Arabtec talks continue with Cairo over $40bn residential project

Arabtec’s shares climbed 6.61 per cent on Wednesday on news of ongoing talks on the Dubai-listed contractor’s low-cost housing project in Egypt.

Arabtec shares jumped to Dh2.42 after the builder said it is still in talks with the Egyptian government to implement the first phase of the US$40 billion housing project to build one million low-cost homes.

The construction of the first phase is “still subject to negotiations” with the ministry of housing and “an announcement will be released upon reaching an agreement”, Arabtec said in a statement to the Dubai Financial Market.

“That news was positive,” said Sanyalak Manibhandu, manager of research at NBAD Securities in Abu Dhabi, adding that Damac Properties’ posting a rise in first half net profit helped improve general market sentiment. “The price of crude also has gone up two days in a row [and] that has helped. It’s a bunch of factors that tells people there is a lot of money on the sidelines.”

Arabtec has been involved in months of negotiations to start construction of phase one, which includes building 100,000 units in the cities of Obour and Badr to the east of Cairo.

Plans spread across 13 sites were first announced a year ago by the Egyptian president Abdel Fattah El Sisi, with construction originally scheduled to start in the final quarter of 2014, taking just five years.

There still remains little clarity on the Egypt deal and whether the firm is able to deliver the whole project, but implementation of the first phase would reap big benefits for Arabtec, said Allen Sandeep, director of research at Cairo-based Naeem Brokerage.

“In our opinion, even just the signing of phase-1 could add substantially i.e. $2.5bn to $3bn to its current backlog,” said Mr Sandeep.

The project is widely regarded as part of a series of Gulf-backed measures aimed at maintaining stability in the region following the Arab Spring protests. But talks stalled over the number of units to be provided in lieu of land payments.

Arabtec announced in April that it was in discussion with a number of local and international banks for the financing of the first phase of the project.

In May, Arabtec reported a Dh279.8 million loss for the first quarter of the year, compared with a profit of Dh137.9m a year earlier.

The company blamed the loss on spiralling costs, with several clients implementing contract clauses, downscaling and re-prioritising projects.

Arabtec said last month that several senior staff were leaving the firm as part of a new round of restructuring.

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