The total revenues of Oman’s 20 largest companies for 2018 went up 38.24 per cent to RO7,202mn, an increase of RO1,992mn from 2017. The profits increased by 43.53 per cent to RO754mn from RO525mn in 2017, according to Oman Economic Review’s annual survey of the companies listed on Muscat Securities Market.    

The World Bank 2019 Global Economic Prospects report titled ‘Darkening Skies’, highlights how precarious the current economic juncture is. In a nutshell, growth has weakened, trade tensions remain high, several developing economies have experienced financial stress, and risks to the outlook have increased.  “At the beginning of 2018, the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead”, said World Bank CEO, Kristalina Georgieva. “As economic and financial headwinds intensify for emerging and developing countries, the world’s progress in reducing extreme poverty could be jeopardised. To keep the momentum, countries need to invest in people, foster inclusive growth, and build resilient societies.”

Moderating activity and heightened risks are clouding global economic prospects. International trade and investment have softened, trade tensions remain elevated, and some large emerging market and developing economies (EMDEs) have experienced substantial financial market pressures. Against this less favourable backdrop, EMDE growth has lost momentum, with a weaker-than expected recovery in commodity exporters accompanied by a deceleration in commodity importers.

Economic activity in advanced economies has been diverging of late. Growth in the United States has remained solid, bolstered by fiscal stimulus. In contrast, activity in the Euro area has been somewhat weaker than previously expected, owing to slowing net exports. While growth in advanced economies is estimated to have slightly decelerated to 2.2 percent in 2018, it is still above potential and in line with previous forecasts. EMDE growth edged down to an estimated 4.2 per cent in 2018—0.3 percentage point slower than previously projected—as a number of countries with elevated current account deficits experienced substantial financial market pressures and appreciable slowdowns in activity.

Global growth is projected to moderate from a downwardly revised 3 per cent in 2018 to 2.9 per cent in 2019 and 2.8 per cent in 2020-21, as economic slack dissipates, monetary policy accommodation in advanced economies is removed, and global trade gradually slows.

Middle East regional growth is projected to rise to 1.9 per cent in 2019. Despite slower global trade growth and tighter external financing conditions, domestic factors, particularly policy reforms, are anticipated to bolster growth in the region. Growth among oil exporters is expected to pick up slightly this year, as GCC countries as a group accelerate to a 2.6 per cent rate from 2 per cent in 2018. Iran is forecast to contract by 3.6 per cent in 2019 as sanctions bite.

The year 2018 saw an increase in the average oil price for the year. The year closed with an average oil price of $65 per barrel, compared with an average price of $57 in 2016. The year high was $76 with a low of $43 and closed the year at $45. According to KPMG Oman Budget 2019 insights, actual revenues for 2018 are up by 8 per cent as compared to the budgeted figures for 2018. This is on account of increase in realised oil price to $68/bbl as compared to the budgeted price of $ 50/bbl.

Oman’s total crude oil and condensate output in December 2017 reached 30.75 million barrels, recording a daily average production of 992,192 barrels.

Major stock markets across the world suffered their worst calendar year since the financial crisis. In 2018, the Dow fell 5.6 per cent, S&P 6.2 per cent and Nasdaq lost 3.9 per cent.  Equity markets outside the US also suffered during the year.  The FTSE All-World index, which tracks thousands of stocks across a range of markets, plummeted 12 per cent this year. It’s the index’s worst performance since the global financial crisis, and a sharp reversal from a gain of nearly 25 per cent in 2017. Markets around the world have been battered by the trade conflict between US and China, fears over rising interest rates and geopolitical issues like Brexit. As the year drew to a close, few issues had been resolved.

For the year 2018, the MSM Index decreased by 15.21 per cent.  This is compared to a decrease of 11.8 per cent in 2017. The MSM industrial sector was the largest loser declining 26.96 per cent, followed by the Shariah Index declining 17.06 per cent.  The services sector declined by 13.36 per cent and the financial sector declined by 8.66 per cent for the year. A total of 4 billion shares got traded during the year amounting to an aggregate turnover of RO739mn, which was down by about 19.43 per cent, compared to 2017.  The MSM 30 Index started the year at 5,099 closing the year at 4,324 points, with a negative return of 15.2 per cent for the year. The MSM ranked sixth among the stock markets in the GCC. Qatar was the best performing showing a gain of 20.8 per cent followed by UAE (ADX) in the second position with a return of 11.7 per cent.  Saudi followed in third place with a return of 8.3 per cent; Kuwait was fourth with a return of 5.2 per cent; Bahrain was fifth with a return of 0.4 per cent while UAE (DFM) was the last at 24.9 per cent.

During the year 2018, the revenues of Oman’s 20 largest companies showed an increase of RO1,992mn. Total revenues for the OER Top20 companies increased by 38.24 per cent to RO7,202mn. Corporate performance for the year 2017, overall, also increased. The profits for the year 2018 increased this year by 43.53 per cent to RO754mn from RO525mn in 2017.  The total market cap of the OER Top20 companies on December 31, 2018 was RO4,871mn, which decreased by about 10 per cent compared to 2017. On March 31, 2019, the market cap of the Top20 decreased further to RO4,420mn. The OER Top20 companies represent 27 per cent of the total market cap of the MSM of RO18,176mn at the end of 2018.  The average P/E ratio of the OER Top20 based on the profits of the year 2018 and the share price on March 31, 2019 is 5.86 times earnings.

Who is out and who is in

Raysut Cement has returned to the OER Top20 this year at the expense of Oman Refreshment Company.

The ranking of Oman’s 20 largest companies in order of revenue produces a list, which includes eight companies from the services sector, seven from the financial sector, and five from the industrial sector.

Top five by revenue

Omantel has maintained its position as the number one company in Oman in terms of turnover. Omantel has shown a growth in revenue of 190.80 per cent compared to 2017. The group revenue of RO2,186mn include RO1,642mn from the acquired business of Zain Group. Oman Oil has moved up to the number two position. Bank Muscat has slipped one to the third place. Shell Oman has retained the fourth position and Al Maha the number five position.

Chairman of Omantel, Eng Sultan Hamdoon Al Harthi in his report to the shareholders states that the parent company revenue recorded a growth of 2.6 per cent to RO532.2mn. Parent company costs also increased by 0.9 per cent to RO 445.1mn. Al Harthy explains that the increase in costs is mainly due to growth in revenue related expenses and provision of impairment of receivables.  The group achieved a net profit after tax of RO208.8mn, compared to RO99.8mn in 2017.  The parent company however achieved a net profit of RO75.5mn during 2018, an increase of 4.3 per cent from 2017.

The board has recommended a dividend of 50 bz per share. Al Harthy adds that the total subscriber base has recorded a decline of 0.2 per cent. The total number of subscribers has reached 3.5 million.

Al Harthy informs that Omantel has expanded its operational footprint through an international acquisition of a strategic stake in the Zain Group.  Omantel acquired 21.9 per cent.

Al Harthy states that revenues, especially in mobile, are showing signs of stagnation or even a slight decline, only partially compensated by growth in fixed line services. This market stagnation is caused by reduction in spending power as well as a stagnation in population growth and a change in demographics. These conditions will likely fuel more aggressive competitive behaviour between existing players, further accelerated with the introduction of new players in the market, such as the introduction of a third mobile license and the new license for Oman Broadband as well as the new Access & Interconnect regulation. In a declining core telecom market, this will very likely limit revenue growth potential across all players.

Al Harthy is confident that the execution of the “Omantel 3.0” strategy remains the essential tool for Omantel to defend its position in the market and deal with the changing market dynamics. The focus is on maximising the share of wallet and value for customer, through excelling in customer experience as well as expanding beyond the core services such as ICT solutions for enterprise and government customers. This will assure that they can further grow their position in the market.  He adds that the acquisition of a stake in Zain will enable Omantel to diversify its revenue sources and contribute to the creation of an added value to the shareholders of both companies, and will provide opportunities for integration between the two companies as well as to find a strong platform to compete more effectively in the market and overcome the risks of being in a single market.

Top five by profit 

Four banking and financial companies and one telecom company constitute the five most profitable companies of 2018.  Omantel has jumped to the number one position as the most profitable company in 2018, followed by Bank Muscat which dropped to the number two spot.  NBO has jumped one place to number three position from being number four in 2017.  Bank Dhofar has slipped one place to the number four slot. OMINVEST has retained its number five position.

Bank Muscat’s chairman, Khalid bin Mustahail Al Mashani, states in his year-end report to the shareholders that the bank is taking forward the growth momentum with a focus on offering simplified and integrated solutions. The year marked the launch of the bank’s dynamic new vision ‘To serve you better every day’. He adds that the bank is geared towards robust business growth and profitability, improvement in operational efficiency and enhancement in customer experience with objective of improving value for stakeholders and fulfilling social responsibilities.

The bank posted a net profit of RO179.63mn for the period, compared to RO176.82mn reported during the same period in 2017, an increase of 1.6 per cent.

Mashani adds that the basic earnings per share was RO0.061 in 2018 and 2017. The bank’s capital adequacy ratio stood at 19.22 per cent as on December 31, 2018 after appropriation for proposed dividend for the year 2018 against the minimum required level of 13.575 per cent as per Basel III regulations issued by the Central Bank of Oman.

Mashani goes on to say that the board of directors has proposed a dividend of 40 per cent, 35 per cent of paid-up share capital in the form of cash and 5 per cent in the form of bonus shares.

Mashani states that the year 2018 witnessed further strategic progress. The board approved a new organisation structure in line with the bank’s strategic plan and announced the appointment of Sheikh Waleed Hashar as CEO. Abdul Razak Issa, CEO and Ahmed Al Abri COO retired their positions on December 31, 2018 after more than 30 years of illustrious service.

The bank marked a successful closure of a five-year, $500mn bond issuance under its Euro Medium Term Note programme, carrying a coupon of 4.875 per cent which was oversubscribed more than two times.

Following 36 years of successful growth, Mashani is confident that the Sultanate’s flagship financial institution is poised to further consolidate its leading position.

Top five by growth of profit

Four of the top five are newcomers to this list. Galfar has shown a growth profit of 134 per cent, thus attaining the number one position in this category. Renaissance has taken the number two slot. Omantel is at number three. HSBC has slipped one to number four. Oman Cables is at the fifth place. Sohar International, which was number one last year, Oman Flour Mills, Oman Refreshment and Bank Muscat were eliminated from the list this year.

Vice chairman of Galfar, Mohiuddin Mohamed Ali in his report to the shareholders stated that the group’s performance during the year 2018 resulted in a positive contribution to the equity and reduction in accumulated losses. The net profit after tax of the parent company has improved by 11.8 per cent as against 8.4 per cent in 2017 to RO5.7mn, as against a loss of RO3.7mn in 2017.

Ali adds that the liquidity issues of the company continued on account of delay in receipt of certified payment from the government-related entities. Unpaid receivables were at RO60mn at the closing of the year.

Ali explains that the board and management continue to explore avenues to strengthen the company’s financial position in a challenging external environment. There are strict measures in place to control the manpower and overhead expenses.

Post the balance sheet date, Ali confirms that the parent company has entered into a preliminary agreement to sell all its investments in India. Wholly owned subsidiaries in Oman have achieved good financial results.  Associate company in Kuwait again recorded a profit for 2018. Ali also stated that in addition to hiving off investments in India, the company continues to pursue international business opportunities in selected geography in the MENA region.

Top five highest-capitalised 

Four of the top five companies that have the highest amount of equity employed are banks. All the companies in this category remain the same as last year and in the same positions. Eng Abdul Hafidh Salim Rajab Al-Aujaili, chairman of Bank Dhofar in his report to the shareholders has stated that despite the current challenging economic and financial situation driven by volatile oil prices and rising interest rates, the bank continued to grow its net profit in 2018 achieving 5.57 per cent growth year-on year from RO47.63mn ($123.71mn) as of December 31, 2017 to RO50.28mn ( $30.60mn) as of December 31, 2018. Al-Aujaili adds that the net loans, advances and financing to customers reached RO3.16bn ($8.21bn) at December 2018, compared to RO3.25bn ($8.44bn) at the end of 2017. In line with a decline in loans and financing book, customer deposits, including Islamic deposits, also decreased by 4.88 per cent from RO3.07bn ($7.97bn) at the end of 2017 to reach RO2.92bn ($7.58bn) at the end of 2018. Total assets reached RO4.21bn ($10.94bn) in December 2018 as compared to RO4.25bn ($11.04bn) at end of 2017, a marginal decline of 0.94 per cent.

Maisarah Islamic Banking Services, Al-Aujaili states, has achieved a strong growth in profitability of 86.21 per cent net profit before tax of RO5.94mn ($15.43mn) compared to a net profit before tax of RO3.19mn ($8.29mn) in 2017.

Al-Aujaili advises that in continuation of its capital augmentation to strengthen the capital base, the bank has successfully raised capital of RO95mn in the forms of a rights issue of its ordinary shares by RO55mn which forms part of the bank’s Core Equity Tier 1 Capital (CET1); and additional Tier 1 perpetual bond of RO40mn which forms part of Tier 1 Capital. This takes the CET-1 Ratio to a healthy 11.88 per cent and total Capital Adequacy Ratio (CAR) to 17.33 per cent, compared to the regulatory requirements of 8.875 per cent and 12.875 per cent as at December 31, 2018.

The board of directors Al-Aujaili informs have proposed a cash dividend of 10 per cent (2017: 12 per cent) for the year ended on December 3, 2018 amounting to RO28mn (2017: RO27.09mn) and a bonus share issue of 7 per cent (2017: 8 per cent) amounting to 196,022,990 shares (2017: 180,268,618 shares) of RO 0.100 each subject to regulatory and shareholders’ approvals.

Top five by market capitalisation

Three of the top five companies that have the highest market capitalisation on the MSM are banks.  All five companies remain in the same position as last year.

Chairman of Ooredoo Oman, Sayyed Amjad Mohamed Al Busaidi states that the past year has been another show of strength, with Ooredoo continuing to show growth in what was a year of unpredictability. Through perseverance and consolidation of investments of previous years, the company saw another strong financial performance.

Al Busaidi adds that 2017 was a year in which the company focused on their commitment to investing in the digital future of both telecommunications and the country; striving to enrich the digital lives of all of their customers. Ooredoo maintained its commitment to giving customers the ultimate way to ‘enjoy the internet’, with the extension of their superfast fiber coverage. With speeds of up to 1 Gbps and unlimited data, the rollout started with over 1,500 homes being connected in Muscat, followed by rapid expansion across Muscat and beyond.

Perhaps the most significant of the company’s milestones, however, was the rollout of the all-new Ooredoo Oman app. Redefining the way to deal with customers, the app has a constantly expanding range of services, to give customers control at their fingertips. Since its launch in January, the app has seen over 500,000 downloads, all with a high utilisation level of the wide range of services and customer it offers.

Revenues for the year 2017 grew by 1.3 per cent to RO273.6mn, compared with RO270.0mn in 2016. EBITDA for the year stood at RO151.0mn, compared to RO148.3mn for the year 2016.  Net profit for 2017 was RO31.0mn, compared with RO46.3mn in 2016. Net profit for 2017 is impacted by increase in royalty fee from 7 per cent to 12 per cent, increase in income tax rate from 12 per cent to 15 per cent as well as higher depreciation cost due to investment in network modernisation.  The total number of customers grew by 4.2 per cent, in 2017 from 2,946,660 to 3,071,644.

Top five by returns on equity 

Of the top five companies with the best returns on equity for the year 2018, three are from the services sector, one from financial and two from the industrial sector.  Shell maintains its first position from 2017. Renaissance is a new entrant in the number four spot. Omantel has moved up to number one from being five in 2017. Ominvest has moved up one to the number two spot. Shell has slipped to the number three spot from being one in 2017 and Oman Flour has slipped from number four to number five.

Khalid Mohamed Al Zubair, chairman of Ominvest in his report to the shareholders states that during the year, Ominvest delivered strong results both at the group and the parent level.  Al Zubair adds that during 2018, Ominvest successfully raised and secured total funding facilities of over RO250mn at attractive terms from leading local and international banks and prominent Omani institutional investors. Ominvest has used most of these funds to allocate capital to their key non-banking subsidiaries in growth sectors (insurance, private equity and real estate) with the highest ROI potential and to achieve the revenue diversification objectives.

Al Zubair states that during the year ended 31 December 2018, total revenues rose by 29 per cent to RO47.72mn and the net profit by 27 per cent to RO34.36mn, over the same period in 2017. The increase in the parent-level net profit was mainly due to increase in the share of P&L of the subsidiaries and interest income. As at December 31, 2018, total assets of the parent company stood at RO541mn compared to RO388mn as at 31 December 2017.

During the year ended 31 December 2018, Al Zubair adds the total group revenues rose by 17 per cent to RO277.53mn and the net profit attributable to Ominvest’s shareholders grew by 47 per cent to RO30.52mn from RO20.83mn, over the same period in 2017. The growth is attributable to strong performance of our major subsidiaries: Oman Arab Bank (OAB), National Life & General Insurance (NLG), Oman Real Estate Investment & Services Corporation (ORIS) and Jabreen Capital.

Al Zubair is confident that the subsidiaries will continue to deliver healthy results in the future.

Top five by earnings per share growth

Three of the top five earnings per share growth companies are newcomers on this list. Galfar, a newcomer, comes straight into the number one position; Renaissance moves up to the number two spot from being five last year. Ominvest takes the number three position. HSBC slips two places to number four and Al Jazeera Steel at number five is a new comer to this list.

Sir Sherard Cowper-Coles, chairman of HSBC in his report to the shareholders states that the bank had encouraging results in 2018.  Performance shows a 64.4 per cent increase in net profit for the year ended on December 31, 2018 to RO31.4mn. This compares with RO19.1mn for 2017, the increase being driven primarily by a 14.1 per cent growth in revenues.

Cowper-Coles explains that the net interest income grew by 10.7 per cent to RO60.1mn for the year due to the growth in the average loan balances of the customers as well as the rising yield on financial investments which the company made with itssurplus liquidity. Net fee income stood at RO11.7mn for the year.

Cowper-Cole advises that the board of directors proposes a total cash dividend of RO18.6mn, with a dividend pay-out ratio of 59.3 per cent.  This represents a 63.2 per cent increase in the dividend payment, compared with 2017.

Top four by share price growth

Once again, out of the 20 companies, only four companies showed a share price growth during the year 2018.  Renaissance has moved to the number one spot from being number two last year. Ooredoo at number two, Galfar at number three and Bank Musat at number four are all new comers to this list. Oman Flour Mills, Al Jazeera Steel and HSBC which were on this list are out.

Samir J Fancy, chairman of Renaissance in his report to the shareholder states that in 2018 the company returned to profit.  For 2019, the two businesses – Topaz and Renaissance– have each secured revenue growth. Political and economic volatility, both global and regional, continues to present challenges. The company is sensitive to risk and alert to opportunity.

The group revenue increased to RO244mn compared to RO195mn in 2017.  EBITDA in 2018 was RO94mn against RO60mn in 2017. The net profit for the year after tax and minority interest was RO6.8mn against a loss of RO44.5mn in 2017.

Fancy states that Topaz is a global powerhouse in marine logistics, with the vision of being the champion provider of marine and logistics solutions to the global offshore industry. Whilst market conditions are improving, continued volatility and uncertainty about the oil price may temper the speed of recovery.

Renaissance is a market leading services solutions business in Oman, Fancy adds, which is delivering growth by combining the cost advantage of the company’s scale with a strategy to diversify its services, sectors and geography. The outsourcing culture is improving, and the addressable market is growing.

Fancy states that expectations for 2019 are very positive, with growth and margin improvement building every quarter. The pipeline of new opportunity is encouraging and the focus is on growth, whist managing efficiencies and cash gives the company the confidence. Dealing with the long-term capital structure for Topaz is a priority.

Top five by dividend yields

NBO was the best dividend yielding company in 2018 moving up from the number four place. Bank Muscat has moved up a place to number two. Ooreedoo has dropped one place to the number three position. HSBC and Al Maha have taken the fourth and fifth place.  Al Jazeera, which was number one  in 2017, has dropped out.

Chairperson of NBO, Sayyida Rawan Ahmed Al Said, in her report to the shareholders states that the banking sector, has continued to face a challenging market. The liquidity position has not eased to the desired extent and asset quality pressures persist, especially in the real estate sector. Credit growth in Oman in the first 10 months has been 5.7 per cent, while deposits growth was 4.4 per cent. Against this backdrop, NBO reported 15 per cent growth in net profits compared to 2017, primarily as a result of lower provisioning from the UAE. As reported in prior commentaries, Al Said adds the bank has proactively exited most of its non-strategic UAE customers over the past 18 months, as they seek to concentrate on relationships emanating from Oman. The decline in UAE net loans in the last six quarters was RO93mn, leading to a significant decline in total operating income during 2018.

Al Said states that their short-to-medium term focus remains on growing their margins, with a modest growth in loan book size and continued fee income diversification. The latter in particular has gained momentum during 2018, while ongoing cost management initiatives have kept cost growth to a minimum. Cost management will continue to be a relentless focus in 2019, although there is ample investment approved for digitisation and transformation initiatives.

As they look forward to 2019, Al Said confirms that they are committed to leading the market by consistently demonstrating their customer-first approach, superior service, innovative technology and diverse range of products and services.