Opportunities in Palestine Economy

Transcription

1 Opportunities in Palestine Economy Dr. Mohammad Mustafa The Economic Adviser to the Palestinian President The Chairman & CEO, Palestine Investment Fund PEX Roadshow to London June 23-24,

2 Palestinian Economy Palestine One of the Fastest Growing Economies in the MENA Region, with an Expected GDP Growth of between 10-12% in the Next Few Years Real GDP growth in Palestine is expected to be within the range of 10-12% over the years according to IMF and World Bank reports. Palestine has one of the youngest and fastest growing population in MENA of 3.2%. Key Economic Indicators Nominal GDP US$ bn (2010) 7.4 GDP/Capita (2010) US$ 1,830 Real GDP Growth 2010 (%) 9.3% Inflation 2010 (%) 3.7% Expected Real GDP Growth Comparison ( ) 2

3 Palestinian Economy Palestine Offers Attractive Investment Opportunities Across Many Economic Sectors Business-friendly government which is committed to reforms at all levels, with emphasis on improved business environment Willingness and commitment from international donors to support the Palestinian economy, to create a lively and viable state Democratic political system with a market-based economy Well-reputed and business-friendly regulators, including: The Palestine Monetary Authority ( PMA ) which regulates the financial sector and maintain monetary stability The Capital Market Authority which oversees and monitors the stock market and promote transparency and corporate governance The Palestinian Investment Promotion Agency, which provides incentives and facilitation to local and foreign investors. Attractive investment promotion laws The financial sector remains fundamentally healthy demonstrating the viability of the economy Palestinian equities are attractively valued relative to the region representing a good investment entry point 3

4 Palestinian Economy Key Highlights in the Financial Sector in 2010/2011 Palestinian Capital Markets: 1. Wataniya Mobile IPO: Offering size of $50.3m. The IPO was 1.5x oversubscribed and raised Wataniya s capital to $258 million. 2. PADICO S Bond Issue: issuance of the first corporate bonds in Palestine at a par value of $70 Million; a true milestone for Palestine s financial services sector. 3. Rasmala Palestine Equity Fund: In cooperation with the Palestine Investment Fund, Rasmala is expected to reach up to US$100 million during the next three years. PIF invested US$15 million initially. Private Equity Funds: 1. Palestine Growth Capital Fund: PIF and private equity group Abraaj Capital have set up a private equity, which focuses on investing in Palestinian SMEs. PIF will invest $10 million in the fund 2. Siraj: The first private equity fund dedicated exclusively to investing in companies operating in Palestine. Total commitments in the exceeded $60 million. The Fund is expected to catalyze increased private sector investment and as a result to play a significant role in Palestinian economic growth. 3. Middle East Venture Capital Fund: secured $28.7m from leading international companies targeting Palestinian technology companies. MEVCF's investors include Cisco, Google, The Soros Economic Development Fund, Skoll Foundation, Jean and Steve Case, and the European Investment Bank, among others. 4

5 Palestinian Economy Palestine Investment Fund (PIF) is the Leading Institutional Investor in Palestine and the Partner of Choice to Regional and International Investors Background State-owned independent investment fund established in 2003 $868 million in assets under management. Since establishment, PIF has distributed $631 million in dividends to its shareholder, around 110% of paid up capital. PIF has extensive investment management experience and strategic relationships within the private and public sectors both at home and abroad. Main office in Ramallah; offices in Amman and Gaza. More than 50 professionals and growing. Sample of PIF s Partners 5

6 PIF PIF is Leading A $4 Billion Investment Program Over The Next 5 Years Across Multiple Business Sectors An ambitious diversified 5-year investment program, which is being implemented in partnership with international, regional and local partners. Capital Market Investments, $300 Real Estate and Hospitality, $1,500 Telecommu nications, $700 SME's, $330 Finance, $500 Energy, $1,000 Trade, $60 Major Sectors Telecom: Ownership of 36.5% of Wataniya Mobile The second mobile operator in Palestine. A fast growing company in a fast growing sector. Additionally, PIF owns 6% of Paltel Group. Real Estate and Hospitality: A diversified $1.5 billion dollar planned investment program in fast growing and relatively low risk real estate development (residential and commercial) and highly promising tourism sector. The program is implemented by Amaar Real Estate Group, the real estate investment arm of PIF. Power and Energy: A strong footprint in vital energy infrastructure projects, including Palestine s sole power station in the Gaza Strip and the planned 300 MW power generation plant in the West Bank, in addition to a strategic stake in the gas field off the shore of Gaza. SMEs: Several strategic projects to capitalize on the attractive investment opportunities presented by small and medium size enterprises, which constitute 95% of Palestinian enterprises and which proven great vitality and resiliency. Capital Markets: A diversified $300 million portfolio, of which around $150 million are invested in the Palestine Exchange. The portfolio is managed by a specialized asset management subsidiary, Khazanah. Trade and Industry: Strategic shareholder in APIC, one of Palestine s largest holding companies with several subsidiaries in retail and manufacturing and the owner of the PCSC, the dominant cement supplier in Palestine. Mortgage Finance: PIF established a $500 million facility to provide fixed and variable rate long-term mortgage loans to working and middle class Palestinians in partnership with two local banks and a number of international finance institutions 6

7 Telecom Wataniya Mobile A Strategic Partnership between PIF and Qatari Qtel and a successful IPO Telecom market Company performance Differentiated offering People Shareholder Support Successful IPO Customers hungry for choice, better network quality and improved service Market growth potential lowest penetration in MENA today 49% in 2009 vs. 101% in Jordan Strong subscriber growth Number of subscribers more than doubled in the past year, reaching 388,000 subs in Q1 11. Rapid market share development 21% in Q1 11 vs. 12.5% in Q1 10. Strong and recognizable brand 74% of customers would promote the brand Advanced billing platform and network covers 95% of the Palestinian population of the West Bank (83% of surface area) Extensive distribution network brand over 4,500 points of sale Experienced management team with a mix of local and international experience Benefits from local knowledge and expertise of PIF - an US$858 million stateowned investment company Strategic partnership with Qtel provides technical expertise and procurement benefits a leading operator with over 68m customers in 16 countries Among the most significant achievements for PIF of 2010 was the successful IPO of 15% of Wataniya Mobile shares. The IPO was 1.5x oversubscribed and raised Wataniya s capital to $258 million. 7

8 Millions (US$) Industry & Trade PIF is Planning to Offer up to 25% of PCSC s Shares to Public Investors in an Effort to Involve more Stakeholders in PCSC s Success and to Provide Greater Depth to the Palestine Exchange (PEX) Terms & Assumptions Key Terms Main Valuation Assumptions Offering Size Price Advisors Key dates Ordinary shares on PEX Offering size of US$ million 15% - 25% of PCSC shares TBD Al-Arabi Investment Group: Financial Advisor Ernst & Young: Transaction Auditors Shehadah Law: Legal Advisor Launch subscription: TBD Listing: TBD Projection period extends between Cement demand growth continues in line with historical trend and converges with perpetual growth rate at the terminal year (i.e: 8%,7%, 6%, 5%, 4%) Cement prices to grow by 2% per annum. Perpetual growth rate was assumed at 3.5% WACC set at 17.43% Scenarios & Equity Value Scenarios 8 I. PCSC regains Gaza market position (equal to~54% of WB cement market). II. PCSC regains part of Gaza market (equal to ~20% of WB market). III. PCSC doesn t enter Gaza at all. Equity Value Baseline Scenario $228 million $272 million West Bank Only West Bank and Gaza (Partial Entry) $360 million West Bank and Gaza (Full Entry)

9 Real Estate Amaar Real Estate Group, PIF s Investment Arm in the Real Estate Sector is Palestine s Largest Real Estate Company and is Leading a $1.5 Billion Dollar Investment Program A future Candidate For an IPO AMAAR Group (ARG) was established in April 2009 as a wholly owned PIF subsidiary to serve as the Real Estate Development and Investment arm of the Palestine Investment fund (PIF) Amaar Group has an authorized capital of US$140mn and a paid-in capital of US$117mn. Envisioned Investment Program over the next 5 years ($1.6 Bn) Commercial Projects, $500 AMAAR s mission is to originate, structure and execute new ventures in the Real Estate and Tourism Sectors which meet the following objectives: Generate excellent return on investment to AMAAR shareholders. Positively contribute to the Palestine s economic development, through creating thousands of jobs and hundreds of business opportunities to SMEs. Hospitality, $100 Residential Projects, $1,000 USD - Millions 9

10 Real Estate Ersal Center: Modern Financial Center in the Heart of Palestine One of Amaar s developments Ersal Center Project Ersal Center occupies approximately 51,000 sqm envisioned to progress into a thriving business community with high quality mixed use towers, commercial and office buildings, a shopping mall, residential units and a five star hotel Ersal Center will serve more than 800,000 Palestinians living in Al- Bireh- Ramallah Governorate and the central Region. First Phase Development has began on the first phase, which is composed of: Four commercial towers that will serve as the headquarters of four of Palestine s leading corporations (Bank of Palestine, Al-Quds Bank, Amaar Group and CCC). A shopping mall that will be the first of its kind in Palestine with an approximate parcel area of 11,400 sqm and a total BUA of 70,000 sqm. 10

11 SMEs The Palestine Growth Capital Fund (PGCF) is a Joint Initiative by PIF and Abraaj Capital that will Target Palestinian SMEs with Proven Business Models, Significant Growth Potential, and Openness to Institutional Support. The Fund Manager Sponsors Opportunity 11 The US$ 50 million Fund is the first private equity vehicle in Palestine dedicated to investing in local small- and medium-sized enterprises (SMEs) across a range of sectors and stages of maturity. Riyada Managers Limited, a fully owned subsidiary of Abraaj Capital, is the Fund Manager and has established an office in Ramallah staffed with a dedicated and experienced investment team. The Fund will enjoy substantial support from its joint sponsors, PIF and Abraaj Capital. It will leverage Abraaj s dedicated regional SMEs investment platform, as well as PIF s local network and investment experience. The Fund provides investment exposure to one of the fastest growing economies in the MENA region (economic growth in Palestine reached 9.3% in 2010 and expected to hit 12% within the next two years), and its management team expects to provide a 15-25% in overall return to investors. Key Indicators Funds Raised to Date Target Size Institutional Investors Deal Pipeline (Stage) - Preliminary Screening 18 - Advanced Evaluation 3 - Letter of Intent 2 Sector Coverage (Sample) Fund First Close $40 million $50 million PIF, EIB, CISCO, BoP, and Abraaj Manufacturing Agriculture Services Education Logistics Healthcare Technology June

12 Gaza The Fund Objectives Sponsor The Gaza Growth Capital Fund (GGCF) will be the First of its Kind in Gaza and will Initiate Feasible Investments in SMEs with Proven Business Models, Successful Operational History and Significant Growth Potential. The US$ 100 million Fund will be the first private equity vehicle in Gaza dedicated to investing in local small- and medium-sized enterprises (SMEs) across a range of sectors and stages of maturity. The Fund will aim to contribute to creating sustainable economic recovery in the Gaza strip by providing capital and institutional support to promising SMEs in growing economic sectors in Gaza. PIF will serve as the Fund s lead investor and key sponsor. In this role, PIF will lead the process of creating, structuring and operationalizing the Fund; provide the first $10 million of capital invested in the Fund; and lead the Fund-raising effort. Sector Focus Some of the potential promising sectors that the Fund may invest in include agriculture, manufacturing, real estate, tourism and ICT. Fund Management Exit Strategy and Target Returns PIF will hire a professional fund management firm with a proven track record to manage and oversee the proposed fund. Exit optionsinclude IPOs or sale to other investors. The Fund will target an average gross IRR of 5% to 10%. 12

13 Gaza Palestine Unity Capital Fund (GUCIF) will be Palestine s First Infrastructure Fund and will invest in Feasible Large Scale Strategic Projects in Multiple Sectors The Fund The US$ 1 billion Fund will be the first private equity vehicle dedicated to investing in largescale strategic and infrastructure projects in Gaza. Objectives The Fund will aim to contribute to creating sustainable economic recovery in the Gaza strip by providing capital to large scale, yet financially and economically feasible, ventures and projects in strategic economic sectors in Gaza Sponsor PIF will serve as the Fund s lead investor and key sponsor. In this role, PIF will lead the process of creating, structuring and operationalizing the Fund; provide the first $200 million of capital invested in the Fund; and lead the Fund-raising effort. Sector Focus Some of the potential promising sectors that the Fund may invest in include power and energy, telecommunications, real estate, healthcare, and transportation. Fund Management Exit Strategy and Target Returns PIF will hire a professional fund management firm with a proven track record to manage and oversee the proposed fund. Exit optionsinclude IPOs or sale to other investors. The Fund will target an average gross IRR of 5% to 10%. 13

14 14 Thank You