Correction, but still on the right track

30 September 2005
The Muscat Securities Market (MSM) has been in correction mode since the highs seen in June and July, with the MSM index down by some 15 per cent. But a year-to-date rise of more than 50 per cent means investors would be hard-pushed to complain about their lot. Prices remain reasonable. And a positive macroeconomic outlook on the back of high oil prices and government delivery on diversification and privatisation augur well for the months ahead.

The most-recently arrived blue-chip, Oman Telecommunications Company (Omantel), has consolidated at around RO 2.10 ($5.45) after an initially rocky ride since listing in August, following its initial public offering (IPO). 'Trading has been fluid, as the larger investors amass more substantial holdings by buying out the smaller players [to whom the IPO was limited],' says a Muscat-based analyst. The next milestone will be the opening of shares to foreign investors, due to take place three months after the offering to nationals in July.

The current IPO under way is on an altogether smaller scale. Shares in consumer finance company Taageer went on sale in mid-September, with the issue due to close on 9 October. The 3 million shares on offer are priced at RO 1.40 ($3.64) each, which some analysts say looks expensive. On a horizon generally lacking in imminent primary market activity, Taageer could also be responsible for the next offering, as there is talk of the firm's brokerage arm being taken public.

Among the more heavyweight financial stocks, National Bank of Oman (NBO) has been doing well since the sealing of its tie-up with Commercial Bank of Qatar. However, it has also become the most expensive of the banking stocks, trading at a price/earnings (PE) ratio of about 20. 'NBO is popular because it is a turnaround story after the difficult times,' says the analyst. Nor is rival Bank Muscat looking a cheap bet - investors like the stock because of its wider exposure not just to the local but to the regional and Indian markets, where the economies are booming. Over the short term, the sector as a whole is looking fully valued, but the macroeconomic picture leaves the banks looking an attractive pick over the medium-to-long term.

More immediately attractive are shares in oil and gas services company Renaissance, fresh from its recent merger with Topaz Energy & Marine. 'The stock is trading at a low PE and the firm has a global reach and a good range of business lines,' says the analyst. 'Among the smaller caps, Fincorp appeals because of its regional expansion plans.' The financial services firm recently completed an acquisition in Jordan and a tie-up in the UAE.

As a whole, the Omani bourse appears a good place to be, although as thin trading implies it is not as exciting to investors as neighbouring exchanges. 'Average valuations are about 14,' says the analyst. 'In relative terms, stocks are cheap. In absolute terms, they are reasonable. The outlook is generally positive.'

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