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Qatari firms resilient in face of COVID-19 crisis, says QNBFS

Satyendra Pathak
Qatari companies have outperformed their GCC peers and remained resilient in the face of the coronavirus (COVID-19) pandemic, QNB Financial Services (QNBFS) has said.
In a report, QNBFS said it remains bullish on Qatari stocks in long-term given their defensive characteristics backed by strong fundamentals, reasonable valuation, and the government’s support packages.
“We continue to believe the dual headwinds of coronavirus malaise and oil price volatility will impact Qatari equities, albeit to a lesser extent against their regional peers, as has been the case since the beginning of 2020. So far, year-to-date, the decline for the QE Index has been 10.6 percent, outperforming the 11.9-24.7 percent declines seen in other major GCC stock markets,” QNBFS said.
“Moreover, the significant QR10 billion government backstop for Qatari equities along with myriad investment and support programmes targeted at the Qatari real sector, especially the QR75 billion support package for the private sector, should go a long way in shoring up business, consumer and investor sentiment,” it said.
On top of Qatar’s macro strengths, the report said, Qatari companies enjoy robust balance sheets backed with low leverage and a decent return on equity (RoEs), whereas Qatari banks stand out with their exceptional capital adequacy ratios, low non-performing loan (NPLs), strong provision coverage, and high profitability.
“Although we expect Qatari banks under coverage to report a 7.8 percent year-on-year decline in profits for the second quarter of 2020, the sector remains resilient against other GCC banks,” it said.
Near-term, the report said, the QR10 billion stock purchase programme creates an important safety net for Qatari stocks in 2020.
The recent proposed merger announcement between Masraf Al Rayan and Al Khalij Commercial Bank should create a positive catalyst for Qatari banks and fuel investor interest in the sector, irrespective of the near-term drop in earnings.
“While Qatari equities could remain volatile, we continue to think this market will outperform on a relative basis, as it has thus far this year. We do note that the COVID-19 pandemic and the global oil price weakness and volatility remain as major risk factors to our estimates and will likely impact directly on the financial results of the stocks under our coverage,” the report said.
Highlighting Nakilat as one of the best bets for investors in the Qatari market, it said, “We remain bullish on Nakilat and consider it as the best avenue for equity investors to participate in the long-term growth expected in Qatar’s LNG sector. For now, we maintain our accumulate rating and price target of QR2.6 for Nakilat.”