Amidst high profits, UAE listed companies’ Q1-2024 results also show these costs

Amidst high profits, UAE listed companies’ Q1-2024 results also show these costs

The UAE’s earnings season kick-started the year with two basic themes:

Whilst the latter had a differential impact across sectors, it drove home the point that focusing on EBITDA, as opposed to ‘owners’ earnings’, is that much more silly, especially since owners absorb all the costs that come into the equation after EBITDA is calculated.

Indeed, the EBITDA was higher pretty much across the board, and yet equity prices remained sluggish.

Whilst there is no way to determine the path that equity prices can take over the short-term, the real risk investors must assess over the longer term is whether the aggregate after-tax receipts that accrue from holding the asset exceeds the net present value of the purchase price plus a modest rate of interest (defined by the risk-free rate) on that initial stake.

On an aggregate basis, that is the way decision-making is supposed to be done for the purchase of all assets and or investments, regardless of whether you are an investor or part of the management of a company.

Yet there are plenty of instances of misallocation of capital across the board. In boom times, the frequency of misallocation increases, especially as there is greater liquidity to