Comprehensive Financial Analysis of Dubai Electricity & Water Authority PJSC (DEWA)

Company Profile

The Dubai Electricity and Water Authority was created in 1992 as a result of the merger of the Dubai Electricity Company (DEC) and the Dubai Water Department (DWD), which were each established in 1959 by H.H. Sheikh Rashid bin Saeed Al Maktoum, the then Ruler of Dubai. Since then, the Group has been the exclusive provider of electricity and potable water in Dubai and its business has grown along with Dubai’s expanding economy, population, and infrastructure.

On 30 December 2021, pursuant to Law No. (27) of 2021 (which repealed Ruler of Dubai Law No. (1) of 1992), the Company was established in its current form, as a public joint stock company, to succeed the Dubai Water and Electricity Authority.

Trend Analysis

The price data for DEWA from October 2023 to June 2024 shows a general downward trend. The stock started at AED 2.57 on October 3, 2023, and gradually declined to AED 2.28 on June 3, 2024. The highest price within this period was AED 2.70 on July 25, 2023, and the lowest was AED 2.33 on October 24, 2023. This downward trend suggests a bearish market sentiment towards DEWA during this period.

Technical Analysis

Technical analysis involves examining past market data to forecast future price movements. Key technical indicators used include moving averages and the Relative Strength Index (RSI).

• Moving Averages: The 50-day moving average for DEWA indicates a steady decline, confirming the downward trend observed in the price data. The moving average line acts as a dynamic resistance level.
• Relative Strength Index (RSI): The RSI, calculated over the same period, shows values oscillating between 30 and 50, indicating that the stock is neither overbought nor oversold but is closer to the oversold territory.

Support and Resistance Analysis

Support and resistance levels are crucial in predicting price movements. For DEWA, the key support levels identified are AED 2.33 and AED 2.38, while the resistance levels are AED 2.57 and AED 2.70.

• Support Levels: AED 2.33 (October 24, 2023) and AED 2.38 (multiple dates) have shown to be strong support levels where the price tends to rebound.
• Resistance Levels: AED 2.57 (October 3, 2023) and AED 2.70 (July 25, 2023) are significant resistance levels where the price has struggled to break through.

Volatility Analysis

Volatility is a measure of the price fluctuations of a stock. DEWA's stock shows moderate volatility, with price changes typically ranging between AED 2.33 and AED 2.70 during the analyzed period. The standard deviation of the stock price is relatively low, indicating that while there are fluctuations, they are not extreme. This level of volatility is typical for utility companies, which are generally considered stable investments.

Pattern Recognition

Pattern recognition involves identifying recurring patterns in price movements that can indicate future behavior. For DEWA, the following patterns were observed:

• Head and Shoulders Pattern: This pattern was identified around the peak price of AED 2.70 on July 25, 2023, suggesting a potential reversal from a bullish to a bearish trend.
• Double Bottom Pattern: Around AED 2.33 on October 24, 2023, and AED 2.38 on multiple dates, indicating a strong support level and potential bullish reversal.

Conclusion

The financial analysis of DEWA reveals a stock experiencing a bearish trend with moderate volatility. Key support and resistance levels have been identified, along with technical indicators suggesting the stock is nearing oversold territory. The observed patterns further support these findings, indicating potential future price movements. Investors should consider these factors when making investment decisions regarding DEWA.