Drake shares seen struggling on Dubai debut
Dubai, March 16, 2009
Shares of contractor Drake & Scull International may face heavy selling on their debut on the Dubai bourse on Monday, according to traders.
Drake - which specialises in mechanical, engineering and plumbing businesses - will list eight months after it raised around $322 million in its flotation.
'We're expecting heavy selling. People have been holding the stock for a long time,' said Ayman el-Saheb, Darahem Financial Brokerage director of operations.
'Investors' money has been tied up and they may need to access these funds. Banks aren't lending and liquidating stock is a quick way to get some cash, so many investors will sell, even if it's at a loss.'
There will be some buying demand, Saheb said, with day traders seeking a quick profit, while long-term players will wait for the price to fall before buying at bargain levels.
'Drake's stock will be extremely weak, with everyone rushing to sell, because it's still priced at 1 dirham from July,' said Julian Bruce, EFG-Hermes director of institutional equity sales.
'It would have to come off 60 to 70 per cent to reflect what has happened elsewhere since then, and if the stock heads towards one fils it will shake the market,' Bruce added.
Sherif Abdul Khalek, Beltone Financial institutional trading manager, predicted Drake will trade in a 0.85-1.1 dirham range. 'Drake will be very volatile, but the stock is listing at a good time - the market seems to be consolidating and appears to be close to the bottom - and if the stock falls below one dirham many investors may see it as cheap,' said Abdul Khalek.
In one indication of volatility, Drake shares traded in the so-called grey market rose to as high as Dh2.10 shortly after launching at 1 dirham in the IPO, then fell as low as 0.65 dirhams last month, brokers said.
Dubai's stock index has fallen 71 percent since Drake's initial public offer closed on July 17, while the dominant real estate sector is in turmoil.-Reuters
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