After an outstanding 2018 performance, Qatari equities are set for a positive 2019. QNBFS forecasts the Qatari stocks within its coverage universe to increase by 4.0 percent in aggregate earngings as of 2019.
“After an expected 10.0 percent rise in DPS for 2018 (only 1 percent excluding IQCD’s DPS growth), we anticipate a 3.9 percent DPS increase for 2019 and a 5.9 Percent growth for 2020”, QNB Financial Services noted in its ‘Qatar equity strategy 2019’.
DPS or dividend per share is an important metric to investors because the amount a firm pays out in dividends directly translates to income for the shareholder, and the DPS is the most straightforward figure an investor can use to calculate his or her dividend payments from owning shares of a stock over time.
Within the QNBFS’ coverage universe, it forecast a 4.0 percent increase in aggregate earnings as of 2019 to be tracked by a more robust 2020 with 9.4 percent. QNBFS also foresees Qatari equities to post better ROE (return on equity) metrics for 2019 and 2020 than their GCC peers (13.9/14.3 percent vs. regional peer medians at 12.9/13.9 percent). QNBFS’ Qatari coverage list constituted a significant 80 percent of the overall total market capitalisation (excluding QNB Group) of the Qatar Stock Exchange.
Further deterioration of global economic growth prospects, regional geo-political issues, significant decline in oil prices, increase in volatility, exit of hot money from emerging/frontier markets, etc are the factors that can negatively impact QNBFS forecast.
From its Qatari coverage universe, QNBFS favours QGTS (Nakilat), QEWS ( Electricity & Water ) and GWCS (Gulf Warehousing). “We continue to favour Nakilat, #1 owner/operator of LNG vessels globally, as a LT play geared to Qatari LNG’s dominance & anticipated growth in the LNG market.
“In terms of catalysts, we believe expansion of Qatar’s LNG output from 77 MTPA to 110 MTPA is a significant driver. Currently our model does not assume any fleet expansion and we will incorporate such expansion once more details are revealed. We foresee significant upward revision to our estimates and price target once we factor in this expansion,”, the research note said.
Also, QGTS is targeting FSRUs (Floating Storage Regasification Units) with one vessel already added to the fleet. “We note that the company’s ships have 40-years of life vs. maximum debt life of 25 years (last debt maturing 2033), creating refinancing opportunities to increase fleet size. Medium-term, we believe the shipyard business, which is no longer loss making, could further improve.”
On QEWS, the QNBFS analysts said they continue to like QEWS as a long-term play with a defensive business model. QEWS enjoys a solid long-term growth profile with attractive EBITDA
margins and compelling dividend yields.
QNBFS retains its bullish investment thesis on GWCS – the company has withstood the blockade well with its freight forwarding segment showing significant growth in 2018. The Company’s logistics business also remains robust driven by contract logistics and increasing occupancy in Bu Sulba.
Solid macro backdrop and accelerating growth continues to support Qatari equities. QNBFS anticipates Qatari assets to positively diverge especially from rest of the emerging markets, which are likely to suffer from rising debt costs in 2019 and availability of new debt both on macro and micro levels.
QNBFS’ economics & strategy team forecasts Qatar’s GDP growth to accelerate from 1.6 percent in 2017 to 2.6 percent as of 2018 and further to 3.2 percent as of 2019. The expected rise in growth is attributable to both hydrocarbon and non-hydrocarbon sectors.
While hydrocarbon growth is anticipated to speed up from an expected 0.2 percent in 2018 to 0.7 percent, the non-hydrocarbon sector expansion is also anticipated to rise from 5 percent to 5.3 percent in 2019.
Strength in construction, agriculture, manufacturing, transportation and storage sectors backed by strong consumer demand are likely to be the primary drivers of a higher growth in 2019. Given the IMF’s recent reduction in its 2019 global growth estimates for the second time over the last two months, global outlook continues to be subdued, regardless of the Fed’s recent dovish statements.
Nevertheless, Qatar is likely to be one of the few countries that promise GDP acceleration in 2019. Apart from this growth, Qatar’s other major macroeconomic metrics are quite strong for 2019 as well, with current account surplus estimated as 7 percent and fiscal surplus to reach 6.2 percent of the GDP.
