Markaz: 2 fils EPS for H1 2012.

23/08/2012

Active advisory role towards restructuring a large segment of Kuwaiti companies

Markaz announced the results of the first half of 2012, Markaz posted a Net Profit of KD 1.2 million and a 2 fils EPS in H1 2012, compared to a profit of KD 750 thousand and a 2 fils EPS  during the same period of 2011. Total Equity grew by 23% compared to the same period of 2011 and accounted to KD 155.39 million.

Mr. Diraar Alghanim, Chairman & Managing Director of Markaz said: “Despite the ongoing global financial crisis, which commenced in 2008, Markaz successfully honored all of its financial commitments without any delays, resulting from the prudent and conservative financial management approach Markaz implements. Markaz management continues to strive for excellence in good governance and responsible management practice, benchmarking those of the best global companies. Our financial management approach coupled with our effective corporate governance has enabled Markaz to maintain a “BBB” credit rating from Capital Intelligence Ltd.”

Alghanim also added, “Markaz follows a dynamic investment strategy which enables the firm to identify eligible investment opportunities. Of these opportunities, advising local companies on restructuring and recapitalization, as well as the increased demand for Kuwaiti distressed debt by regional and international investors, have been on the rise. Markaz is constantly on the pursuit of new investment opportunities – which are made after thorough due diligence and risk assessment – spanning across different sectors and industries.”

Mr. Manaf Alhajeri, Chief Executive Officer of Markaz said: “Local and regional markets are continuously becoming unstable and highly volatile. As a result of the instability and volatility, the current situation requires market participants to be highly flexible and quick to react towards changes. Therefore, it is essential for companies to provide up-to-date investment solutions, to keep up with the developments in the market place, as well as maneuver between different asset classes meeting the investors’ requirements.”

Alhajeri also added: “Liquidity management will enable Markaz to benefit from investment opportunities in various fields with good returns and low risk. Lately the interest for income generating investments has increased in Kuwait and the GCC. Therefore, Markaz intends to expand on this class of investment in addition to the Company’s current promising investments.”

Asset Management

MENA Equities

Trading activity in local Kuwait market remained weak. Possible factors are the increasing volatility on the political front slowing down the Economic development and also affecting the investor confidence. Kuwait’s banking sector continues to remain vulnerable resulting from its exposure to investment companies and also lack of lending opportunities which has kept growth in credit to private sector sluggish.

The department’s AUM as of June stood close to USD 2.1 Billion of which 44% was of discretionary managed Funds & Portfolios.

International Investments

After a robust start to the year in the first quarter, markets performed otherwise in the second quarter as fears of another Euro Zone recession, sent international indices down for the quarter. Markets were unnerved by the political crisis in Greece and Spain fearing a systemic risk. After long-lasting debates, European Union leaders reached agreements that they hope will restore market confidence in the debt of Eurozone members.

Private Equity

Markaz Private Equity Portfolio realized a year-to-date return of 4.65%.

Investment Banking

Corporate Finance Advisory

We continue to witness a growing interest in distressed debt of Kuwaiti issuers by regional and international investors; and we have executed several trades in this space, allowing Markaz to become a market maker for such debt.

Consistent with the market environment, we continue to build strong capabilities in distressed debt transactions, restructuring advisory services (either representing creditors or corporations), liquidating non-core assets for our clients, and raising fresh capital [debt and/or equity] for local corporations. We currently have five assignments in the various activities described above and are actively working on creating value for our clients.

Fixed Income

Markaz Fixed Income Fund (MFIF), recorded a YTD return of 1.34% for the Q2 2012 and an absolute return of 3.30% since the fund was launched last year. Markaz acted as a Joint Lead Manager for the KWD26.5 million bonds issued by Al-ARGAN International Real Estate Company K.S.C.C. with Burgan Bank and KAMCO.

Structured Finance

Markaz has been the sole options market maker in the Middle East since 2005. The company continues to develop and stimulate options market as it has many benefits to traders in the Kuwaiti market, especially  the derivatives market.

MENA Real Estate

Markaz Real Estate Opportunities Fund is managing its investments in Lebanon, KSA, Jordan, Syria and Abu Dhabi. Jordan residential development has been completed and final exit process is underway; the fund exited in June its investment in KSA with a 32% ROI.

Markaz Real Estate Fund reached its maximum capital allowed of KD 50m (par value) in March 2012 at that point we were able to secure CMA approval to increase the maximum capital of the fund to KD 100m (at par value). In addition, the fund received the approval from over 75% its investors and the CMA to extend its term for a new 10 years starting from June 2012. MREF received additional subscriptions totaling KD 15.9 m in H1 2012 and deployed KD 9.5 m in acquisition of new properties. On the financial side, the fund continued to make steady monthly cash distributions to investors generating a return of 4.82% for the period inclusive of improvement in property valuations.

Aradi Development investment: We are focusing our efforts towards the exit of the second of the two investments (Al Bandariah) in KSA Eastern province after completion and exit of the first investment (Al Nimr) during 2010.

KSA Residential investment: Markaz is proceeding with the development of 54 residential villas in Al Khobar KSA. Markaz team initiated the marketing and sales campaign in time with the completion of the mock-up and first four units in November 2011. Up to end of H1 2012 we have sold 10 villas and expect to complete the sale of the developed villas by the end of 2012. The development targets local Saudi mid-level employees who constitute the segment of population with the largest pent-up demand and aims to generate gross returns in the tune of 20%.

Kuwait Development: Markaz acquired, as a proprietary investment, two adjacent old buildings in Salmiya Kuwait and is in the process of vacating, demolishing and redeveloping the merged property into a residential complex for renting residential apartments to expatriates.

International Real Estate

In order to capitalize on the prevalent distress in the real estate debt markets, we continue to grow our U.S. distressed debt activity, seeking to invest in non-performing and sub-performing commercial mortgages in the U.S.  During the second quarter we resolved one of our distressed debt investments with the borrower and we also sold one of the properties that we had previously foreclosed on; the average return on investment multiple is 1.14 times for the two assets.

Oil and Gas

The Oil & Gas Department manages the Markaz Energy Fund (MEF) which invests in a diversified portfolio within the oil & gas sector. Oil prices and lower demand for petrochemicals has adversely impacted our investments in the sector, and was offset by the improvement in performance of our direct investments.

-Ends-
Photo caption: Mr. Diraar Y. Alghanim, Chairman and MD, Kuwait Financial Centre, Markaz

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About Kuwait Financial Centre “Markaz”

Kuwait Financial Centre S.A.K. 'Markaz', established in 1974 with total assets under management of over KD 878 million as of June 30th, 2012, is the leading and award winning asset management and investment banking institution in the Arabian Gulf Region. Markaz is listed on the Kuwait Stock Exchange (KSE) since 1997 under ticker Markaz.