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Thursday, 12 November 2009

Emirates Pres: Its Clear Emerging From Worst Of Downturn

Dubai-based Emirates Airline Thursday said yields are returning, but that it will continue to keep costs tight as it starts to emerge from the global downturn.

"Yields did take a beating, but after much work they are slowly returning," Emirates Airline President Tim Clark said at the European Aviation Club in Brussels, according to a transcript of the speech. "It is clear we are emerging from the worst of the downturn."

Once buoyed by soaring oil revenue, Emirates, like other airlines around the world has been feeling the impact of falling passenger numbers and weakening demand for business and first class traffic amid the wider global economic crisis.

In Dubai, real-estate development, which has fueled local growth and attracted foreign residents and investors, has plummeted. Tourist numbers, meanwhile, which have served as the backbone for Emirates Airline's expansion, have also fallen.

Clark Thursday acknowledged that 2009 had been a tough year for Dubai, but said that the emirate was also starting to recover from the financial crisis.

"2009 was a difficult year...it has been a wake up call for Dubai," he said.

Clark said that the U.A.E. and Dubai will remain a "critical market" for Europe and that the economic relationship between the European Union and Dubai was "strong and accelerating".

Emirates last week said its first-half net profit almost tripled to 752 million U.A.E. dirhams ($205 million) from a year earlier on lower costs and fuel prices, but warned that demand for air travel is unlikely to pickup for at least a year. Emirates will continue its "ruthlessness on costs" to remain competitive, he said Thursday.

Clark also hit back at critics of the airline who accuse it of receiving government subsidized fuel and reduced parking fees at Dubai airport.

"I am sure this list of misconceptions will remain aloft - too many competitors have a vested interest in keeping it that way," he said.END

Abu Dhabi freezes Saad Group's UAE assets

An Abu Dhabi court has issued a provisional attachment order of about $151 million on the accounts and assets of two companies owned by Saudi business tycoon Maan Al Sanea.

The court on Nov. 12 ordered the freezing of funds, assets and listed securities held by Saad Group and Saad Trading & Financial Services in the United Arab Emirates, according to a statement issued Thursday by the Judicial Department in the Emirate of Abu Dhabi.

The statement didn't name the banks involved.

Saad Investments Finance Files for Court Protection in U.S.

Saad Investments Finance Co. (No. 5) Ltd., a private equity firm owned by Maan al-Sanea and his family, sought protection from its creditors in the U.S.

Saad filed yesterday under Chapter 15 of the U.S. bankruptcy code, which gives a foreign company protection from U.S. creditors while the business reorganizes or liquidates in its home country.

Saad is owned by Saad Investments Company Ltd., which in July was placed under a court-appointed liquidator in the Cayman Islands.

Dubai Stocks End 4-Day Rally as Emaar, DIB Fall; Kuwait Falls

Dubai shares dropped for the first time in five days, led by Emaar Properties PJSC and Dubai Islamic Bank PJSC, as investors speculated recent gains outpaced growth prospects.

Emaar, the United Arab Emirates’ biggest property developer, and Dubai Islamic Bank retreated for the first time in a week. The DFM General Index fell 1.4 percent to 2,175.48. at 1:06 p.m., paring this week’s advance to 3.7 percent. The MSCI Emerging Markets Index declined for the first time in seven days and oil prices lost 0.2 percent to $79.10 a barrel.

“The local market is consolidating after a strong start to the week,” said Mark Friedenthal, fund manager at Abu Dhabi Commercial Bank.

NOVEMBER RAILTIME INDICATORS REPORT

The always informative railtime indicators report is out and the outlook is still forecasting a tepid and vulnerable recovery. The real economy is not recovering at the same pace as the equity markets might have you believe. The AAR Reports:

“October’s intermodal numbers, along with the recently-announced increase in GDP for the third quarter, indicate that we are seeing some hope for improvement in the nation’s economic situation,” said AAR Senior Vice President of Policy and Economics John Gray. “While it is still too early to say we are on the road to recovery, railroads continue to take freight cars out of storage with over 11,000 cars back in service in October.”

Throughout this financial crisis, I have come to rely on Railway Freight Reports, as they seem connected to the real economy. It will be interesting to see, as GCC Railways develop, if they will become Regional economic indicators.

Qatar Qinvest Plans To Raise $350 Million In Rights Issue

QInvest, Qatar's largest investment bank, is looking to raise up to $350 million in a rights issue, as the company looks to capitalize on investment opportunities in the region, the bank's chief executive has said.

"We are in the process of increasing our capital now through a rights issue," Shahzad Shahbaz told Zawya Dow Jones in a phone interview Wednesday.

QInvest was set up in 2007 with authorized capital of $1 billion and paid up capital of $500 million.

Great Portland Estates prepares for recovery

Great Portland Estates, the London property investor, is positioning itself for a recovery in the market through a series of deals and new schemes, including one of the first debt restructuring development arrangements.

The company will buy and develop two West End schemes for £10m ($17m) under an innovative arrangement with Istithmar, the previous owner, and its bank Eurohypo that will give it the first of any profits, and a share of additional money above a limit.

Great Portland Estates said that it had a 2.6m sq ft development pipeline ready for the market recovery, including the new West End acquisition, Marcol House, which will be redeveloped in the first half of 2010.

Makaseb Monthly Commentary - October 2009 (PDF)

  • Both medium and longer term returns clearly demonstrate the potential of the MENA asset class. Returns have been comparable to other emerging markets, including the BRIC markets over both periods. MENA markets have posted decent returns over the last 9 years, rising 12.9% per annum
  • There appears to be a clear size effect at work here, with smaller companies outperforming the larger companies (in terms of market cap) by a wide margin.
  • Over the past 5 years Markets which were in bubble territory (mainly the GCC) in November 2000 have all performed modestly. Egypt is the clear winner over the last 5 years, benefitting from a reasonable starting point for valuations for this period

GCC Telecom Sector Report - November 2009 (PDF)

Global Research is delighted to bring our investors a new research product i.e. "GCC Telecom Sector Report”. The report intends to provide among others:

· Quarterly country-wise subscriber base of GSM segment
· Quarterly subscriber base and market share of telecom operators in GCC
· Performance of companies under coverage by Global Research

Highlights:

· Shift in Call Traffic Impacted Revenues of Telecom Operators in Kuwait
Revenue of telecom operators in Kuwait were hurt by regulatory changes as fee charged by mobile operators to receive calls on their network from fixed-line has been scrapped, resulting into a loss of revenue for mobile operators in Kuwait. On the back of this ARPU and margins have been negatively impacted. This regulatory change has far more consequences as there has been a shift in call traffic with increase in fixed to mobile (F2M) calls and declining calls from mobile to mobile (M2M) and also mobile to fixed (M2F). On the back of this Zain Kuwait’s ARPU declined from US$69 in 1H-2008 to US$54 in 1H-2009 while in case of Wataniya Telecom ARPU declined from US$50 in Q3-2008 to US$37 in Q3-2009.


· Zain Stake Sale Deals
With regard to selling of 46% stake in Zain by Al-Khorafi group to Vavasi group and selling of 24.6% stake by KIA (in a separate transaction) at KD2 per share, the deals are valued at 2009E earnings multiple of 24.5x and 2009E EV/EBITDA of 10.0x. In our view, transaction multiple looks expensive. At the same time, the deal provides good exit opportunity to the sellers but there is no clarity on minority shareholders. Ideally, both the stake selling deals should entail an open offer by the acquirer.


· Recommendation
In the telecom sector all the GCC countries have different operational metrics and each company in the region has different operational dynamics depending on its reach in the domestic market, its strategy for overseas expansions and funding strategy. In the GCC telecom space we remain overweight on Etisalat and Omantel.

Gulf issues leading bond markets

Gulf bond sales are accelerating at a faster rate than anywhere in the world as international investors buy sovereign and corporate debt from the Emirates, a senior Bank of America Merrill Lynch economist says.

Returning appetite for Dubai debt is also expected to be given a boost by the anticipated repayment by Nakheel of US$4.1 billion (Dh15.06bn) in bond principal and profit by Nakheel next month. The bond reached a record this week on expectations that it would be repaid in full.

“We have an excess of demand because we do not have that many sovereign issuances [of debt from the Gulf], so there is a good appetite for either quasi-sovereign companies or sovereign issuances, and it is going to carry on,” said Turker Hamzaoglu of BofA Merrill Lynch. “We’ve had more than $30bn of issuances so far [this year] and the UAE accounts for a big chunk of that.”

Istithmar loses out on West End properties

The Istithmar unit of Dubai World has sold two buildings in London’s West End for a fraction of what it paid for them two years ago as it seeks to raise cash and trim costs.

Istithmar World, which is part of Dubai World, sold the buildings to Great Portland Estates (GPE), a UK property company.

The disposal coincides with a major restructuring exercise at Dubai World, which is owned by the Dubai Government. The conglomerate has already cut about 12,000 jobs and merged some of its operating units as the emirate seeks to reduce its debt burden.

Taqa puts brake on 3 years of spending

The Abu Dhabi National Energy Company, or Taqa, announced a major change in strategy yesterday as profits disappointed investors just weeks after the company replaced its most senior executive.

Having spent three years on a US$24 billion (Dh88.15bn) global spending spree, the government-controlled company will now concentrate on existing operations and reduce debt.

“We will shift our focus from growth by step-out M and A [mergers and acquisitions] to organic growth from our existing assets,” Carl Sheldon, the newly appointed general manager of Taqa, said yesterday, laying out his plan to turn the company around. “We’ve now got a suite of internal investment opportunities that will allow us to grow the business without further acquisitions.”

Nakheel debt talks turn spotlight on future of the Islamic bond market

Nakheel, Dubai’s leading property company and owner of the Palm development, offshore of the Gulf city, is in talks with Dubai World, its heavily indebted parent, over the repayment of a $3.5 billion (£2.1 billion) Islamic bond.

Dubai World, which also owns DP World, the world’s No 3 port operator, is guarantor of the Nakheel bond, which is being watched closely by Islamic investors as a bellwether for the shaky finances of the city-state and the health of Islamic finance, generally. Dubai World is the investment holding company of a clutch of emirate-related businesses that have huge debts. Dubai has to refinance $50 billion of maturing borrowings by 2013. Dubai World is believed to owe $60 billion.

In an effort to keep the State’s business ventures afloat, the Dubai Government this year raised an emergency $10 billion loan from the central bank of the United Arab Emirates.

Egyptian bourse becomes Arabian star

True, the Cairo and Alexandria Stock Exchange has markedly underperformed MSCI Barra’s Emerging Markets Index, which has gained nearly 70 per cent over the past 12 months. But, compared with the Gulf markets, the Case has provided a relatively comfortable ride.

It is the best performer of all Arab stock markets over the past 12 months. The Egyptian market has produced a 28 per cent gain compared with a 1.2 per cent rise in the MSCI Arabian Markets Index.

Hashem Montasser, head of asset management at investment bank EFG-Hermes in Dubai, says Cairo has long been on the investment horizon of large family groups and institutional investors in the Gulf. More recently, listed Egyptian companies have benefited from the comparative openness of their executives, which has been at a premium in the downturn.

BAE Jockeys With Lockheed for Gulf Sales Amid Iran Arms Threats

Most of the world looks at Iran and perceives a growing nuclear threat. Its Persian Gulf neighbors are also focusing on what they call a dangerous conventional weapons buildup.

Saudi Arabia and the United Arab Emirates are leading a drive to upgrade their missile-defense, naval and air forces. The spending offers U.S. and European defense companies such as BAE Systems Plc and Lockheed Martin Corp. as much as $40 billion in sales, mostly in the next two to five years. Some of these deals may be discussed at the Dubai Air Show starting Nov. 15.

The buildup is a sign that Iran, suspected by the U.S. and its allies of developing atomic weapons, poses a growing conventional military threat too. It is testing new missiles with a longer-range strike capability and building naval forces capable of hitting neighboring oil facilities, said Sami al- Faraj, director of the Kuwait Center for Strategic Studies, which advises the Kuwaiti government.

Saad unit lenders meet, liquidators appointed

Creditors of Saad Investments Company Ltd held their first official meeting on Thursday, accountancy firm Grant Thornton said, taking a next step in the troubled firm's restructuring process.

Banks are seeking repayment of a loan of up to $2.8 billion taken out in 2007 by Cayman Islands-registered SICL, a unit of Saudi investment firm Saad Group.

The meeting took place in the Cayman Islands, SICL's court-appointed liquidator Grant Thornton said in a statement.

Travails test Alba’s mettle



It has been a tough year for Alba. The 40-year-old Bahraini aluminium producer has endured a long corruption inquiry, a change of management, an extensive restructuring, job losses and whisperings of a possible privatisation.

Add to this the halving of aluminium prices in the past 12 months and the construction of at least four new smelters in its backyard, and a casual observer might assume that Aluminium Bahrain was on its last legs. Yet quite the reverse is true, says Mahmoud al-Kooheji, chairman of the company.

“In many ways the financial crisis has been a good thing as it has forced us to do our homework and work out how to stay ahead of the competition,” he says. “We’re still one of the lowest-cost producers in the world.”

Comment: Oil wealth must be used prudently

The price of oil has nearly doubled since the beginning of the year, reaching the $70-$80 per barrel level necessary to ensure a return to vibrant economic activity in the six Gulf Co-operation Council states.

Stock indexes in Saudi Arabia and the United Arab Emirates – which account for two-thirds of GCC stock market capitalisation – have risen by about a third. Spreads on sovereign credit default swaps have been falling steadily.

Sheikh Mohammed bin Rashid Al Maktoum, Dubai’s ruler, said this month: “I am confident that the worst has passed, and that, as the global economy stabilises, Dubai today is well placed to exploit its inherent strength.” And over the summer, a Dun and Bradstreet business optimism survey in Saudi Arabia showed confidence increasing in all sectors, with nearly half of those questioned confirming plans to expand their businesses.