Sorouh surges on UAE real estate merger deal

Updated 22 January 2013
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Sorouh surges on UAE real estate merger deal

DUBAI: Abu Dhabi’s Sorouh Real Estate jumped to a 25-month high 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 AED 1.70, its highest level since December 2010; they hit a high of AED 1.87 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.
“The official announcement highlights a ratio that on paper is favorable 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 UAE 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 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.
“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 SR 4.5 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.


Jordanian cabinet approves new IMF-guided tax law to boost finances

Updated 21 May 2018
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Jordanian cabinet approves new IMF-guided tax law to boost finances

AMMAN: Jordan’s cabinet on Monday approved major IMF-guided proposals that aim to double the income tax base, as a key part of reforms to boost the finances of a debt-burdened economy hit by regional conflict.
“When only 4 percent of Jordanians pay (personal) income tax, this may not be the right thing,” Finance Minister Omar Malhas said in remarks after the cabinet meeting, adding the goal was to push that to eight percent. The draft legislation was submitted to parliament.
The IMF’s three-year Extended Fund Facility program aims to generate more state revenue to gradually bring down public debt to 77 percent of GDP in 2021, from a record 95 percent.
A few months ago Jordan raised levies on hundreds of food and consumer items by unifying general sales tax (GST) to 16 percent — removing exemptions on many basic goods.
In January subsidies on bread were ended, doubling some prices in a country with rising unemployment and poverty among its eight million people.
The income tax move and the GST reforms will bring an estimated 840 million dinars ($1.2 billion) in extra annual tax revenue that will help reduce chronic budget shortfalls normally covered by foreign aid, officials say.
Corporate income tax on banks, financial institutions and insurance companies will be pushed to 40 percent from 30 percent. Taxes on Jordan’s phosphate and potash mining industry will be raised to 30 percent from 24.
The government argues the reforms will reduce social disparities by progressively taxing high earners while leaving low-paid public sector employees largely untouched.
“This is a fair tax law not an unfair one,” said Malhas, who shrugged off criticism the law is lenient on many businesses connected to politicians whose transactions are not subject to tax scrutiny.
Husam Abu Ali, the head of the Income and Sales Tax Department, said a proposed IMF-recommended Financial Crime Investigations Unit will stiffen penalties for tax evaders. Critics say it will not tackle pervasive corruption in state institutions.
Abu Ali said the government could be losing hundreds of millions of dollars through tax evasion, which is as high as 80 percent in some companies.
The amendments lower the income tax threshold and raise tax rates. Unions said the government was caving in to IMF demands and squeezing more from the same taxpayers.
“It is penalizing a group that has long paid what it owes the state,” the unions syndicate said in a statement.
“It imposes injustice on employees whose salaries have barely coped with price hikes rising madly in recent years.”