RAK Cement a possible candidate for takeover

Ankur Agarwal, an analyst at Nomura in Dubai, commented recently that, "There are reasons why transnational cement companies may explore the possibility of acquiring assets in the UAE." He also noted that RAK Cement was a credible candidate.

This past week, RAK Cement was among the most actively traded on the Dubai Financial Market, where almost 19 million shares changed hands. Since the middle of last month, the company’s shares have risen by 37%, but are still well below their book value of AED1.58.

The Indian UltraTech Cement, controlled by the Aditya Birla Group, completed the acquisition of Eta Star in September for US$380 million. More recently, this year, Omani Raysut Cement acquired the Pioneer Cement, an UAE company, for US$172 million.

Mr Agarwal recommends buying RAK Cement stock, and predicts a target price of AED1.35. "We see continued merger and acquisition interest in cement assets in the region that could be a catalyst for the cement stocks in the UAE," he said.

Analysts believe RAK Cement’s proximity to the Oman border could boost the area's international cement exports to regions deficient in the product – including sub-Saharan Africa – with attractive returns.

It is also a "defensive move" for international players to invest in cement companies in the UAE, Mr Agarwal said, to pre-empt any threat to profitability as a result of dumping. However, the company decided at its last meeting not to distribute profits, meaning investors will have to wait for a dividend payout.