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Ratings agency S&P Global sees GCC corporate and infrastructure firms standing strong this year despite “soft global economic growth,” surging interest rates, and geopolitical risks in the region, S&P Global Ratings said in its latest GCC Corporate And Infrastructure Outlook 2024 report. The report looks at how S&P feels about the companies it rates across the GCC.
Driving the optimism: S&P Global says many companies will benefit from a cushion provided by strong operating performances since last year. It likes the prospects this year for non-oil, oil and gas, and chemicals players alike. Companies are, on the whole, underleveraged, giving them more room to adapt to changing circumstances — a good sign when many will need headroom to invest in capex programs to grow or short-up their businesses.
Refinancing risk is low: As much as 80% of the debt maturing this year is with “highly-rated government-related entities,” it says.
The EBITDA benchmark: S&P sees operating profitability in the 5-10% range in aggregate for GCC companies through this year and net.
Look for non-oil GDP growth to clock in at a bit under 5% in the UAE and Saudi Arabia on the back of ongoing economic diversification drives and population growth across the GCC, the ratings agency said. It sees non-oil sectors benefiting from a public spending spree and consumer spending growth. The GCC as a whole is expected to grow 2-3% this year, driven by increased oil-related real GDP growth on the back of OPEC+ production cuts, the agency said.
REMEMBER- S&P Global expects the UAE’s GDP growth to accelerate to more than 5% in 2024, outpacing the 2.8% growth expected for the global economy.
M&A and real estate drive record 2023 earnings: S&P Global expects non-oil companies in the UAE to have achieved a 5-15% earnings growth in 2023, while their counterparts in Saudi Arabia are projected to have experienced a 3-4% increase. The earnings growth was fueled by active mergers and acquisitions, and a booming real estate market. The credit rating agency expects to see 7% growth in non-oil earnings for 2024, a decline from the 15% penciled in 2023.
More GCC investments in clean energy: A surge in regional renewables is expected over the next five years, backed by capital and low-cost renewable energy. More energy efficient water desalination plants are also on the horizon for the region, notably in Abu Dhabi, where plans aim to meet over 90% of water demands by 2030. The agency cited the UAE’s commitment to decarbonization with its USD 30 bn energy transition fund, and Adnoc’s revised USD 23 bn budget aimed at developing the company’s carbon management platform.
Geopolitical tensions pose risks for certain sectors: Companies operating in oil and gas, tourism, shipping, and the retail and automotive supply chain sectors “could face some operating weaknesses if conditions take a turn for the worse,” according to the report.
But we’re going to have a “sustained” 2024 IPO market: The UAE’s IPO momentum stems from the government’s commitment in 2022 to list 10 GREs, with only five having been listed so far, including Dubai Taxi in December 2023.
REMEMBER- Dubai is offering up to a 25% stake in car parking space manager Parkin in what is set to be the country’s first IPO of the year.
