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Attractive dividends to drive near-term rally in Qatari stocks

Satyendra Pathak
Qatari stocks are expected to outperform their emerging market (EM) peers as the dividend season is approaching, QNB Financial Services (QNBFS) said in a report released on Monday.
“As we approach the dividend season, we expect Qatari stocks to outperform their EM peers as they have done in the past. Qatari stocks enjoy stronger dividend yields of 4.2 percent estimated for 2019 and 4.5 percent for 2020, which are notably above MSCI EM averages of 2.9 percent and 3.2 percent respectively,” the report said.
“Since 2014, the QE Index has beaten the MSCI EM Index by an average 3.8 percent with an absolute average return of 4.8 percent between the end of November until the beginning of March the following year,” it said.
“Equities listed on Qatar Stock Exchange (QSE) offer attractive dividend yields against the region. Widam Food offers one of the best yields of 6.6 percent in Qatar. Moreover, Al Khalij Commercial Bank is yielding 5.4 percent, Milaha 4.9 percent, Masraf Al Rayan 4.8 percent, Qatar Electricity and Water Company and Vodafone Qatar 4.7 percent,” the report said.
Going forward, the report said, Qatari stocks will have positive earnings and dividends surprises to set up a 2020 rally in the short-term.
“Longer-term, we remain bullish on the Qatari stock market given attractive fundamental drivers and a significant spending programme including a 2020 budget that is the biggest in five years that should provide tailwinds for growth,” it said.
QNBFS said in the report that it expected Qatari stocks under coverage to exhibit strong year-on-year (YoY) earnings growth on a normalised basis in the fourth quarter of 2019.
“Normalised earnings should grow 13.1 percent YoY in aggregate. Commercial Bank and Doha Bank should contribute positively to the YoY net income growth of stocks under our coverage,” it said.
“We estimate banks under coverage (ex-QNB) to experience a YoY earnings growth of 15.9 percent largely attributed to Commercial Bank and Doha Bank. Lower provisions and cost control, countering margin pressure and weak revenue, drive the YoY aggregate growth in profitability,” the report said.
Making a forecast about the key Qatari stocks under coverage, it said that Gulf International Services (GIS) is expected to register revenue of QR3 billion in 2019, up 20 percent YoY and net income of QR42.7 million. “We do not expect GIS to declare dividends for 2019, as was the case in 2017 and 2018,” it said.
For Gulf Warehousing Company (GWC), it projects revenue of QR1.23 billion in 2019, flat YoY, while net income of QR245.1 million should exhibit an increase of 3.5 percent. “We also expect DPS to grow 5.3 percent from QR0.19 in 2018 to QR0.20 in 2019,” the report said.
“Net income of Vodafone Qatar should grow 32.5 percent from QR118 million in 2018 to QR156 million in 2019. We expect QR0.05 in DPS for 2019, flat with 2018,” the report said.