Markaz Q1 2010 Financial Results


KD 3.72 million net profit / 8 fils EPS - Assets under management grow 18%   - Increased demand for corporate finance advisory services

“Markaz”, announced its financial results for the first quarter ended March 31 2010. The Company reported a net profit of KD 3.72 million, or 8 fils per share, compared to a net loss of KD3.36 for the same period in 2009, primarily due to management fees and income and gains in GCC and international equity investments. Markaz short-term debt totalled KD 8.02 million and total debt reached KD38.37 million which represents 9% and 44% of total shareholders’ equity, respectively. Markaz assets under management grew by 18%.

Diraar Y. Alghanim, Chairman and Managing Director of Markaz said: "Markaz capitalized on the upturn in regional and worldwide capital markets in the first quarter of the current year. Markaz continues to pursue investment opportunities while enjoying a healthy balance sheet in terms of quality of assets and low debt-to-equity ratio."

Markaz Activities - Asset Management

Local and GCC Investments

GCC equity markets continued positive momentum in the first quarter of year 2010 as MSCI Arabian Index closed the quarter with a gain of 12.8 percent. Kuwait led the top performing markets during the period, followed by Saudi and Egypt. Kuwait market turned buoyant in the middle of the quarter as KSE weighted index closed the quarter with gains of 14.33%.

Markaz equity funds capitalized on the strength seen in local and regional equity markets with optimal management of risk. Markaz flagship Kuwait focused equity fund "Mumtaz" delivered gains of 11.8 percent while Markaz Gulf Fund posted gains of 9.4 percent for the quarter. Recognition of Markaz’s pre-eminence in the equity fund management industry came as "Mumtaz" fund was awarded as the best equity fund for the year 2009 by the leading regional publication "MENA Fund Manager". Three of Markaz mutual funds collectively won four Lipper Awards for best risk-adjusted performance during the year. Markaz "Mumtaz" Fund won two awards for best Kuwaiti Equities Fund for the periods of three and five years. "Markaz Gulf Fund" won best MENA Equities Fund and "Markaz Islamic Fund" won best Islamic Kuwaiti Equities Fund, both for the period of three years.

“Markaz” manages a significant market share in the GCC fund management industry; the company maintained its ranking as fourth on the GCC in terms of size of assets managed, and maintained its market leadership in Kuwait. The company is in the final stages of launching a Shariah-compliant MENA equities fund.

International Investments

The flagship fund of our international investment products, "Atlas Diversified Class", which reflects our asset allocation ideas, returned 1.92% for Q1-10. Our themes based fund, "Atlas Emerging Markets Thematic Fund", which captures the global macro opportunities with a thematic approach to investing, rose by 0.62%. And the "Atlas ETFs Program", which manages a slew of ETFs, rose 2.96% during the same period.

Our asset allocation calls for the year have been biased towards emerging markets and commodity sector, while US market has been over weighted among the developed. In the case of emerging markets, we are overweight on Russia. And among sectors, we are overweight on Energy, Materials, Technology and Manufacturing. We believe our asset allocation thoughts haven’t played out completely during the first quarter and the second quarter should see the gains accruing from the same as the macroeconomic picture improves globally.

Markaz Activities - Investment Banking

Corporate Finance

Markaz has been selected by leading companies to offer advisory services focusing on strategy, liquidation of non-core assets, restructuring capital bases, in addition to mergers and acquisitions. The company signed a mandate with a client to acquire on its behalf a KSE listed operating company in the industrial sector.

GCC Fixed income market issuance decreased to USD 10.1 billion in the Q1 2010 from USD16.9 billion for the same period last year. The assets under management of "Markaz Fixed Income Program" appreciated by 16% due to the positive performance of portfolios which exceeded the targeted 12% IRR. Markaz is planning to launch a fixed income fund with capital ranging from USD15-150million.

Structured Finance

Markaz remains the sole options market maker in the Middle East since 2005. A total of 3,048 contracts were traded in Q1 2010 with an underlying value of KD 2.62 million, a decline of 4.79% and 17.65%, respectively, compared with the same period in 2009. The decline is due to the high volatility of the stock market.

Markaz Real Estate Investments

In the first quarter of 2010, the Kuwait real estate market witnessed a continuation of a stabilization process which started mid-2009. This has led to a positive 2% return for Markaz Real estate Fund. Going forward, we expect further stabilization with a room for a marginal increase in prices for the rest of 2010. Our residential projects in Lebanon are on target in relation to the planned construction schedules, and sales and marketing objectives. The Lebanese real estate market is on a solid positive upward trend, and Markaz is keeping an eye on new opportunities in that market. As for our KSA "Aradi Portfolio", progress in executing the infrastructure is nearing an end and we are planning to start selling the developed plots of land in the coming months in accordance with our marketing and sales strategy for the developed properties in the Eastern Province. Markaz is contemplating the commencement of the development of villas in the Eastern Province to take advantage of the acute shortage in the supply of mid-income housing in KSA in general and the Eastern Province in particular. Our new targets for investments and developments are the real estate markets of Abu Dhabi and Egypt, where we are studying the feasibility of a number of projects in the residential and commercial segments of these markets.

Investor sentiment surrounding commercial real estate in the US appears to be improving.  The fundamentals have strengthened slightly as the economy is showing early signs of a recovery. Transaction volumes, too, have advanced as debt and equity capital are making a cautious re-entry into the market. Notwithstanding the above, recovery is expected to be slow and a large volume of upcoming debt maturities is likely to suppress markets.  Consistent with this outlook, in the first quarter of this year, we have made significant progress towards replacing existing maturing debt with longer-term financing for our funds.  Furthermore, we are actively pursuing distressed real estate debt investments for our proprietary account as well as for our clients.

Oil and Gas

"Markaz Energy Fund" was up 3.6% as of the end of March 2010 due to gains in fixed income, dividends and value improvements in select strategic holdings. Markaz signed a mandate to manage a capital increase for a leading client listed in the KSE's services sector.

Photo Caption: Diraar Y. Alghanim, Chairman and Managing Director of Kuwait Financial Centre “Markaz”

Kuwait Financial Centre S.A.K. 'Markaz', with total assets under management of over KD921 million (USD 3.19bn) as of March 31, 2010, 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.