Investors show confidence in Middle East low-cost carrier Air Arabia

Air Arabia PJSC climbed the most in more than a year on investor bets a slump in oil prices will boost earnings at the Middle East’s biggest no-frills airline.

The stock jumped 4.7 percent, the biggest increase since February 2012, to 91.4 fils at the close in Dubai. About 36.6 million shares traded in Dubai today, or 2.7 times the three- month daily average, making it the most traded stock on the benchmark DFM General Index. The gauge gained 0.1 percent. Brent crude declined for the sixth day, retreating 0.6 percent to $99.31 a barrel at 2:35 p.m. in Dubai, extending the slump this month to 9.7 percent.

“With the drop of fuel prices, margins are expected to improve,” said Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities. “The company has a solid strategy in overseas expansion and investors are expecting solid results for in first quarter.”

Air Arabia last year started flights to nine additional destinations from its hub in Sharjah, United Arab Emirates. That helped boost passenger numbers by 13 percent to 5.3 million in 2012 and profit by 56 percent. First-quarter net income may rise 9.5 percent to 52.2 million dirhams ($14.2 million), according to Securities & Investments Co. estimates on Bloomberg.

Goldman Sachs Group Inc. raised its price estimate for the airline in February to 1.14 dirhams. Six analysts recommend investors buy the shares, according to data compiled by Bloomberg. Five, including Goldman Sachs, have a hold rating on the stock and one advises selling it, the data show.

Air Arabia shares have gained 9.5 percent this year, trailing the 21 percent increase in Dubai’s gauge.

Editors: Claudia Maedler, Peter Branton. To contact the reporter on this story: Sherine El Madany in Dubai at [email protected]. To contact the editor responsible for this story: Claudia Maedler at [email protected].