Saudi Arabia’s Alsalam Aerospace set to double turnover, mulls long-term IPO

The Alsalam Aerospace Industries stand at the Dubai Airshow. (AN photo)
Updated 15 November 2017
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Saudi Arabia’s Alsalam Aerospace set to double turnover, mulls long-term IPO

DUBAI: Saudi Arabia’s Alsalam Aerospace Industries aims to double turnover within two years and could consider becoming a public company.
The Riyadh-based outfit that repairs, maintains and overhauls aircraft, has formed an alliance with other aerospace industries in the Kingdom, said CEO Yahya Homoud Al-Ghoraibi in an interview on the sidelines of the Dubai Airshow.
Such an approach mirrors a similar recent consolidation of aerospace and defense-focused companies in the UAE, as both countries seek to add high-value aviation jobs in line with economic diversification plans aimed at creating more private sector employment for citizens.
The company currently generates revenues in the range SR1 billion ($266 million) to SR1.2 billion. But that is expected to grow to about SR2 billion by 2019, said Al-Ghoraibi.
He said a public listing could be considered over the next five years.
“With the new vision, a lot of projects are coming to Alsalam and we are working hand-in-hand with some of the other offset companies to form an industrial alliance,” he said.
Alsalam is one of a group of Saudi aviation groups that have signed an initial agreement to form an alliance to undertake manufacturing of aircraft parts as well as maintenance work.
The move was announced by TAQNIA Aeronautics on Monday. Other companies in the alliance include Middle East Propulsion, Advanced Electronics, Advanced Arabian Simulation, Saudia Aerospace Engineering Industries, Aircraft Accessories and Components and Saudi Rotorcraft Support.
Based next to King Khalid International Airport in Riyadh, Alsalam employs about 2,600 people — almost 60 percent of whom are Saudis.
Its corporate brochure shows a picture of the Douglas DC-3 plane that was gifted by President Roosevelt to King Abdul Aziz in 1945 — marking the birth of civil aviation in the country.
The company was established in 1988 as an “offsets” program, aimed at encouraging knowledge transfer from foreign companies winning big contracts in the country to local joint ventures.
Other Gulf states have developed their own offsets programs to attract more inward investment and the economic visions of both Saudi Arabia and the UAE identify aviation as a key focus.
The offset system prioritizes Saudi-origin products and stipulates that a proportion of the technical or services component of contracts are awarded locally.
But the acceleration of economic reforms in the Kingdom is putting even more pressure on foreign corporations hoping to win work in Saudi Arabia to demonstrate that they are helping to transfer skills, create jobs and build capacity.
BAE Systems, the world’s third-largest defense company, highlighted the importance of that process in winning work in the Kingdom.
“This is all driven by Vision 2030,” said Guy Griffiths, BAE Systems’ international managing director during the company’s first-half earnings webcast in August.
“In every negotiation that’s conducted, whether with us or other defense suppliers, a key component beyond the price and specifications of the product is what is the industrial, training, development and technology transfer contribution that goes with this order? It’s probably the most preeminent part of every negotiation,” he said.
Frost & Sullivan expects that the Saudi military offsets market will grow at an annual rate of 3.9 percent to reach $62.6 billion by 2021.


China’s real estate investment slows as caution sinks in

Updated 19 October 2018
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China’s real estate investment slows as caution sinks in

  • Property increases downside risks to economy
  • September new construction starts up by a fifth

BEIJING: Growth in China’s real estate investment eased in September and home sales fell for the first time since April, as developers dialled back expansion plans amid economic uncertainties and as additional curbs on speculative investment kicked in.
A cooling market could increase the downside risks to the world’s second-largest economy, which faces broader headwinds including an intensifying trade war with the United States.
However, while analysts acknowledge increasing caution in the property market, they say investment levels are still relatively high, suggesting a hard landing remains unlikely.
Growth in real estate investment, which mainly focuses on residential but also includes commercial and office space, rose 8.9 percent in September from a year earlier, compared with a 9.2 percent rise in August, Reuters calculated from National Bureau of Statistics (NBS) data out on Friday.
“I think overall, China’s real estate market is still resilient, and the decline in sales is within our expectations,” said Virginia Huang, Managing Director of A&T Services, CBRE Greater China.
“There is no sign that the government has relaxed their control, but it still has many methods and tools to support the market if the economy deteriorates rapidly,” Huang said.
Real estate has been one of the few bright spots in China’s investment landscape, partly due to robust sales in smaller cities where a government clampdown on speculation has been not as aggressive as it is in larger cities.
The market has struggled as authorities continued to keep a tight grip over the sector, ramping up control in hundreds of cities. Transactions fell sharply over the period dubbed “Golden September and Silver October,” traditionally a high season for new home sales.
Property sales by floor area fell 3.6 percent in September from a year earlier, compared with a 2.4 percent gain in August, according to Reuters calculations, the first decline since April. In year-to-date terms, property sales rose 2.9 percent in the first three quarters.
China’s central bank governor Yi Gang said last week he still sees plenty of room for adjustment in interest rates and the reserve requirement ratio (RRR), as downside risks from trade tensions with the United States remain significant.
The government has implemented four RRR cuts this year, releasing hundreds of billions in new liquidity to the market.
China has for several years pushed a deleveraging campaign to reduce financial risks, clamping down on shadow banking and closing many “grey” financing channels for real estate firms.
For many highly leveraged developers, there are already signs of increasing caution as exemplified by a surge in failed land auctions due to tight liquidity and thinning margins.
New construction starts measured by floor area, an indicator of developers’ expansion appetite, rose 20.3 percent in September from a year earlier, compared with a 26.6 percent gain in August, Reuters calculations showed.
That’s against the backdrop of seemingly looser funding conditions for China’s real estate developers, who raised 12.2 trillion yuan ($1.76 trillion) in the first nine months, up 7.8 percent from the same period a year earlier, the NBS said.
The growth rate compared with a 6.9 percent increase in January-August period.
“Many developers will face lots of maturing debt by the end of this year, and there are perceived risks in the economy, so they will be more cautious,” Huang said.
China’s housing ministry is considering putting an end to the pre-sale system that developers use to secure capital quickly, in an effort to crack down on financial risks in the property sector.
China’s home prices held up well in August, defying property curbs. But analysts expect additional regulatory tightening and slowing economic growth will soon take the wind out of the property market’s sails.
The National Bureau of Statistics will release September official home price data on Saturday.