Kuwait Financial Centre “Markaz” (KSE: Markaz, Reuters: MARKZ.KW, Bloomberg: MARKAZ:KK) reported Total Revenue of KD 12.47 million during H1 2019 compared to KD 8.77 million in H1 2018. Net Profit attributable to shareholders of Markaz was KD 4.82 million (EPS 10 fils per share) for H1 2019, with a margin of 39%.
Mr. Manaf A. Alhajeri, CEO of Markaz, said in a statement, “I am pleased to announce that Markaz has delivered 42% growth in Total Revenue along with a 9% increase in Asset Under Management on a year on year basis. This growth was primarily driven by gains from investments measured at fair value through profit or loss amounting to KD 6.67 million.
Markaz continues to drive growth across its investment businesses with income from total investments up by 87.8% to KD 8.47 million. Furthermore, return on total investments approached 9.35% on an annualized basis. Given the transactional nature of mergers and acquisitions, our Investment Banking fees were KD 0.32 million, lower compared to same period last year but our pipeline remains robust. AUM at the end of the period was KD 1.11 billion, registering a growth of 9% y-o-y.
During H1 2019, GCC markets delivered strong YTD performances driven by international capital inflows despite heightened geopolitical tensions, the US-China trade war and broader concerns over global economic growth. During Q2 2019, the S&P GCC benchmark delivered a positive performance of 2.27% with Kuwait being the best performing market in the region. On a year to date basis, the Kuwait All Share price Index gained 14.8% being supported by the much awaited upgrade of Kuwait’s status from Frontier Market to Emerging Market by MSCI. Saudi Arabia was the second best performing market in the region as Tadawul All Share Index (TASI) recorded gain of 12.7%. In the UAE, DFM General Index and Abu Dhabi Securities Exchange General (Main) Index recorded gains of 5.1% and 1.3% respectively.”
Markaz Fund for Excellent Yields (MUMTAZ) provided investors with returns of 15.0% YTD outperforming the Kuwait All Share Index. Markaz’s other equity funds also delivered strong growth with Forsa Fund, MIDAF, Markaz Islamic Fund generating gains of 17.7%, 14.5%, and 12.5% respectively. On YTD basis, Markaz Fixed Income return outperformed the benchmark return.
In contrast to the equity market, real estate across the region particularly in the UAE remains relatively weak with lower real estate rental rates and sale values. Despite these challenging market conditions, Markaz MENA real estate team was able to maintain occupancy levels of 95% across its portfolio in Kuwait, UAE and KSA. Markaz real estate fund (MREF) delivered positive returns of 1.9% on a YTD basis. Looking forward, the real estate sector is expected to remain under pressure due to the overall soft economic environment. With this backdrop in mind, the Markaz MENA real estate team continues to actively manage our portfolios and implement cost saving initiatives such as in-house property management to enhance operational efficiency and improve profitability. The team is also evaluating the launch of a program focused on identifying and acquiring select distressed assets.
International commercial real estate continued its positive trend in Q2 2019 with property prices marginally increasing by approximately 0.5% (CPPI) and the NAREIT index increasing by 1.8% during the quarter. The industrial sector was the best performing asset class with property values increasing by 5% underpinned by higher rentals. Our international real estate team has started construction of two new industrial development projects in the Ridgefield (US) and Wroclaw (Poland), both of which are progressing in line with our expectations. We continue to seek new development transactions however we are becoming increasingly selective given the demand and supply dynamics and the resulting pricing environment.
From an investment banking perspective, the Kuwait market started Q2 2019 with the announcement of several transactions across various industry sectors. Our advisory team has developed a strong pipeline of corporate transactions reflecting the quality of our advice and execution capabilities. We expect some of these existing mandates to close in second half of this year. Our capital markets team successfully completed a rights issue for KD 18 million for United Projects Company for Aviation Services (“UPAC”) and are currently working on the two debt issuances, which are likely to be completed in the coming quarters.
Global markets ended on a positive note at H1 2019 although concerns about earnings growth and geopolitical risks continue to impact investor sentiment. Central Bank policies across major economies will continue to play an important role in shaping capital flows. All of our business areas are attuned to these factors and have positioned themselves accordingly to deliver sustainable financial performance. Markaz is one of the leading wealth management and investment banking financial institutions in the region that has gained the trust and loyalty of its clients over the last 40 years.”