Corporate earnings to maintain growth pace

By Satish Kanady I The Peninsula
The Qatari stocks are projected to maintain their earnings growth momentum in the fourth quarter of 2018 (Q4, 18). QNB Financial Services (QNBFS) expects Qatari stocks under its coverage to maintain their earnings growth momentum in the fourth quarter with a +18.3 percent year-on-year increase, despite some sequential softness.

Industries Qatar (IQ), Doha Bank and Vodafone Qatar are estimated to contribute positively to the YoY net income growth of stocks under its coverage. QNBFS in its ‘QSE Q4 Earnings Preview’ noted the Qatari Index has made a strong comeback in 2018 rising 36.0 percent and 43.0 percent on a total return or TR basis from its lows reached on November 30, 2017.

It also surpassed modestly its pre-embargo level on a price basis while gaining 11.2 percent in TR terms. Increased foreign ownership limit (FOL) and the resultant foreign flows led by QNB & QIB and higher average oil prices have been the primary catalysts driving the index to be the top GCC performer in 2018.

Going forward, the analysts believe, Qatari stocks may need positive earnings and dividends surprises to carry the rally into 2019 in the short-term. Longer-term, QNBFS remains bullish on the Qatari stock market given attractive fundamental drivers and a significant spending program that should provide tailwinds for growth.

According to QNBFS research note, the QSE equities offer attractive dividend yields vs. the region. Doha Bank offers one of the best yields (9.0 percent) in the region even with an estimated dividend cut to QR2.0 per share vs QR3.0 per share in 2017. Moreover, Al Khalij is yielding 6.4 percent, International Islamic (5.9 percent), GISS (5.8 percent), Nakilat (5.7 percent) and IQ (5.1 percent).

The banks under the QNBFS’ coverage, excluding QNB, are estimated to experience a YoY increase of 17.5 percent largely due to a base effect stemming from Doha Bank.

Excluding Doha Bank, the profitability is expected to increase by 11.1 percent, while the QoQ drop (12.5 percent) is generally driven by higher provisions. Doha Bank is expected to contribute positively to the YoY profitability performance based on QNBFS figures.

The analysts expect Doha Bank’s bottom-line to surge in Q4 2018 due to halving of its provisions as the bank booked large provisions in Q4 2017, largest in Doha Bank’s operating history. QNBFS expects Commercial Bank of Qatar to continue its positive performance as the bank has made a successful turnaround and significantly lowered provisions while trimming opex.

A YoY jump of 19.2 percent is expected in the bottom-line of diversified non-financials under coverage, while forecasting a marginal decline of 1.8 percent QoQ. Industries Qatar (IQ) is expected to record a significant growth in net income on a YoY basis followed by Vodafone Qatar. Regarding IQ, strength in urea prices should boost 4Q2018 results.

QNBFS cautioned that estimates can be impacted by one-offs, greater or lower provisions for banks and investment income/capital gains (losses). Volatile oil prices and geo-political tensions remains a substantial risk to regional equities and have a direct impact on stocks under coverage.

Source from: The Peninsula Qatar