Drake & Scull International (DSI) reported its headline figures for 4Q2015. Net income before minority was AED14.7 million (4Q2014: AED3.8 million, 3Q2015: AED985.5 million in net loss, EFGe: AED1.5 million in net loss), whilst its revenue for the quarter totaled AED1,400 million (4Q2014: AED1,169 million, 3Q2015: AED433.8 million, EFGe: AED574 million). This brings 2015 net loss (before minority) to AED937 million (2014: AED100.7 million in net profit) and revenue to AED4,230 million (-11.2% Y-o-Y). The company’s backlog reached AED11,860 million in December 2015, with total awards at AED3.0 billion (2014: AED5.4 billion, EFGe: AED2.7 billion). 70% of the year’s awards were in the UAE and 82% in the Engineering Business, which came in line with the company’s strategy to continue to focus on its home market and core engineering business. We shall provide more details on the results, once the full financial statements are released.   Our view: 4Q2015 set of results came in slightly better than expected, with revenue showing both Y-o-Y and sequential growth, reflecting smoother project execution, and net income (before minority) back in the black. 3Q2015 saw AED984 million worth of revenue and gross profit adjustments for uncertified variation orders, disputed extensions of time claims, accrued certified work, in addition to one-off booked provisions related to ongoing arbitration and legal cases in the UAE and Saudi Arabia. This had weighted down on the full-year financial results. The company sees room for provision reversals in the future and has announced the initiation of a cost-cutting programme to improve operational efficiency. We expect a better 2016 for DSI, with a pick-up in project awards, driven by the UAE and other GCC countries, excluding Saudi.   Our FV of AED0.29/share offers a downside potential of 14.7%; hence our Neutral rating. We expect the stock to continue to underperform DFM, in light of the challenges facing the sector, which are amplified by the company’s high leverage (net-debt-to-market cap at 2.4x in September 2015). The stock trades at a PER multiple of 17.7x for 2016e, EV/EBITDA of 18.1x. (DFM, Mai Attia, Sara Boutros)