Investor sees value in Dubai fit-out contractor Depa’s future

The recent travails of the Dubai-based fit-out contractor Depa have not deterred one investor from buying its stock.

Depa announced on Wednesday that Dubai-based Union Insurance had increased its holding in the business by buying 28,934,000 shares at $0.45 per share, increasing its stake to 11.41 per cent from 6.71 per cent.

Depa’s market capitalisation has lost almost a quarter of its value over the past year. Hari Prasad, chief financial officer for Union Insurance, said: “We saw value for money in Depa shares. It’s also fitting our investment strategy where we wanted to diversify our real estate assets into equities.”


He said that the investment committee “had the opinion that the company has a good future, particularly in terms of gearing up for Expo 2020”.

Depa declared a 44 per cent decline in net profit in the first half of 2015 to Dh15 million, which it blamed on cost revisions at major projects, as well as extra costs owing to project delays. Revenue was also 4 per cent lower, which the then-chief executive Nadim Akhrass said was due to a strategy of targeting higher-value work. About 57 per cent of its backlog of Dh2.3bn was for hospitality fit-out projects, including a Dh188bn fit-out of the Fairmont Abu Dhabi hotel and serviced apartments and a Dh178bn fit-out contract for the new W Hotel Dubai.

The company has had a couple of roller-coaster years since its joint venture with the German firm Lindner was removed from a $245m contract to fit-out Hamad airport in Doha, Qatar, in 2012. The directors Mohannad Sweid and Roddy Maciver are running Depa after Nadim Akhrass stepped down as chief executive last month. A search for a new CEO is now under way

Data from the Ship Recycling Industries Association India shows that the number of ships being scrapped at Alang has fallen sharply over the past three years. In 2012, the industry reached a peak, with a total of 432 ships recycled at Alang. That reduced to 306 in 2013, then to 286 in 2014. In the first 10 months of this year, only 164 ships scrapped, compared to 251 in the same period last year. Last month, only four ships were recycled in Alang, while there were 16 in the same month last year and 40 in October 2012.

Other major shareholders in Depa include Al Futtaim Capital with a stake of more than 11 per cent, and the Drake & Scull chief executive Khladoun Tabari, who holds 7.7 per cent.

Union Insurance said its decision to invest was not influenced by management changes.

“We look at the book value of the company and how it compares with the market value,” said Mr Prasad. “It’s an investment decision, rather than a strategic decision.”

mfahy@thenational.ae

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