% in 3Q11, respectively. The limited QoQ growth in sector, despite of expected decline in prices of crude, is mainly associated with the expected commencement of QAFCO-V plant of IQ. Furthermore, we are expecting the sector will be able to show gross, operating and net profitability margins at 37.9%, 30.8% and 22.2%, respectively, in 3Q11. 

Recommendation - Neutral

We reiterate our Neutral stance on the sector with SIPCHEM & IQ as our top pick for the sector in 3Q11.

Arabtec Holding (ARTC) - 2Q11 Results

·          Net profit down by 74% YoY to AED29.0mn.

·          Results offer negative surprise against our expectations of AED48.4mn on lower margins and higher than anticipated SGA costs.

·          Total backlog stood at AED13.9bn and is down by AED1.2bn QoQ.

·          Total revenues down 5% YoY to AED1,217mn.

·          Gross profit down by 25% to AED136mn.

·          Gross margin stood at 11.2% compared with 14.0% in 2Q10.

·          SG&A up by 91% YoY to AED94.1mn

·          Minority interest share at 35% vs. 16% in 2Q10 (1Q11 minority share at 50.7%)

·          Total trade receivables down 3.5% QoQ and 7.4% YTD to AED4.6bn 

Analyst comments:

Arabtec posted a weak bottom-line and missed our forecast on lower margins and higher than anticipated SGA costs. Although gross revenues came down by 5% YoY, gross profit was hit hard and was down 24.6% YoY. Consequently, gross margins came down to 11.2% from 14.0% in 2Q10. SGA expenses too jumped 94% YoY, although QoQ are down by 23%. Backlog stood at AED13.9bn and is down 8% QoQ. Pace of project execution regionally remained slow and has impacted revenues while margins have been suppressed on account of higher fixed costs in Dubai and lower margins elsewhere.

Union National Bank (UNB) - 2Q11 Results

·       Net profit reported at AED415mn exhibits growth of 23%YoY on improvement in top-line

·       Results are in line with our expectations of AED426mn (variance < 3%)

·       Net interest income surges 27%YoY; Total income grew 10%YoY

·       Fees & commission income was weak and declined 18%YoY; leads to drop in non-interest income

·       Provisions remained high, up by 21%YoY, doubled QoQ

·       NPL ratio increased by 10bps from previous quarter to 1.5% (excluding DW); coverage increased to 153%

·       Net loans were down 0.6%YTD, deposits also remain stagnant (up 0.9%YTD)

·       Capital adequacy is at 21.8% 

Analyst comments:

UNB’s results were in line with our expectations while performance was good overall. Net interest income jumped significantly, catalyzed by improvement in NIM. UNB was expected to show an improvement in NIM due to a decline in cost of funds which in turn was an effect of a decline in benchmark interbank rates. NPL ratio increased slightly but remained within expectations while coverage increased to over 150%, ex-DW. Provisions increased as well, which seem to driven largely by general provisions – we believe that AED90 – 110mn of the AED150mn taken as provisions could be portfolio provisions. Resultantly, the ratio of portfolio provisions to CRWA increased from 0.78% in 1Q11 to 0.95% in 2Q11. Fee income and therefore total non-interest income was weak due to the new retail regulations; investment gains were higher but not high enough to offset the decline in fee income. We remain satisfied with the bank’s performance for the quarter though continuation of similar provisions and weak loan growth could lead us to revise our estimates for the full year

Dubai Financial Market - 2Q11 Results

      ·         DFM announced a net profit of AED14.7mn in 2Q11

·          Net profit for 1H-11 witnessed a y-o-y decrease of 79.1%

·          Expenses increased 17.6% in 2Q11 to reach AED29.2mn

·          Investment income declined by 16.8% y-o-y in 2Q11

Analyst comments:

Dubai Financial Market (DFM) reported a net profit of AED16.9mn during 1H11, decreasing by 79.1% on a y-o-y basis.  Net profit for 2Q11 stood at AED14.7mn compared to a net profit of AED27.2mn in 2Q10, and increased by 572% q-o-q from a net profit of AED2.1mn in 1Q11. 

In 2Q11, trading commission fees (TCF) witnessed a 38% decrease in 2Q11 as compared to the same period a year ago, reaching AED26.9mn.  During 1H11, TCF decreased 50.4% to reach AED52.4mn. Noticeably, Ownership transfer & mortgage fees witnessed a 620% increase during the 2Q11 as compared to the same quarter a year ago reaching AED16.3mn. This have proved that DFM is on course to diversify revenue streams away from TCF which enjoyed its share of revenue down to 53% in 2Q11 as compared to 75.1% in 1Q11 and 84.4% in 2Q10. According to the company, new flows of revenue are driven by listing fees, sale of market data and online advertising.

Raysut Cement Company – 1H11 Results

·          Net income reported during 1H11 was down by 34.8% at OMR8.89mn

·          Revenue increased by 20.7% YoY during 1H11 aided by Pioneer Cement

·          Gross margins during 1H11 declined to 26.8% as compared to 40.0% in 1H10

·          Sales volume (clinker and cement) during 1H11 were down by 5.4% YoY

Analyst comments:Raysut cement company recorded net profit of OMR8.89mn in 1H11 as compared to OMR13.6mn in the same period last year. The decline in profit is attributable mainly to severe competitions faced by the Company both in the domestic and the export markets which impacted both volume and the realization prices. Numbers of 1H11 are consolidated, if we take the profits of Raysut alone the net income dropped by 44.4%. Global Research estimates for 2Q10 deviated by 8.2%. Competition drove the consolidated gross margins down to 26.8% in 1H11 as compared to 40.0% in the same period last year. Despite addition of Pioneer Cement, sales volume of clinker were down by 30% YoY while that of cement were marginally up by 0.6% during 1H11.

Saudi International Petrochemical Company (SIPCHEM) - 2Q11 Results

Saudi International Petrochemical Company (SIPCHEM) - 2Q11 Results - Snapshot

·         Net profitability was registered at SAR165.4mn which indicated YoY growth of 88.6%.

·         YoY gross profit registered a growth of 67.4%, during the quarter under review.

·         Operating profit stood at SAR288mn in 2Q11 as compared to SAR172.3mn in corresponding quarter last    year. 

Analyst comments:

The notable growth in Saudi International Petrochemical Company (SIPCHEM) net profitability, during the quarter under review, was associated with the improvement in the volumetric production from newly built Acetyl Complex. It is worth mentioning that the YoY volumetric growth was mainly based on increase in production from VAM plant which started its commercial production from 3Q10. However, on quarterly basis, the company’s profitability registered a growth of 36.8% over 1Q11, which was mainly due to QoQ increase in the average prices of related products and volumetric production. We will come up with updated investment recommendation once the company will publish its detailed financial statement for the period.