Satyendra Pathak
Doha
The Qatar Stock Exchange (QSE) is positioned for significant long-term growth in view of the ongoing expansion of the North Field LNG project and strategic initiatives aimed at boosting shareholder value, QNB Financial Services (QNBFS) has said in a report released on Tuesday.
Despite underperforming its regional and global peers in 2024, the report said, QSE earnings displayed resilience, supported by interim dividends, share buybacks, and a constructive outlook for 2025.
"QSE earnings are projected to grow by 6.6 percent in FY2024, accelerating to 10.2 percent YoY in 2025 before adjusting for the upcoming global minimum tax (GMT). Dividends are forecasted to rise by 9.9 percent in 2025, reflecting robust financial health across listed companies,” the report said.
"Qatar’s GDP growth, driven by the LNG sector, is expected to increase from 2.7 percent in 2025 to 5 percent in 2026, significantly outpacing 2024’s 1.5 percent. This economic acceleration aligns with the phased ramp-up of the North Field LNG expansion, underscoring its transformative potential for the local economy and QSE-listed equities,” it said.
QSE’s current valuation presents a compelling case for investment, with the Index showing significant undervaluation compared to historical and regional benchmarks, the report said adding, "Even under stress-tested scenarios that assume a 15 percent earnings decline due to GMT, QSE’s forward PE ratio of 12.6x remains attractive. The market’s divergence from historical means indicates potential upside as mispricing corrects.”
Measures like interim dividends, first introduced by 10 companies in 2024, have enhanced investor confidence. Additionally, QNB Group’s QR2.9 billion share buyback programme highlights efforts to return value toshareholders.
The programme has already contributed to a 16 percent appreciation in QNB’s stock price, setting a precedent for other companies to follow. Anticipated new listings, such as GIS’s planned listing of Al Koot in 2025, further underline QSE’s growth potential.
"Qatar’s economic diversification efforts, including reduced business costs and targeted investments, bolster near-term growth. Initiatives like the QR20 billion Simaisma theme park and a robust tourism sector contribute to a balanced economic strategy. December’s Purchasing Managers’ Index (PMI) of 52.9 affirms the resilience of Qatar’s non-oil economy,” thereport said.
The North Field LNG expansion is central to Qatar’s economic trajectory, expected to catalyze growth in GDP and corporate earnings. Historical data underscores this relationship, with QSE market cap and GDP displaying robust growth during Qatar’s initial LNG capacity expansion from 1997 to 2011. By 2029, QSE’s market cap is projected to grow at a CAGR of 7.2 percent, potentially reaching QR878 billion as nominal GDP hits QR1 trillion.
Banks are poised to lead earnings growth in 2024 and 2025 due to cost containment and stabilised provisions.
However, sequential declines in 4Q2024 earnings are anticipated, driven by credit provisions in the banking sector. Industries Qatar (IQ) may offset some growth, but overall aggregate earnings are set to rise by 4.8 percent YoY in 4Q2024.
Qatar’s strategic focus on LNG expansion, coupled with supportive fiscal measures and economic diversification, positions the QSE as a lucrative investment destination.
While short-term challenges like the GMT and global market dynamics persist, the report said, "The long-term outlook remains positive, with key equities such as CBQ, DHB, QIB, QGTS, QNNS, and MEZA poised to benefit. As Qatar’s LNG story unfolds, the QSE is well-placed to deliver sustainable value to investors.”