Emerging Economies Research LLP (E2 Research),an independent research boutique, focused on investments in Africa, Eastern Europe, Latin America, and the Middle East, values Global investment House "Global" stock price at KD 1.295, a 40 % higher than the current market price in the Kuwaiti market.
E2 research report mentioned that Global, a Kuwait-based asset manager and investment firm, has total assets of $ 2.9 billion and $8.2 billion in client assets under management as of 1H 2007. Its operations are spread across 14 countries in the MENA region and Asia. Its stronghold in the GCC markets combined with management's focus on maintaining strong and profitable growth positions Global as a compelling growth and yield story. It also serves as an ideal investment gateway into the unlisted company space in the MENA region.
Favorable macro story: E2 research estimated a 13% real rate of growth (CAGR) in total financial assets over the next 5 years in the MENA region spurred by strong oil revenues as well as a 11% real growth (CAGR)in non-oil economic activity. Financial liberalization and massive privatizations, particularly in Saudi Arabia, will drive the industry's near-term growth momentum.
Compelling growth and yield prospects: company said that over the past 6 years, Global has grown its fee-paying AUM at a 38% CAGR, revenues at 83% and EPS at 36%. Over the next 5 years. They expect Global's financial investments portfolio growth of 22% and AUM of 21% (CAGR) to drive revenues growth of 22% and EPS of 24% (and 24% growth in dividends).
Super alpha generation: Global seeks to generate a minimum of 20% annual net returns (2x in 5 years) to the clients of AUM as well as generating equal or higher yields for its financial investments portfolio. The realized average ROI of Global's exits in 2006 was c35%, which far exceeded the company's target threshold of 20%.
E2Research believes that their estimates are conservative; Global's private equity unrealized gains ''reserve'' equates to an additional 63 fils of EPS (40% of EPS) in 2008, not yet in their valuation numbers. Management's excellent track record of exiting investments in a timely and profitable fashion increases the likelihood of these unrealized gains also delivering robust alpha.
2004 2005 2006 2007E 2008E 2009E 2010E
EPS (file) 39 103 108 116 152 189 232
DEPS (file) 18 55 63 73 89 111 136
P/BV* (x) 2.7 2.2 1.9 1.6
P/E (x) 7.8 5.9 4.7 3.9
P/E* (x) 12.5 10.1 8.2 6.7
EBITDA(P) Margin (%) 64 58 57 60 76 81 88
EBITDA(P)/avg. assets (%) 32 35 19 17 17 17 17
Net Asset Yield (%) 29 31 15 12 12 13 13
Adjusted ROE* 42 54 30 23 24 26 26
The E2Research report tributes on growing fee base will keep Global recurrent income at about 30% of total revenues in the next 5 years. Recurrent income on Global AUM and investment banking businesses and non-recurrent investment income from financial investments historically constituted 62% of the company's total revenues between 2002 and 2006, while realized and unrealized gains on it's financial investments generated about 38% of it's revenues.
They expect Global AUM business to grow at a CAGR of 21% over the next 5 years, while corporate financial and investment banking business to grow at a CAGR of 17% over the same period.
The company estimates the share of realized gains in total income at 60% over the next 5 years. The weighted average (blended) portfolio yield of Global's financial investment was 23% between 2003 and 2006, half of which came from exited (i.e. realized) investments. They expect income from financial investments to grow at double digits (c20%) over the next 5 years, while fee-based revenues is estimate to grow at a healthy CAGR of 17%. Given its strong cash generation capacity, Global can comfortably sustain a cash dividend payout of 45% over the same period.
About Global Investment House “Global”
Global Investment House “Global” is a full-fledged investment company incorporated in 1998, and falls under the regulation of the Central Bank of Kuwait. Its underlying foundation is to meet the high expectations of local and international clients, and to enhance the investment service industry and the capital market in Kuwait and the region. Today, Global stock lists on the Kuwait, Bahrain, and Dubai Stock Exchanges, with branches and affiliates in Bahrain, Dubai and Abu Dhabi (UAE), Jordan, Qatar, and Sudan. Global plays an important role in promoting investment opportunities in the Arabian Gulf Peninsula to investors through expert financial engineering, in-depth research and reports to advance the capital market in the region. Thus, Global’s achievements have been recognized on local, regional, and international levels. The company’s current assets under management reached KD2.39 billion (USD8.3 billion) as at 30 June 2007.
For more information about Global, please contact Khaled A. AlAttar, Assistant Manager Media Relations. E-mail: kattar@global.com.kw, Tel: (965) 240-0551 Ext. 402; Fax: (965) 242-0498; P.O. Box: 28807 Safat, 13149 Kuwait; Web; www.globalinv.net
