* Aldar plunges on profit-taking after merger deal
* Dubai pulls back from big chart resistance
* Emaar rises on report that mortgage caps suspended
* Saudi telecom shares pull market down
* Egypt weak before possible weekend protests
* Emaar clim
By Nadia Saleem
DUBAI, Jan 21 (Reuters) - Abu Dhabi’s Sorouh Real Estate jumped to a 25-month high on Monday after the company reached a long-awaited merger agreement with Aldar Properties , but most regional markets fell.
Trading volumes for both Sorouh and Aldar, Abu Dhabi’s two biggest property developers, hit record highs. Both stocks had more than doubled in price over the past year in anticipation of the merger, and while the terms of the deal looked positive for Sorouh shareholders, they prompted heavy profit-taking in Aldar.
Sorouh jumped 4.3 percent to close at 1.70 dirhams, its highest level since December 2010; they hit a high of 1.87 dirhams in early trade. Aldar plunged 9.8 percent.
Sorouh shareholders will receive 1.288 Aldar shares for every share in Sorouh, which will be delisted once the merger, which is subject to shareholder approval, is completed, the companies said on Monday.
“The official announcement highlights a ratio that on paper is favourable to Sorouh shareholders, and the valuation is obviously a reflection of the quality of the respective underlying assets,” said Akber Naqvi, hedge fund portfolio manager at Al Masah Capital.
Ali Adou, portfolio manager at The National Investor, said: “Sorouh’s shareholders are being given an incentive to hold more shares in the new company, while Aldar shareholders will be diluted.”
NBK Capital observed in a research note that based on Sunday’s close, the merger plan valued Sorouh at 2.10 dirhams per share.
“On the face of it, this is actually quite a good deal for the Sorouh minority shareholder, since our fair value for Sorouh as a standalone company amounts to 2.33 dirhams per share,” it said, adding: “Given the uncertainties surrounding the still-declining Abu Dhabi real estate market, a discount of just 10 percent to our fair value does not seem unreasonable.”
Including the impact of Abu Dhabi’s financial support for Sorouh in the merger, the company’s fair value is even higher, at 3.24 per share, NBK added.
Abu Dhabi’s benchmark slipped 0.1 percent, easing from Sunday’s 26-month high.
Dubai’s measure shed 0.3 percent to end at 1,786 points, down from Sunday’s 32-month closing high, after the index tested and failed on Sunday to break major chart resistance between 1,778 points, the 2012 high hit in March last year, and the October 2010 peak of 1,793 points.
Trading volumes were thin, however, which may suggest that many investors are unwilling to sell because they think the resistance could be broken in coming days or weeks.
Major property developer Emaar Properties rose 2.1 percent to a fresh multi-year high, however, after the Al Ittihad newspaper quoted United Arab Emirates central bank governor Sultan Nasser al-Suweidi as saying authorities would not impose limits on mortgage lending without consulting commercial banks, and that any new rules were not imminent.
His remarks appeared to show the central bank, after fierce protests from commercial banks, was backing away from caps on residential mortgage lending that it announced just weeks ago. There was no confirmation of the report.
In Saudi Arabia, weak earnings soured sentiment, dragging the market to its lowest in nearly three weeks.
Shares in Saudi Telecom plunged 7.7 percent to 40.6 riyals per share, the lowest price since last November. STC reported a 79-percent fall in fourth-quarter profit on Monday, missing market expectations, after it took one-time charges related to affiliates in South Africa and India.
Zain Saudi slipped 1.8 percent. The firm posted a fourth-quarter net loss that narrowed 4 percent but still missed analysts’ average forecast.
“The improvement in net losses in Q4 is mainly due to the lower financial charges. We remain cautious on the stock,” NCB Capital said in a note.
“Longer term, the company’s main challenge remains growth in top-line. Due to a weak balance sheet, we believe Zain’s capex investment remains behind the levels necessary to be able to effectively compete with STC and Mobily.”
Saudi Industrial Investment Group dipped 1.7 percent to 22.7 riyals after posting a fourth-quarter net profit of 28.5 million riyals, up 506 percent year-on-year. SIIG said in a bourse filing that it would conduct shutdowns at both its projects in Jubail due to technical problems, the impact of which would hit first-quarter earnings.
“Our 2013 earnings per share estimate has been revised down by -28 percent to 2.21 riyals while our target price drops from 29 to 26 riyals,” Riyad Capital said in a note, adding it was downgrading the stock to ‘Hold’.
The kingdom’s index fell 1.0 percent.
In Egypt, the benchmark slipped to its lowest close since Jan. 2, down 0.8 percent, as retail investors in particular sold ahead of a weekend that may see unrest.
Tensions are rising ahead of the second anniversary of the 2011 uprising due on Jan. 25, which is expected to trigger protests against new President Mohamed Mursi and his Islamist allies.
“Investors are selling ahead of the stressful weekend -protests are expected to hit the streets,” says Mohamed Radwan, director of international sales at Pharos Securities. “People would rather be out of the market.”
Elsewhere, shares in Doha Bank surged 5.5 percent to their highest close since September. The lender posted a fourth-quarter net profit gain of 5.1 percent and proposed a cash dividend of 45 percent or 4.5 riyals per share.
Qatar Islamic Bank, however, dropped 4.6 percent after the company recorded a 50 percent fall in fourth-quarter net profit and widely missed analysts’ forecasts.
Qatar’s index declined 0.2 percent, trimming gains to 3.0 percent so far in January.
* The index slipped 0.3 percent to 1,786 points.
* The index declined 0.1 percent to 2,778 points.
* The index fell 1.0 percent to 5,641 points.
* The index dipped 0.8 percent to 5,641 points.
* The index slipped 0.2 percent to 8,608 points.
* The index climbed 0.2 percent to 6,173 points.
The index advanced 0.3 percent to 5,829 points.
* The index fell 0.6 percent to 1,074 points.