Earnings Presentation H1 2018 Asset Management | Investment Banking - - PowerPoint PPT Presentation
Kuwait Financial Centre K.P.S.C. "Markaz" (Boursa Kuwait: MARKAZ) Earnings Presentation H1 2018 Asset Management | Investment Banking Discussion Agenda Markaz Overview ................... 3 H1 2018 Performance
Asset Management | Investment Banking
Kuwait Financial Centre K.P.S.C. "Markaz" (Boursa Kuwait: MARKAZ)
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Markaz Overview …………...................… 3 H1 2018 Performance Highlights ……..… 6 Management Discussion ………..….….… 9 Shareholder Information ……………….… 17
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Sustainable long-term shareholder returns Generates sustainable long-term returns driven by robust operations and consistent dividend payouts Leading market position As one of the region’s leading asset management and investment banking firm, Markaz offers custom investment solutions with exceptional track record Building a sustainable economy in Kuwait Endeavors to actively participate in community service and contribute to building a sustainable economy in Kuwait Our Team - cornerstone of our success A team of 150+ employees spread over
At Markaz, our reputation is our biggest asset. We have been voluntarily operating under strict guidelines long before corporate governance was the norm
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Kuwait Bahrain Qatar Oman KSA UAE Egypt Jordan Lebanon India Germany US
Equity Funds Fixed Income MENA Real Estate Investments International Real Estate Investment Banking Advisory Offices
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Best Asset Manager in Kuwait
By: EMEA Finance
Best Investment Bank
By: Global Finance
Best Investment Bank in Kuwait
By: Global Finance
Best Investment Bank
By: Euromoney Awards
Best Islamic Fund
By: Zawya Awards
Best Equity Fund in Kuwait “Mumtaz”
By: MENA Fund Manager Awards
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3 Mar-Gulf managed funds and our core real estate portfolio. Mar-Gulf, currently manages 7 ongoing projects in the United States and a project in Germany and Markaz continues to evaluate opportunities in high-growth and supply constrained metros. During the first half, Markaz successfully completed several advisory mandates. Flagship assignments year-to-date included the acquisition of 29.5% of HEISCO
clients, a debt settlement for an Emirati bank, and two ongoing high-profile restructuring transactions. In addition, Markaz successfully completed a KD 20 million capital increase of United Projects Company for Aviation Services (UPAC). Markaz has a long standing investment banking track record of providing high quality independent advice coupled with outstanding execution. We continue to build on our reputation as a leading regional investment bank servicing not only corporates within MENA but also multinationals operating across borders. Total transaction value executed by Markaz up to June 2018 amounts to KD 1.24 billion.
Commenting on the performance, Mr. Manaf A. Alhajeri, Chief Executive Officer of Markaz said:
“Markaz continues to drive each of its business divisions successfully delivering an overall 13.7% increase in H1 2018 revenues. We continue to build
asset management business with an AUM increase of 6.3% on a y-o-y basis. Meanwhile,
income
principal investments delivered revenues of KD 4.51 million. On an annualized basis, H1 2018 income returns on principal
H1 2018 vs. H1 2017 (KD million) Total Revenue KD 8.77 mn Growth: 13.7% Management Fees KD 4.26 mn Growth: 34.3% Net Profit* KD 2.62 mn Margin: 29.9% LTM Return on Equity of 4.5% Total Assets Under Management KD 1.02 billion Total Debt / Total Equity of 0.4x 2017 Cash dividend of 7.0 Fils per share
*Net Profit attributable to parent company excluding non-controlling interest
investments were 6.3%. Our asset management fees increased to KD 3.44 million up and investment banking fees reached KD 0.82 million. GCC stock markets witnessed an uptrend during H1 with YTD returns of 9.9% as evident of S&P GCC index. As one of the leading asset managers in the region, Markaz is well positioned to benefit from the healthy performance of the region’s markets. Our asset management
include diverse proprietary and customized investment solutions, and aim to deliver long-term value creation for our investors, and our investment decision-making process is backed by extensive qualitative and quantitative analysis, and stringent risk management guidelines. This is reflected in our funds’ sustainable performance through the years and across different economic cycles. In the first half of 2018 Markaz Proprietary portfolio have beaten its strategic index by 151 basis points. International markets are preparing for ongoing interest rate increases that are being implemented by many central banks of major economies. Although this clearly has some implications, primarily for our asset management business, Markaz is fully prepared to be responsive in these dynamic financial markets. International real estate AUM increased by 18% during the quarter as the US real estate markets continue to strengthen. Our US-based subsidiary, Mar-Gulf, successfully exited three real estate development projects during the first half, with a total value of USD 67.10 million. The exited projects included a self-storage project in Los Angeles California, industrial projects in Phoenix, Arizona and another industrial project in Dallas, Texas. This performance was spread across our
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Asset Management GCC Equity Funds, Fixed Income Fund, Others Total AUM of KD 689 million
up investment approach along with active liquidity management
results being offset by net outflows
negative market conditions and outperformed index performance. The Fund continue to focus on lower duration and higher quality credit investments
MIDAF - MUMTAZ - Forsa Financial - Arabian - Islamic Fund - Markaz Fixed Income - Private Portfolios - Oil & Gas / PE
Real Estate Investments Middle East and North Africa, International Total AUM KD 331 million MENA Real Estate
250 million
and UAE
difficult market conditions across the GCC impacting transaction volumes and values
National Real Estate Portfolio – 12 Properties - Real Estate Fund
International Real Estate
and value-add transactions in high-growth and supply constrained metros
US Distressed Debt Portfolio - US Development Portfolio VI - US Value Add Portfolio VII
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Research Mena focused Research, Consulting Services
services for over a decade
research institutions to generate Economic & Policy Research studies
Research Themes: Capital Markets, Industry, Policy, Economic, Infrastructure, Regulatory, Periodic Consulting Services
Investment Banking Mergers & Acquisitions, Advisory, Equity & Debt Capital Markets, IPOs
billion across the GCC market
HEISCO on behalf of clients, the acquisition of 23.3% of ACICO construction on behalf of clients, a debt settlement for an Emirati bank, and two ongoing high-profile restructuring transactions
Projects Company for Aviation Services (UPAC)
Best Investment Bank in Kuwait 2011, ‘12, ‘14, ‘15, ‘16, ‘17 Best Investment Bank in Kuwait 2013, ‘14, ‘15, ‘16, ‘17 Best Investment Bank in Kuwait 2013, ‘14 Most Innovative Investment Bank in the Middle East 2016
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Total Revenue (KD 000’s) 22.8% EBIT* (KD 000’s)
*After deducting Impairment of available for sale investments
H1 2018 Topline growth on a y-o-y basis
42.97% growth in Profit on Investments at Fair Value through P&L
H1 2018 Improvement in EBIT on a y-o-y basis
commission and gain on liquidation of subsidiaries in H1 2018 3,152 5,543 2,142 4,901 3,871 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2FY18 725 2,917 (1,404) 1,714 905 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2FY18
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10.0 6.0 5.0 6.0 7.0 76.9% 75.0% 83.3% 75.0% 77.8% 2013 2014 2015 2016 2017 Dividend per Share (Fils) Dividend Payout (%) 4.3% 8.9% 4.8% 4.4% 4.5% Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 LTM Return on Equity (%) Dividend per Share and Payout
*Return on Equity (%) = LTM Net Profit attributable to parent company / shareholder’s equity to parent company
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H1 2018 Income Analysis
Management Fees & Commission KD 4.3 Mil 48.6% Return on Investment KD 4.5 Mil 51.1%
Other Sources of Income 0.3%
(KWD 000's) Q2 Y-o-Y H1 Y-o-Y 2018 2017 Growth (%) 2018 2017 Growth (%)
Management Fees and Commission 2,163 1,723 26% 4,264 3,174 34% Interest Income 134 371 (64%) 282 554 (49%) Dividend Income 312 299 4% 688 734 (6%) Gain from Investments at Fair Value through P/L 668 363 84% 3,018 2,111 43% Gain from Investments at Fair Value through OCI nm 5 nm Gain on redemption/Sale investments 524 nm 1,321 nm Gain on liquidation of Subsidiaries 309 nm 309 43 nm Share of results of associate and joint venture 3 (29) nm (32) (43) nm (Loss)/Gain on sale of investment properties (174) nm (363) nm Net Rental Income 119 94 27% 215 261 (18%) Other Sources of Income 163 (19) nm 23 (78) nm Total Revenue 3,871 3,152 23% 8,772 7,714 14% Operational Expenses 2,327 1,982 17% 4,733 3,945 20% EBIT 1,544 1,170 32% 4,039 3,769 7% Margin (%) 40% 38% 46% 50% Financial Cost 434 387 12% 866 742 17% Net Profit 1,065 747 42% 3,047 2,888 6% Margin (%) 27% 24% 35% 37% Net Profit attributable to Parent Company 905 725 25% 2,619 2,915 (10%) Net Profit attributable to Non-Controlling Interest 160 22 428 (27) Earnings Per Share (Fils) 2 2 100% 5 6 (10%) Notes: 1. Management Fees & Commissions include Asset Management and Investment Banking Fees 2. Return on investments include investments in GCC & International Equities , Fixed Income, Real Estate, International Investments and Private Equity Return on Principal Investments
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(KWD 000's) Jun 2018 Mar 2018 Dec 2017 Dec 2016 ASSETS Cash and Bank balances 10,683 6,725 7,622 12,237 Time Deposits 1,427 7,154 1,430 9,857 Investments at fair value through profit or loss 88,149 91,070 49,498 48,033 Available for sale Investments 49,842 41,870 Debt instruments at fair value through profit or loss 430 Investments carried at amortized cost 4,968 4,971 Investment Properties 53,373 48,363 46,450 35,745 Accounts receivable and other assets 4,127 4,847 7,131 5,317 Loans to Customers 270 270 272 253 Investments in Associate and Joint Venture 3,466 3,313 3,231 3,002 Equipment 572 605 631 434 Total Assets 167,465 167,746 166,107 156,748 LIABILITIES and EQUITY Liabilities Accounts Payable and other liabilities 9,333 12,984 10,309 8,327 Bank Borrowings 18,735 17,563 17,516 8,146 Bonds Issued 25,000 25,000 25,000 25,000 Total Liabilities 53,068 55,547 52,825 41,473 EQUITY Equity attributable to the owners of the Parent Company 91,773 90,419 92,418 93,275 Non-controlling Interests 22,624 21,780 20,864 22,000 Total Equity 114,397 112,199 113,282 115,275 Total Liabilities and Equity 167,465 167,746 166,107 156,748
Asset Under Management
H1 2018 AUM KD 1.02 billion H1 2017 AUM KD 0.96 billion
Investments
192 198 192 188 191 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Book Value per Share (Fils)
for the earnings of the quarter
2 Fils per share in book value
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Management Fees & Commission (KD 000’s) Investment Banking Fees (KD 000’s) Asset Management Fees (KD 000’s) 25.5% 24.5% 25.8%
1,723 1,943 2,185 2,101 2,163 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 1,409 1,639 1,906 1,663 1,772 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 314 304 279 438 391 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
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Asset Management Fees (KD 000’s) Average AUM (KD million) Management Fees Percentage (Annualized)
960 1,020 1,027 1,042 1,020 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 1,409 1,639 1,906 1,663 1,772 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 0.59% 0.66% 0.74% 0.64% 0.69% Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
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Income Returns (KD 000’s) Average Investment Assets* (KD million)
*Investment Assets include Investments at Fair Value through P&L + Available for Sale Investments + Investment at Fair value through OCI+Investments at amortised cost+Investment in associates and JV+Investment Properties
Income Returns Percentage (Annualized) 1,448 3,523 (83) 2,940 1,545 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 137 142 145 148 149 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 4.2% 9.9% (0.2%) 7.9% 4.1% Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
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(KD 000's) Jun 2018 Mar 2018 Dec 2017 Term Loan 18,735 17,563 17,516 Bonds Issued 25,000 25,000 25,000 Total Debt 43,735 42,563 42,516 Cash and Bank Balance 10,683 6,725 7,622 Time Deposits 1,427 7,154 1,430 Total Cash including Time Deposits 12,110 13,879 9,052 Net Debt 31,625 28,684 33,464 Shareholders Equity 91,773 90,419 92,418 Total Equity 114,397 112,199 113,282 Net Debt / Total Equity 0.28X 0.26X 0.3X
Return on Assets (%) = LTM Net Profit attributable to parent company / Total Assets
2.5% 5.3% 2.7% 2.4% 2.5% Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Significant reduction in Net Debt
million LTM Return on Assets (%) Interest / Total Debt (%) 1.0% 1.1% 0.9% 1.0% 1.0% Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Capital on the basis of net debt to equity (gearing ratio)
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Major Shareholders Effective Governance Structure
Major Shareholders Type % Holding Kuwait Pillars for Financial Investment Direct 28.36% Al Khair National for Stocks and Real Estate & Group Direct & Indirect 10.30% Al Mubader Co Direct 5.15% Corporate Information Market Segment Listing Main Market – Boursa Kuwait (Sec Code: 213) 2017 Dividends Cash Dividend – 7% Bonds Issued KD 25,000,000 unsecured debenture bonds
480,801,747 shares Authorized share capital KWD 48,080,174.700 Issued share capital KWD 48,080,174.700 Auditors Grant Thornton (Al-Qatami, Al-Aiban & Partners) and Deloitte (Al-Wazzan & Co.) Company website https://www.markaz.com/ Board Committees I. Board Executive Committee II. Nomination & Remuneration Committee
Committee A Total of 7 Board of Directors 2 Independent Directors 5 Non-Executive Directors
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This document has been prepared by Churchgate Partners for Kuwait Financial Centre K.P.S.C. (“Markaz”) investors, solely for informational purposes. This presentation may contain statements that are not historical facts, referred to as “forward looking statements” .The information contained herein has been prepared to assist prospective investors in making their own evaluation of the Company and does not purport to be all-inclusive or to contain all of the information a prospective or existing investor may desire. While the information presented in this document has been researched and thought to be reasonable, in general, the actual future results may differ materially from those suggested in the forward looking statements. No representations are made as to the accuracy of such statements, estimates or projections. Prospective investors will be expected to have conducted their
reading and reviewing the information contained in this document, the investor acknowledges and agrees that Markaz and/or its affiliates do not assume and hereby disclaim any liability to any party for any loss or damage caused by the use of the information contained herein or errors or omissions in the information contained in this document to make any investment decision in the venture referred to herein, whether such errors or omissions result from negligence, accident or any other cause. In no event shall Markaz and/or its affiliates be liable to any party for direct, indirect, special, incidental, or consequential damages of any kind whatsoever arising out of the use of the information contained herein. Markaz and/or its affiliates specifically disclaim any guarantees, including, but not limited to, stated or implied potential profits or rates of return or investment timelines. This document (the “Presentation”) is the lawful property of Kuwait Financial Centre K.P.S.C (“Markaz”), which is regulated by the Capital Markets Authority and the Central Bank of Kuwait. This document and its contents are confidential and may not be distributed, reproduced or copied in whole or in part, nor may any of its contents be disclosed without the prior written and express permission of Markaz.
Deena Yousef Al-Refai +965 2224 8000 (Ext. 2503) VP - Investor Relations & Private Banking drefai@markaz.com Ravi Gothwal +971 4313 2432 Churchgate Partners markaz@churchgatepartners.com
Investor Relations Contact
Kuwait Financial Centre K.P.S.C. "Markaz" P.O. Box 23444, Safat 13095 State of Kuwait Tel: +965 2224 8000 Fax: +965 2242 5828 Email: info@markaz.com markaz.com