Interim Management Statement
12 Février 2010 - 2:37PM
UK Regulatory
TIDMGMFA
RNS Number : 0911H
Global MENA Financial Assets Ltd
12 February 2010
Global MENA Financial Assets Limited
Interim Management Statement
11 February 2010
This is an Interim Management Statement issued by Global MENA Financial Assets
Limited. (GMFA or the Company) in accordance with the FSA's Disclosure and
Transparency Rule 4.3. This statement relates to the period ended 11 February
2010, as date of publication.
Macroeconomic Environment
The global financial crisis has severely affected economies around the world to
varying degrees and MENA has not been any exception, although some of the
regional economies, such as Qatar, Oman & Saudi Arabia, demonstrated some
resilience. The hydrocarbon sector, being the principal GDP contributor to the
Gulf Cooperation Council (GCC) economies, has always played the key role in
driving the economic cycle of the region. On the back of a strong turnaround in
hydrocarbon prices, the GCC's capital markets started recovering in the second
quarter of 2009. Crude oil increased from US$30 per barrel in early 2009 to
US$70 per barrel in August 2009 and is expected to remain over US$75 per barrel
in 2010.
The IMF estimates (October 2009) that GDP growth will be 18.5% in Qatar, and
3.8% and 3.7% in Oman and Bahrain, respectively. The UAE and Kuwait are
expected to post growth of 2.4% and 3.3% in 2010, respectively. Although
financial conditions have started improving, they are still far from their
pre-crisis levels. Looking ahead, governments will need to balance the need to
unwind the liquidity support provided at the height of the crisis, while
maintaining public spending on infrastructure and social development. In the
medium term, financial market development, and employment generation measures,
will remain a priority of governments in the region.
NAV Performance
GMFA's investment portfolio as of 11 February 2010, consisted of ten equity
assets comprising two listed companies and eight unlisted companies. The net
asset value per share as of 11 February 2010 (unaudited) was GBP1.00 compared to
a net asset value of GBP1.07 on 30 September 2009, representing a decrease of
6.5%. Regular updates of the Company's NAV can be found on the Company's
website, www.gmfa.com.
Portfolio Update
As of 11 February 2010, the portfolio's cash and cash equivalent investments
amounted to a face value of US$187 million. This comprises approximately US$157
million of cash and deposits with highly rated banks and approximately US$30
million of investments (net of provision) in two murabaha1 contracts with two
Kuwaiti companies. The two Kuwaiti companies defaulted in paying their financial
obligations. As referred to in previous statements, a committee comprised of
independent directors was established to monitor and recover these murabaha
investments. With the help of the Investment Manager, this committee has to date
recovered US$22.4 million (KD 6.5 million) owed under these murabahas. The
committee is working to recover the remaining balances as soon as possible. The
Company has made no further investments in murabahas and will not do so in
future.
2009 was a difficult year for the portfolio companies of GMFA. The operating
performance was hit hard due to the international financial market crisis
affecting the MENA region. The year-on-year performance also declined due to the
fact that most companies registered high revenue and profit in 2008, before the
financial market crisis entered the MENA region. In 2009 we focused mainly on
fortifying the core operations of the companies where we had controlling stakes.
We strived to achieve this through shifting focus from non-core activities to
core-activities, introducing higher corporate governance norms, stringent
operational and financial risk management mechanisms, cost reduction strategies,
organizational restructuring, and exacting efficiency measurement norms. Our
efforts are expected to bear fruit in the current year and that the operating
performance of the two Jordanian companies where GMFA has a controlling stake
will continue to improve. We also expect significant business consolidations to
take place in the markets where some of the GMFA portfolio companies operate.
We are currently evaluating a number of investment opportunities in banking,
financial services and insurance (BFSI) sectors across the MENA region. Given
the future prospects of some of the emerging markets outside the MENA region,
there is also interest in considering investments outside of the MENA region, to
the extent permitted under the investment mandate. Separately, we are also
exploring profitable exits from some of the portfolio companies.
[1]Murabaha is an Islamic financing structure, where an intermediary buys an
asset with free and clear title to it. The intermediary and prospective buyer
then agree upon a sale price (including an agreed upon profit for the
intermediary) that can be made through a series of instalments, or as a lump sum
payment. Pricing depends on credit ratings, transaction size and types of goods
being financed. The premium is generally based on a benchmark figure, such as
LIBOR, plus a margin. A bank cannot re-price its receivables if LIBOR rises
during the contract's duration. A Murabaha is not an interest-bearing loan,
which is considered riba (or excess). Murabaha is an acceptable form of credit
sale under Sharia (Islamic religious law). Similar in structure to a rent to own
arrangement, the intermediary retains ownership of the property until the loan
is paid in full.
Changes to the Company's Board and Auditors
Messrs. Richard Bernays, John Hawkins, and Terrence Allen (who were not
re-elected to their positions to the board at the Company's AGM), and Mr. Omar
El-Quqa (who resigned due to his departure from Global Investment House K.S.C.C
(Global) ) are no longer directors of the Company. Ms. Anne Ewing and Mr. Hisham
Al Otaibi have both joined the board as independent directors. Mr. Al-Otaibi
was also appointed as the chairman of the board. Currently the board has three
independent directors being Messrs. Hisham Al-Otaibi, Kishore Dash, and Ms. Anne
Ewing (from Guernsey) and one non-independent director, being Ms. Maha Al
Ghunaim from Global. As announced in September last year, the Company has
appointed Allen & Overy LLP as its legal advisor and KPMG as its auditors.
Investment Activity in the Company
On 17 June 2009, GMFA, through its wholly owned subsidiary, Financial Assets
Bahrain W.L.L., acquired a minority holding in Twenty Third Project Management
Company W.L.L., and consequently an indirect equity stake of 5% in Dar Al
Tamleek Company (DAT) from Global, a 29.99% shareholder in the Company. The
consideration of US$ 4,117,358 was set off against a corresponding amount owning
under certain Islamic money market instruments with Global and its subsidiaries.
In October 2009, GMFA also participated in the 25% second capital call of DAT,
raising the aggregate acquisition cost to US$ 7,459,605.
On 4 January 2010, GMFA, through its subsidiary, Financial Assets Bahrain W.L.L
(FAB), acquired a 49% shareholding in Twenty Fourth Project Management Company
W.L.L. from Global, resulting in an indirect interest of 20% in Al Fajer
Retakaful Insurance Company KSCC. The consideration of US$ 34, 000,000 for this
acquisition was adjusted against an equivalent amount receivable from Global
under Islamic money market instruments. As a result of this transaction, GMFA
ended its exposure to Global under the Islamic money market instruments.
As announced on 19 November 2009, following the Company's shareholders' approval
to settle the put option agreement entered into between the Company and Global,
the Company received US$21.26 million in cash from Global, which was distributed
to the Company's shareholders by way of a special dividend of GBP0.05 per share.
De-listing
The Company received communications from a number of shareholders during 2009
requesting that the Company consider cancelling its listing on the Official List
of the UK Listing Authority and their trading on the London Stock Exchange's
market for listed securities (the LSE). Taking into consideration the prolonged
illiquidity of GMFA's shares since their admission to trading, a market price at
a large discount to NAV and the significant administrative costs arising from
maintaining its listing on the LSE, on 21 December 2009, the board put forward a
proposal to the Company's shareholders (by way of a notice of EGM), that the
Company should cancel its listing on the Official List and cease trading of its
shares on the LSE. By a significant majority of those who voted, GMFA's
shareholders approved a resolution to this effect on 27 January 2010.
GMFA is currently exploring various options to provide liquidity in the
Company's shares, including (amongst other things) providing a matched bargain
facility to facilitate a mechanism for an exit for those shareholders who are
unable or unwilling to hold un-listed securities. Notwithstanding the
de-listing, GMFA's board intends to adhere to international best practices in
the area of corporate governance and risk management, following the de-listing.
Such practices will include, but will not be limited to, a) the maintenance of a
majority independent board, the continued appointment of a third party
independent administrator, a custodian, a reputable legal advisor, and a
reputable audit firm; and b) providing quarterly updates on the Company's
operations and portfolio performance, timely updates on all key material
developments, an annual audit and interim review of the Company's performance, a
performance review of the investment manager by the Company's board, and a
performance review of the board.
Rajiv Nakani, CFA, Managing Partner, Global Capital Management Ltd. commented:
"While we have a renewed focus on driving overall strategic direction and value
add in the portfolio companies of GMFA, we are also reviewing a number of new
investment opportunities in the BFSI sectors with an aim to create a growth
portfolio utilizing the cash available to the Company. For portfolio companies
where growth prospects, after comprehensive analysis, appear limited, we may
consider disposing such investments to shift funds into opportunities that may
generate returns commensurate to the GMFA investment mandate.
In light of the major events of 2009 in the banking and finance sectors in the
GCC countries, we are cautiously optimistic about the prospects of these sectors
in 2010. We are evaluating available investment options to take advantage of
opportunities in the BFSI sectors in emerging markets outside of the MENA region
where the fundamentals, overall and sector specific, are relatively stronger."
For information please contact:
Rajiv Nakani, CFA
Managing Partner
Global Capital Management Ltd.
T: +965 2295 1200
F: +965 2295 1648
E: rnakani@global.com.kw
Financial Dynamics
Ed Gascoigne-Pees
Nick Henderson
+44 (0)20 7269 7114
Notes to Editors
About Global Mena Financial Assets Limited.
Global MENA Financial Assets Limited is a Guernsey incorporated investment
company formed on 2 June 2008 to make attractive absolute gains through
investment in a diversified portfolio of financial sector assets focused
predominantly in the MENA Region (including Turkey).
www.gmfa.com
About Global Capital Management Limited.
Global Capital Management Limited is a wholly owned subsidiary of Global
Investment House K.S.C.C. The Manager has one of the largest private equity
teams in the MENA region. The members of the private equity team have diverse
sector and geographic experience in countries and sectors across the MENA and
other emerging markets. The team collectively maintains a broad network of
institutional relationships within the regions targeted for investments by its
funds. Global Capital Management Limited currently manages assets of more than
US$3 billion.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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