JEDDAH, 24 October 2005 — After getting one of the first two licenses from the Capital Market Authority (CMA) recently, BMG Financial Advisors has taken up the challenge of persuading the family businesses to merge, acquire, divest or go public. BMG’s Chief Executive Officer Basil Al-Ghalayini said in an exclusive interview to Arab News that after creating CMA, it is helping to improve investment environment in the Kingdom. Following are excerpts from the interview:
Question. What will be the BMG’s strategy after CMA approval?
A. Firstly, we are proud to be one of the first two licenses to be granted to national firms. We do aim, with God guidance, to continue carrying out our responsibilities in the most professional and ethical manner. As for our strategy, we are planning to approach family businesses with a view to educate them about the pros and cons of going public and if so the requirements per the CMA rules. Talking about that, we are planning to host a family business forum in mid December in cooperation with the Family Business Academy. Furthermore, we will be advising financial institutions and major trading groups on their investments in the local and international stock markets as per the CMA rules and regulations. Finally, at the right time we are planning to expand our professional services to include fund management and brokerage subject to the CMA’s approval.
Q. What exactly will be BMG’s role in an advisory capacity? Whom you are going to advice? I mean companies or individual investors in the stock market.
A. We advise listed Saudi companies on their plans to raise capital as well as advising private firms or family companies on their private or public offerings per the offering and listing rules of the CMA. We also advise clients, listed or private companies on their mergers and acquisitions activities. Furthermore, through our research department, we provide Saudi equity research reports which are distributed to the public free of charge.
Q. The CMA also slowly allowing stock brokerages in the Kingdom. How it will beneficial for the investors?
A. This will improve the stock market investment environment in general. It will eliminate monopoly of banks which will lead to more competition and greater variety with better services to the customer. They also allow for more transparency in the Saudi stock market.
Q. Recently, the CMA suspended an investor for manipulation. Do you believe there is manipulation and insider trading in Kingdom and how it can be stopped?
A. Manipulation and insider trading do happen in major developed as well as emerging markets and Saudi Arabia is no exception. However, the CMA has been enforcing its rules and regulations with an iron fist fashion which is a needed and healthy development for the ethical conduct of the KSA market.
Q. The Saudi listed companies have announced their third quarter results. Do you think it will have a major impact on Saudi stock market?
A. Yes, usually quarterly results do affect prices of stocks depending on their directions. However, we have to pay attention that many major companies in Tadawul are already overpriced. Based on that, we don’t believe that the upward effect of the third quarter results will be massive
Q. The recent IPOs were several times oversubscribed. What reasons you see for this?
A. The reasons behind these over subscriptions include; The liquidity in the market; high oil prices; the wider traders base; and last but not least the fact that only 20 percent of the market is traded and the rest is owned by either the government and major groups who are not trading their stocks.
Q. Do you think it is time for family businesses to go public?
A. It really depends on the circumstances of each family. There is a saying “raise money when money is available not when you need it” which is becoming an obvious phenomena in the Saudi market. Therefore, it is an appropriate timing for family business to consider going public. But before going public, there are certain requirements these businesses need to fulfill. They need to confirm with the rules & regulations of the CMA, as well as being ready to meet market expectations as a sustainable profitable entity.
Q. In your opinion which sectors are good for investment now?
A. Obviously, high growth sectors are attractive for investment in general. In our market we have the insurance, telecommunications and the healthcare sectors, to name a few.
Q. Talking about healthcare, can you give an idea about some of the deals which BMG is currently advising in this sector?
A. We are working on few private placement transactions including; Healthy Solutions Company, which is a new concept in healthcare service delivery in Saudi Arabia based on a network model of clinics and small hospitals providing above par quality of service at competitive prices. BMG is acting as financial adviser and arranger of financing. Also, we are advising The Wellness Center project. The center, which will be based in Dubai, is another new concept that will incorporate a highly successful program at Duke University Health System, as well as medical and scientific programs at Partners HealthCare. The service will be a unique, cutting edge scientific program of weight reduction, and healthier living. BMG is acting as financial adviser on the capital structuring and placement.