Saudi operations help to grow Shuaa earnings

Saudi operations help to grow Shuaa earnings
Shuaa Capital has expanded operations in Saudi Arabia. (Supplied)
Updated 06 November 2018

Saudi operations help to grow Shuaa earnings

Saudi operations help to grow Shuaa earnings
  • Highest quarterly profit since 2008
  • Deal struck with Jabal Omar Development

LONDON: Dubai-headquartered investment house Shuaa Capital has posted its highest quarterly profit since 2008 as it continues to expand its operations in Saudi Arabia, UAE and Kuwait.
The company reported a 30.1 million dirham ($8.2 million) net profit for the third quarter this year, a 31 percent increase year-on-year, according to a filing on the Dubai stock exchange.
Year-to-date net profit stood at 56.4 million dirhams, slightly down on the 59.8 million dirhams recorded in the same period in 2017.
The increased profit has been driven by growth in the company’s asset management arm which oversees the development of real estate projects in Saudi Arabia and the UAE. The division reported a 8.5 million dirham profit in the third quarter, a 35 percent increase on the previous year.
Shuaa expanded its presence in Saudi Arabia earlier this year, signing a preliminary deal with the Saudi real estate developer Jabal Omar Development Company to jointly manage real estate investment funds in the Kingdom.
Jabal Omar’s existing flagship development is in Makkah, just walking distance from the Grand Mosque. Set to be delivered in phases, the project will feature high-rise towers, luxury apartments, residential units and shopping malls.
The investment house also worked with the hotel management firm Rotana on the Centro Waha Riyadh hotel which opened in the Saudi capital city in October last year. The hospitality project was funded by the Shariah-compliant Shuaa Saudi Hospitality Fund I.
Kuwait is another target market for the firm, said Shuaa chief executive Fawad Tariq-Khan, in a DFM statement, saying the company will build on its acquisition of Amwal International Investment Company and its subsidiary Noor Capital Markets, which was first announced in July 2017.
“Our recent acquisition of Amwal International Investment Company in Kuwait, and intended business affiliations are meant to help us benefit from synergies and capture inbound and outbound business prospects,” he said.
“Activating these investments and partnerships is imminent, and we expect the final quarter to be another game changing quarter for the group,” he said.
This quarter’s results continue the growth seen in the second quarter where profits rose by 21 percent to reach 14.6 million dirhams.
However, Shuaa’s profits more than halved in the first quarter compared to 2017, a decline which Shuaa’s management partly blamed on lower interest income from its lending arm following a reduction in bank debt at its lending subsidiary, Gulf Finance Corporation.


Saudi Arabia’s surprise cut transforms oil market outlook

Saudi Arabia’s surprise cut transforms oil market outlook
Updated 48 min 59 sec ago

Saudi Arabia’s surprise cut transforms oil market outlook

Saudi Arabia’s surprise cut transforms oil market outlook
  • From a situation at the end of last year when there was talk of Brent crude “stuck” at $50-$55 per barrel, many experts are now looking for upward of $60 in 2021
  • The “big three” of the American financial scene — Bank of America (BoA), Goldman Sachs and JP Morgan (JPM) — have all recently come out with positive outlooks for oil

DUBAI: Suddenly, the outlook for oil prices has changed dramatically.
From a situation at the end of last year when there was talk of Brent crude “stuck” at $50-$55 per barrel, many experts are now looking for upward of $60 in 2021, with some of the more bullish targeting $65 by this summer.
The “big three” of the American financial scene — Bank of America (BoA), Goldman Sachs and JP Morgan (JPM) — have all recently come out with positive outlooks for oil for the rest of the year.
BoA said a number of macroeconomic factors “could all combine to push oil above the $60 mid-2021 target we introduced back in June last year,” and acknowledged that the oil price could “easily overshoot” its projections.
JPM said a “supercycle” in oil prices — a scenario where surging demand and tightly controlled supply led to prices significantly, albeit temporarily, above current levels — could be on the horizon.
In perhaps the most bullish recent prognosis, analysts at Goldman Sachs — already among the most optimistic in the business — brought forward the date by which they expect Brent to hit $65. They now think it will be at that level six months earlier, in July this year.
“The events of the first weeks of the year have sharply reduced the risks that the market rebalancing gets derailed,” Goldman said.
So what has happened to change sentiment so significantly? While there is a range of positive economic news — from the global rollout of vaccines to a general surge in commodity prices signaling a pick-up in industrial activity — this has been tempered to some degree by the increased number of COVID-19 cases in many parts of the world.
But what appears to have made the difference for the energy analysts was the surprise decision by Saudi Arabia earlier this month to cut an extra 1 million barrels per day from its output. This unilateral reduction — greeted by the Kingdom’s OPEC+ partner Russia as a “new year present” — headed off simmering tensions within OPEC+ and accelerated the drain of global oil inventories still high after the oil market chaos of 2020.
“The unilateral and unexpected production cut from Saudi will offset in our view the near-term negative hit to demand from a quickly spreading virus,” Goldman said.
The cut by Saudi Arabia — which its Energy Minister Prince Abdul Aziz bin Salman said was a reflection of its role as “guardian of the oil industry” — will keep March production at low levels just as global oil demand rebounds sharply as vaccine rollouts encourage more global economic activity.
The other positive factors for Brent, according to Goldman, are the US presidential transition, which is likely to lead to a $2 trillion stimulus package by Joe Biden, and the continuing tight financial discipline within the American shale industry, which is unlikely to significantly raise production until oil hits $65 per barrel.
BoA pointed to the general increase in commodity prices — not just crude oil — as a sign that global economic growth was resuming, especially in Asia.
Regardless of the generally more benign global economic outlook, JPM highlighted the critical role the Saudi oil cut had played in the new bullishness for Brent, and for the longer-term outlook.
“The short-term supply cut demonstrates that Saudi is willing to cut deeper if demand is at risk, and ensures a sustained OECD (Organisation for Economic Co-operation and Development) inventory drawdown, also capable of absorbing increased supply from Libya and Iran.”
It is too early to call the end of the pandemic economic shock, but at least in global energy markets it looks as though rebalancing of supply and demand is well on track.
The oil price is reflecting that optimism too. Brent is now trading at above $56 per barrel — a post-pandemic high.