Monday, February 26, 2007

OIB engineers a drop in its own share price

Oman International Bank (OIB), recently made a series of press and market announcements that resulted in a sharp drop in their stock price, followed by a small correction. Question: were the announcements deliberately designed to bring the price down (market manipulation) or were they honestly incompetent fumbles from a bank that lost its way for good? Is the market investigating this?

The evidence:

27/12/06: Oman International Bank (S.A.O.G.) has announced that the estimated results as of December 2006 indicate profitability in excess of 31 % of paid up capital and this reaches a level of more than the profits achieved last year. Based on this we estimate the Net Profit to be RO 23.398mn compared to RO 22.028mn up by 6.2%. The EPS works out to be RO 0.310. Based on these results and the closing price of RO 3.403 (on 26/12/2006) the PE 10.98x 2006 estimates.

15/1/07: OIB share price at RO. 3.6.

28/1/07: The BOD of OIB announced that it proposes to distribute only 3% cash dividend and 32.5% stock dividend after the approval of CBO and the shareholders. Therefore, the bank will be the largest in the Sultanate in term of capital as it will reach to RO 100mn. However considering that the bank's return on equity has been stagnant, this isn't good news for shareholders. No confirmation of net profit figures is given. Brokers explain that it must be because the December guidance was accurate. They call customers who are holding OIB shares advising them to sell. OIB share price now at RO. 3.45

29/1/07: Oman International Bank has announced their results for FY 2006 ending 31st December 2006, showed a net profit of RO 27.185mn compared to RO 22.028mn for FY 2005; up by 23.4%. No explanation is given on why it is so much higher than previously announced. Instead of climbing, the stock falls 6.8% OIB share price now at 3.22.

12/2/07: OIB share price now at 3.01 sometimes dipping below 3 during day trading.

February 24. 2007: OIB announces that its board met and "recommended the distribution of 21 per cent as cash dividend and 10 per cent as stock dividend to it's shareholders". No mention anywhere that this contradicts a previous announcement.

February 26, 2007: OIB share price at 3.27

Question 2: Who benefited from the above?


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