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Asif Iqbal
Doha
The equity market in the country is expected to see more robust earnings this year and in 2019, a Qatar National Bank Financial Services (QNBFS) report said on Thursday.
According to the report, companies like Qatar Electricity and Water Company (QEWC), Qatargas Transport Company (QGTC) and Gulf Warehousing Company (GWC) will lead the way in strong earnings this year and in 2019 as well.
"We forecast a normalised 4.4 percent increase in aggregate earnings in 2018 followed by a more robust 2019 with 11.7 percent. Despite the issues related to the blockade, we expect Qatari equities to post return on equity (ROE) metrics for 2018 and 2019 that are largely in line with peers," QNBF said in its report.
The report noted that Qatari equities are expected to register dividend yields in line with peer average over the next two years at 4.3-4.6 percent against 4.75-5 percent.
Regarding the net income expectations for QEWC, the report said,"Our long term thesis remains unchanged given the company's market leader position in Qatar with international expansion gathering steam.
"A subdued 2018 should be followed by a strong rebound in earnings growth of 7.8 percent in 2019 with decent earnings before interest, taxes, depreciation and amortisation (EBITDA), free cash flow (FCF), compound annual growth rates (CAGRs) and attractive FCF/dividend yields expected through 2023 in part as a result of Facility D, and inflation-driven capacity change increases. This should help QEWS maintain above-average margins."
Facilty D is QEWC's combined-cycle Independent Water and Power Project (IWPP), that can generate 2,520 MW of electricity and 136.5 million gallons of water per day, making it one of the largest such projects in the Middle East.
Regarding QGTC, the report said,"We believe there is upside, albeit long term in nature. We note the fourth quarter of 2017 results are unlikely to be a strong catalyst but a dividend boost beyond our flat QR1/share estimate for 2017 (5.6 percent) could drive upside.
"However, we currently expect earnings growth in 2018 to be 7 percent followed by a more robust 2019 at 10 percent."
On the earnings forecast for GWC, the QNBFS report noted that while growth post Bu Sulba Warehousing Park (which expects 100 percent occupancy later in 2018) will decline, GWC should start generating substantial free cash flow from 2018 onward with FCF yields reaching 18.7 percent in 2023 with dividend yields growing to 6.3 percent by 2023.
"With major capex already behind us, there could be potential upside to dividends in the medium-term," the report added.
The report further said that the macro picture of the country remains resilient with no significant challenges for Qatar to continue to offset potential fund outflows, support the banking system, sustain economic growth, and defend the dollar peg.
"With the recent regional tensions, the government quickly responded by undertaking various measures that have resulted in limited impact on the economy.
"New trade routes were established, while the government injected liquidity and initiated projects focused on self-sufficiency," the QNBFS report pointed out.
