June 2008 IFA. Group Performance Analysis

Transcription

1 June 2008 IFA Group Performance Analysis

2 Objective To analyze the performance by identifying constituents amongst the group, relative performance with market (KSE), volatility and other sensitivity analysis over the period of 8 years i.e. since Jan 00 May 08. Introduction IFA Group is a group of companies that are inter-related with each other. Each company owns shares from the other companies in the group. The Group constituents are: 1. International Financial Advisors (IFIN): International Financial Advisors KSC (Closed) ( the parent company ) is a Kuwaiti closed shareholding company incorporated on 31 January 1974 under the Commercial Companies Law No. 15 of 1960 and amendments thereto. Investment in various sectors including hotel and tourism, real estate, banking, telecommunication, aviation and oil and gas; investment banking services including asset management, investment advisory and brokerage; Islamic fund management. 2. Kuwait Investment Holding Company (KTIN): Kuwait Invest Holding Company K.S.C.C. is a Kuwait-based company engaged in investment activities. Its activities include owning stocks and shares in Kuwaiti or non-kuwaiti companies, investing in real estate and portfolios, and owning industrial equities that can be franchised, such as patents, trademarks, royalties and rights. The Company's subsidiaries, which are involved in real estate and brokerage services, are Gulf Financial Brokerage Co. K.S.C.C., Kuwait Invest Real Estate Co. W.L.L., Saudi Real Estate Kuwait Invest Co. W.L.L., Saudi Arabia, IFA Financial Brokerage Company W.L.L., United Arab Emirates, and Horizons Invest Co. W.L.L., Jordan. 3. Kuwait Real Estate Company (KREK): Kuwait Real Estate Company was incorporated in 1972 as a Kuwaiti Shareholding Company. The principal activities of the company are dealing in various real estate activities including the sale and purchase, leasing and renting of land and buildings, development and construction of buildings and investment in projects similar to its own activities. 4. International Finance Company (IMACK): International Finance Company K.S.C.C. is a Kuwaitbased company engaged in providing financial credit facilities for consumers. The Company s services include financing cars, boats, motorbikes, furniture, electronics and heavy equipment, as well as projects. It also has online support services, which include online insurance quotes and car insurance, installments payment and finance applications. The Company has two branches in addition to its main office, which are Hawali branch and Al-Mahboula branch, as well as wholly-owning two subsidiaries, which are Al-Addan Real Estate Co. WLL and International Finance Company SAL, Lebanon. 5. Jeezan Holding Company (JEZK): Jeezan Holding Company K.S.C.C., formerly Jeezan Real Estate Company K.S.C.C., is a Kuwait-based company engaged in investment activities within Kuwait and abroad. Its activities include owning shares, participating in the establishment and management of Kuwait and non-kuwaiti companies, and owning industrial rights and patents. The Company holds a 22.36% stake in Market and Marketing Services Co. K.S.C.C. 6. International Investment Projects Co. (IIPK): International Investment Projects Company K.S.C.C. is a Kuwait-based company engaged in real estate and investment activities within Kuwait and abroad. The Company s main activities include managing companies in the same field of business, selling,

3 buying and owning shares in real estate companies, performing construction works and preparing studies for private and public real estate projects. 7. IFA Hotels & Resorts Company (IFAH): IFA Hotels and Resorts Company K.S.C.C. (IFA H&R), a subsidiary of International Financial Advisers (IFA) K.S.C.C., is a Kuwait-based company engaged in the development of integrated and mixed-use hotels, and tourism resort projects throughout Europe, the Middle East, the Indian Ocean region and Africa. IFA H&R have entered into strategic alliances and joint venture partnerships with companies, such as Kingdom Hotel Investment Group (Saudi Arabia), Nakheel (United Arab Emirates), United Investments Portugal, Savills (the United Kingdom), a strategic alliance with RCI (part of the Cendant's Group) and Moreland Developments (Pty) Ltd (South Africa). The Company is also engaged in a number of services and investments within the tourism and travel industry such as developing residential properties, consulting, vacation ownership, fractional ownership and a yacht ownership club. 8. International Resorts Company (IRCK): International Resorts Company K.S.C.C. is a Kuwait-based company engaged in the purchase, sale and development of real estate and land in Kuwait and abroad. The Company establishes, operates, trades, rents and invests in hotels, beach cabins, offices, apartments, dwelling houses, restaurants, cafes, casinos, play grounds, public places, gardens and exhibitions, as well as conducts studies and provides related consultancy services. Its activities also include investments in real estate companies within or outside Kuwait, organizing real estate exhibitions and auctions, providing maintenance and contracting works and managing others' properties. The Company s wholly-owned subsidiary is Assjad Al-Kuwait General Trading and Contracting Co. W.L.L. 9. Al-Deera Holding Company (DEER): Al-Deera Holding Company is a Kuwait-based company that transacts a range of business activities, including ownership of shares in Kuwaiti and foreign shareholding companies, acquisition of properties and buildings, acquisition of industrial rights and related intellectual property, in addition to providing loans to companies for investment purposes. The Company owns a number of subsidiaries and associates, such as, Al-Deera International Communication Co. WLL, Al Deera SG Co. WLL, BPL Global Middle East WLL, Univest Consultancy Group, Univest Brokerage LLC, United Arab Emirates, Gulf Safat Limited Co. WLL, Saudi Arabia, and Good Food International, United States. 10. First Takaful Insurance Company (FTIK): First Takaful Insurance Company K.S.C.C. is a Kuwaitbased company that offers Takaful (co-operative) insurance services and products in compliance with Islamic Shareia. The Company is engaged in carrying out all types of insurance, reinsurance and related activities, as well as investing in various activities. The Company provides, through its different departments, marine and aviation insurance, fire and non-marine insurance, health and life insurance, and motor insurance. It also provides insurance and reinsurance consultancy, and technical studies to other insurance companies. 11. Automated Systems Company (ASCK): Automated Systems Company K.S.C.C. (ASC), a subsidiary of Kuwait Airways Corporation, is a Kuwait-based company engaged in providing information technology for corporate and individuals. Its services include consulting, system design and development, system integration and outsourcing. The Company also offers training (Galileo System), customer flow management (Q-Matic System), disaster recovery solutions (DR), airline solutions and strategic outsourcing.

4 12. National Slaughter House (NAT Slaughter): National Slaughterhouses Company K.S.C.C is a Kuwait-based company that is involved in the administration, investment and operation of the central slaughterhouse and livestock market in Al-Jahra, Kuwait. The Company s activities include processing and recycling the waste of the slaughterhouse, and importing and selling all kinds of livestock, as well as constructing and participating in similar slaughterhouses across Kuwait and abroad. Its activities also include installing and participating in meat factories, as well as importing and manufacturing related packaging materials. Performance Overview Figure 1 Since Inception to date (Jan 00 May 08) IFA Group performed well during the period with several ups and down in its returns. In its nine years of operation it has posted only twice negative returns which are in 2006, when total market sentiment was negative and all regional markets ended in red zone and in The maximum return has been posted in 2003 of 93% followed by 77% in While the years 2001, 2002, 2004 and 2007, the returns has been quite flat between 5-16% with an average of 6%. Since inception it has performed better with 92% to date. Correlation Matrix The table 1 describes the correlation between the companies in IFA Group. Correlation describes the relationship between one or more companies with each other, the outcome of the correlation are between -1 and +1. When the correlation coefficient is +1, it shows that when company A price appreciates the price of company B appreciates accordingly. When the correlation coefficient is -1 it shows that when the price of company A decreases the price of company B appreciates. In this case nearly all of the constituents are positively correlated with each other indicating that when one company price appreciates all of the company prices appreciate accordingly to the correlation coefficient. In this group, rarely two companies having negative correlation one is First Takaful Insurance Company (FITK) and National Slaughter House (NAT Slaughter). The Automated Systems Company (ASCK) has a positive but comparatively lower correlation with other group components. International Financial Advisors (IFIN) is the most which is positively correlated with all the rest of the companies and is highly correlated with Kuwait Real Estate Company (KREK) and Jeezan Holding Company (JEZK). Kuwait Investment Holding Company (KTIN) also has less correlation

5 with other companies but it has relatively better correlation with the Kuwait Real Estate Company (KREK) and Jeezan Holding Company (JEZK). Table 1 Correlation Matrix (Jan 2000 May 2008) IFIN 1 KTIN IFIN KTIN KREK IMACK JEZK IIPK IFAH IRCK DEER FTIK ASCK NAT Slaughter KREK IMACK JEZK IIPK IFAH IRCK DEER FTIK ASCK NAT Slaughter Only companies which have negative correlation between them are: International Investment Projects Company and First Takaful Insurance Company K.S.C.C, First Takaful Insurance Company K.S.C.C. and Al-Deera Holding Company, Automated Systems Company K.S.C.C. and National Slaughterhouses Company K.S.C.C. Earnings per Share of Group Constituents Table 2 Earnings (in Kuwait Fils)

6 The earnings of the constituents of the group have remained mixed over the years. All the companies present in the group, has witnessed years of positive growth in net income but in the year 2006 all the companies witnessed losses besides IFA Hotels and Resorts Company K.S.C.C, First Takaful Insurance Company K.S.C.C, Automated Systems Company K.S.C.C. and National Slaughterhouses Company K.S.C.C which witnessed decline in their earnings. IFA Hotels and Resorts Company K.S.C.C, First Takaful Insurance Company K.S.C.C and National Slaughter Company are the ones which have witnessed years of positive profit. Group Monthly Return Figure 2 Monthly Returns The graph 2 above represents the monthly returns of the index since January 2000 till May As we can see the performance has been volatile in terms of returns. In March 2006 the index witnessed the highest decline of nearly 23%. In June 2005 the index performance was fairly stable and continued to move in the positive direction and posting healthy returns and posted an exceptional high of 40%, which is the highest posted so far. Since then the troughs have been lowers and peeks have been better.

7 Group Yearly Performance Figure 3 Yearly Returns Since 2000 to 2007, the group returns continued to increase posting healthy gains. In 2000, the return was way lower to only 1%. However in subsequent years from 2001 to 2004 the group has posted returns between 2% - 6%, except for 2003 when it has posted 93% and later on in 2005 when the group return had marked to 77%. The group has only two negative returns on his books during its nine years of performance, one in 2006 with 45% and the other in the current calendar year its performance has remained unsatisfactory and has posted a decline of 18% YTD. The group performance since inception to date is fairly better with 92% return depicted that overall performance of the group is average with lots of up and downside in terms of returns.

8 Volatility Measures Table 3 Summary Statistics (Monthly returns since Jan May 2008) Arithmetic Mean (%) IFIN KTIN KREK IMACK JEZK IIPK IFAH IRCK DEER FTIK ASC K NAT Slaughter Standard Deviation (%) Beta Alpha Sharpe Ratio Highest Return (%) Lowest Return (%) Skewness Kurtosis Geometric Mean (%) Among the group the arithmetic mean is highest for International Financial Advisors (IFIN) and International Investment Projects Co. (IIPK) and the lowest is for Kuwait Invest Holding Company K.S.C.C and IFA Hotels & Resorts Company (IFAH). The company with highest standard deviation is International Investment Projects Co. (IIPK) at and Kuwait Real Estate Company (KREK at followed by International Financial Advisors (IFIN) at correspondingly. Twelve companies are present in the group and out of them six companies have negative Beta while the others have low Beta. The company which has the highest Beta is Jeezan Holding Company K.S.C.C at 0.55.

9 Regression Analysis Table 4 Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 101 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Intercept IFIN KTIN KREK IMACK JEZK IIPK IFAH IRCK DEER FTIK ASCK NAT Slaughter Overview 2008 Figure 4 YTD Return

10 IFA Group performance during the year 2008 has remained on the declining trend as so far it has posted a highest negative return of 11% YTD as against at the start of the year. For the year the index touched the maximum of in the month of January and receded to as low as in the month of July 08. In terms of monthly returns, the index posted almost all negative monthly returns from Feb 08 Jul 08, an average of almost 5%. Whereas the only positive return for the current calendar year it has is in the month of Jan 08 with 3%, which is the maximum gain as well. EPS Comparison Table 6 EPS Comparison in Kuwaiti Fils As the year 2006 was a lean year for the companies as they witnessed drop in their profitability so on the basis of comparison during the fourth quarter of 2007 versus 2006, all the companies witnessed positive growth and ended the quarter in the green. IFA Group company s performance during the first quarter of 2008 remained fairly better than that of The maximum improvement in earnings per share was for International Resorts Company K.S.C.C. at 820% followed by National Slaughter Company at 386% and Kuwait Real Estate Company at 286%. While the companies which witnesses most of the decline were Jeezan Holding Company K.S.C.C at 281% and International Investment Projects Company K.S.C.C at 210%.