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Drake And Scull to spend $136m on 2010 buys

2010-02-22

DUBAI: Dubai"s Drake & Scull International has $136 million to spend on acquisitions in 2010, which includes three firms, as it continues to expand and weather a downturn at home, an executive said on Thursday.  Drake — a contractor which specializes in mechanical, engineering and plumbing (MEP) businesses and listed on the Dubai Financial Market in March -- has been rapidly expanding operations outside Dubai, where house prices have plunged some 60 percent since their peaks in 2008, and billions of dollars worth of projects have been put on hold or canceled.  "We are hoping to have the Qatar acquisition in the first quarter, one in Saudi Arabia in the second quarter and the second in the third quarter," Zeina Tabari, the firm"s chief corporate affairs officer said. The Qatar acquisition will be an MEP business while the two in Saudi Arabia will be an MEP and a civil construction firm, she added. Drake"s projects include luxury hotels such as the Shangri-La Qaryat Al-Beri in Abu Dhabi. It has won three projects so far this year in Abu Dhabi and is eyeing two new contracts in Abu Dhabi and Kuwait before the second quarter. Tabari declined to give a value for the contracts but said the firm, which won its first contract in Thailand in September, is looking to enter Oman and Egypt this year. The company won seven contracts worth a total of 2 billion dirhams in the Gulf Arab region, Sudan and Thailand in 2009, bringing its order backlog to 3.3 billion dirhams. Tabari said the company did not expect to take provisions in the first quarter, after charging 35 million dirhams in amortization and 15 million dirhams for doubtful loans or receivables outstanding. “We like the company. It has one of largest net cash per share positions," said Roy Cherry, vice president, research, at Shuaa Capital in Dubai, which as a "buy" rating on the stock and target price of 1.42 dirhams. The firm"s shares fell  as much as 1.2 percent, but clawed back losses and were trading flat at 0906 GMT at 0.85 dirhams a share. "They will be able to use current market conditions to their advantage by making acquisitions at a prevailing discount and reduce their reliance on Dubai," Cherry added. Tabari said that the company"s focus would continue to shift to Abu Dhabi and Saudi Arabia from Dubai, which accounted for 45 percent of revenues in 2009. Drake made a net profit of 41 million dirhams in the fourth quarter, according to Reuters calculations after net profit for the year rose 32 percent.
Deutsche Bank on Wednesday cut Drake"s share-price target to 1.1 dirhams from 1.3 dirhams, citing faster-than-expected decline in the Dubai construction sector and its fourth-quarter profit miss. Two analysts in a Reuters poll in January forecast a fourth-quarter profit of 77.3 million dirhams and 87 million dirhams respectively.