Kuwait Financial Centre “Markaz” [KSE: Markaz, Reuters: MARKZ.KW, Bloomberg: MARKAZ: KK] announced a net profit of KD 2.56 million for the first quarter ending 31st March 2013, a net profit of 5 fils per share as compared with a net profit of KD 2.82 during the same period in 2012.
Markaz Chairman, Mr. Diraar Y. Alghanim, said “Markaz profit during the first quarter of 2013 has come on the back of its high quality assets and strong financial standing. These positive results reflect its diverse base of assets and controlled solvency. In addition, available credit channels provide Markaz with the required flexibility to change its assets distribution, enabling the company to capitalize on the volatile investment environment. Global markets have also shown positive economic indications, which led to better performance and helped in achieving higher returns.”
Alghanim added, “We are optimistic regarding the recently enacted Companies’ Law (25/2012) and its amendments by law (97/2013). These laws facilitate business formation, and allow for new sophisticated financial instruments such as convertible debt, preferred shares, and derivatives. This will provide companies with more flexibility in deleveraging and restructuring their balance sheets, and will result in investment banking opportunities.”
Mr. Manaf Alhajeri, Chief Executive Officer at Markaz said “We hope that more new laws will be legislated in 2013 to improve the business environment. The private sector anticipates the legislation of the bankruptcy law to provide an effective and organized framework for dealing with insolvency and illiquidity of companies. The government has already started working on drafting this law. Once enacted, the bankruptcy law would hasten solving the debt crisis by paving the way for new and promising opportunities that include sale of distressed real estate at fair prices.
Asset Management
Mena Equities
For the first quarter of 2013, Markaz Islamic fund, focused on the Kuwait market, closed the quarter with a gain of 2.7% against an increase of 1.9% in its benchmark Al-Madar Index while our another Kuwait focused Forsa Fund, the only derivatives fund in the region returned 3.4% for the quarter. MIDAF and MUMTAZ funds continue to focus on the index heavyweights and blue chip stocks, posting 2.1% and -0.4% respectively for the same period, against an increase of 3.8% on their KIC Index benchmark. Meanwhile, our MENA focused Markaz Arabian Fund NAV gained 6.7% YTD against a gain of 4.6% in the benchmark S&P Pan Arab Composite Index.
International Investments
In the first quarter of this year, Atlas Diversified Class, investing in a portfolio of multi-asset global funds, gained 2.47% outperforming its benchmark by 58 basis points. Atlas Emerging Market Thematic Class Fund, which invests in a portfolio of Emerging Markets equity funds focusing on selected themes, grew 0.19% in Q1. Atlas ETFs Program, which allocates its assets into various Exchange Traded Funds globally, had a robust performance of 8.02% in the same period.
Private Equity
In the first quarter of 2013, the private equity asset class has performed relatively well, with robust fundraising activity, increasing capital deployment, and growing investor appetite. The aggregate amount of capital raised in the first quarter totaled $67.2 billion across 130 funds, with 39% being allocated to buyout funds. The “Markaz Private Equity Funds Portfolio” values remained stable in the first quarter of 2013 and Markaz continues looking for opportunities in secondary sales.
Investment Banking
Corporate Finance Advisory
Consistent with the market environment, Markaz continues to build strong capabilities in restructuring advisory services (either representing creditors or corporations), distressed debt transactions, liquidating non-core assets for our clients, and raising fresh capital [debt and/or equity] for local corporations. In addition to our ongoing mandates, we have been awarded three new mandates, including: restructuring advisory for a local company, buy-side advisory for a multinational company, and cross-border acquisition advisory for a local contracting company. We are also actively bidding for a number of transaction advisory roles for the public private partnership projects
Fixed Income
As at end of Q1 2013, Markaz Fixed Income Fund (MFIF) recorded an increase in its Net Asset Value (NAV) of 1.17% bringing its Inception-to-date return to 8.16%. The average credit rating of the Fund was A, while the fund’s assets were allocated to different sectors across GCC countries and across various sectors including government, Financial Services, Oil & Gas, Power & Utilities, Real Estate, Telecom and Transport.
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. During Q1 2013, Markaz continued its talks with the Capital Markets Authority (CMA) and Kuwait Stock Exchange (KSE) to finalize and approve the amendments proposed by Markaz, which aim to increase liquidity and introduce new financial tools to the options market.
Mena Real Estate
Markaz Real Estate Fund reached a net asset size of 91.5m KD as of Q1 2013 and managed a portfolio of 40 properties. MREF progressed with developing its land plots in Dasman and Bneid El Gar. Financially, the fund continued to make steady monthly cash distributions to investors, and generating a total return of 4.8% for the period.
Meanwhile, KSA Villas Development in Al Khobar KSA is progressing with the project reaching the final finishing stage. Up to end of Q1 2013 we have sold 38 out of 54 villas and expect to complete the sale of villas by Q3 2013. The development aims to generate gross returns in the tune of 20%.Markaz acquired a plot in Al Khobar Rawabi neighborhood and hired a design consultant with the aim to develop it into a residential apartment complex for rental targeting expatriates living in KSA. The development is in the permitting phase with the preliminary permit secured. The development aims to generate gross returns in the tune of 20%.
In addition, Markaz acquired a plot in Al Asdaf neighborhood and hired a market consultant with the aim to develop it into mid-level villas for sale targeting young Saudis. The development aims to generate gross returns in the tune of 20%.In November, Markaz obtained the final approval to manage part of the National real estate portfolio with a maximum value of KD 250 million and for a period of 10 years intended to invest in Kuwait’s real estate market. Markaz is also in the process of setting up a new income generating fund targeting the GCC region. The fund is expected to be launched in 2013.
International Real Estate
During the first quarter of 2013, Markaz has been involved in the following international real estate activities:- Actively managing Markaz distressed debt portfolio with a view to enhancing values. Towards this, Markaz signed several new leases for certain properties and have been renovating other assets within the portfolio, improving the overall occupancy of the portfolio and potential realizable values.
- Invested in a vehicle focused on acquiring single family homes in order to benefit from improving trends in the U.S. residential market.
- Committed to an office development project within a supply-constrained location in Dallas, Texas, with a view to building and leasing an efficient office building, suitable for corporate headquarters and call centers.
- Conducting due diligence on a proposed residential development project in Istanbul, Turkey.
Oil and Gas
The Oil and Gas Department manages the Markaz Energy Fund (MEF) which invests in a diversified portfolio within the oil & gas sector. MEF improved in Q1 2013 with gains stemming from local/regional and international oil & gas equities and debt markets which had a positive effect on the Fund’s performance. The fund has gained 5.94% during the first quarter of 2013.
Photo caption: Mr. Diraar Y. Alghanim, Chairman, Kuwait Financial Centre, Markaz
About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre K.P.S.C “Markaz”, with total assets under management of over KD903 million (USD 3.2 billion) as of December 31, 2012, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997.