Someone New

sepp-blatterAs expected, April turned out to be a dismal month for the hospitality sector as profitability indices sank by 19.5%. Occupancy, Average  Room Rates and Rev PAR all headed south – 0.5% to 84.9%, 12.8% to US$ 374 and 13.5% to US$ 317 respectively. Total Revenue per Available Room (TRevPAR) dropped 15.7% because of revenue falls in food (19.8%) and Beverage (26.7%). Signs are that the golden goose may have laid too many eggs!

However if a report from Network International is indicative then it seems that more money is being spent by tourists; Q1 expenditure  on credit and debit cards rose by 5%, compared to the same period in 2014. Dubai is again moving up the charts – this time to 4th (out of 132 locations) in MasterCard Global Destination Cities Index, behind London, Bangkok and Paris. This year, the emirate is expecting an 8.0% jump in tourist numbers to 24.3 million. 

Abu Dhabi’s Manazel is studying the feasibility of investing US$ 817 million in a hospitality project, located on the borders of the capital and Dubai. The developer is already credited with developments in both emirates, including Dune Village in Dubai.

A sign that the retail section is still moving north is Nakheel’s proposed 766k sq mt expansion, adding a further 600 outlets and a new 370-key hotel, to its Ibn Batuta Mall. Extending 1.2km, the mall is already the largest themed shopping mall in the world and attracts over 19 million visitors a year. 

HH Sheikh Mohammed bin Rashid Al Maktoum reviewed Emaar’s latest project – a US$ 2.72 billion mixed use development in Al Mamzar. The developer has signed a memorandum of understanding with Dubai Municipality, to build 4k residences, 300 hotel rooms and retail outlets encompassing 230k sq mt.  

According to Meydan Sobha, phase 1 of its Mohammed Bin Rashid Al Maktoum City project, comprising 267 villas, has been sold out whilst the 364-villa phase 2 is selling well. Villas are priced at between US$ 4.2 million to US$ 6.9 million, with a few higher ranged properties going for up to US$ 25 million. The US$ 10 billion project, encompassing 1,100 acres, has a further two phases to build and will also include a 7km lagoon with beach, an 8.8km cycle track and a hotel along with retail/ dining outlets.

Ajman-based R Holdings is planning to invest US$ 68 million to build two community malls in Dubai. The malls will be under its CityLife brand which already operate in Ajman and will have the Dutch supermarket chain Spar as an anchor tenant.

Drake & Scull announced that its Omani subsidiary had won several MEP (mechanical, electrical and plumbing) contracts, valued at US$ 95 million. Work on the Seeb convention centre and two hotels will start in Q3 and be completed by 2017.

A new investment banking advisory firm is due to shortly set up in Dubai. Trussbridge Group, headed by ex-investment bankers Rody Yared and Samer Katerji, will focus on the regional mid-market sector.

Another finance-related firm is opening in Dubai. The UK’s IG Group deals in forex trading and became infamous when hundreds of its clients, who had bet against the Swiss franc, were left with huge losses when the Central Bank unexpectedly scrapped its Euro 1.2 to the US$ cap earlier this year.

It seems that the Investment Corporation of Dubai is one of the leading contenders to buy Hyde Park Barracks in London from the Ministry of Defence. No bids from interested parties have yet been submitted.

Dubai-based Al Ittihad Drug Store announced a 28% rise in Q1 revenue, compared to the sector’s average of 12%, whilst shipping 1.3 million packaged units. IDS, established in 1968, is one of the main regional pharmaceutical distributors and has recently acquired rights to market the anti-aging product Fillerina, and Medcoll, a Collagen product.

Masharie LLC, a division of Dubai Investments, has sold its 51% shareholdings in two entities for a reported US$ 100k; these were International Rubber Company and Techno Rubber Company. The private equity firm has eight operating companies in its portfolio and is considering further investments in the healthcare and hospitality sectors.

The UAE Minister of Public Works, HE Abdullah bin Mohammed Balhaif Al Nuaimi, has indicated that an inter-city metro line is being actively considered. If given the green light, it is almost certain that it will be in place in time for Expo 2020 and that it would link all seven emirates.

Emirates has just had its second sukuk listed on Nasdaq Dubai. The US$ 913 million faculty, to be used for financing new Airbus A380s, brings the total sukuk value on the bourse to US$ 35 billion. 

Figures from Dubai Customs show that last year there was a 10.0% rise in auto parts and accessories to US$ 12.1 billion.with the value of exports and re-exports up to US$ 4.9 billion. The four top trading partners were Japan, South Korea, China and Germany with values of US$ 1.7 billion, US$ 902 million, US$ 861 million and US$ 847 million.

Emaar Properties will soon float 12.99% of its Egyptian unit, Emaar Misr, on the Cairo exchange. 86% of the 600 million shares will be made available for institutions, with retail accounting for the balance. Shares will be listed at between US$ 0.46 and US$ 0.56.

After being delisted from the Dubai bourse in November 2008, when its share value was at US$ 0.28, Amlak Finance, resumed trading on Tuesday. Within hours, the Islamic mortgage provider saw its value fall 23.5% before a recovery closing its first day on US$ 0.24 and the week on US$ 0.36.

Following four weeks of losses, the DFMI clawed back 32 points to close the week marginally higher at 4032. Thursday saw increased business with 593 million shares, totalling US$ 789 million, changing hands – compared to 474 million and US$ 297 million the previous Thursday. Whilst Emaar Properties shares rose – by US$ 0.04 to US$ 2.17 – Arabtec remained flat at US$ 0.63. For the month of May, the index fell 7.2%, closing at 3923, having risen 20.2% in April. 

Both gold and Brent crude prices have been dipping, with the former ending the month of May at US$1,194 and the week even lower on US$ 1,183. Ahead of the OPEC meeting in Vienna, crude was trading at US$ 65.30, at the end of last month, and fell to US$ 63.92 by the end of the Thursday’s trading.

One bank that is facing mounting problems is HSBC. It seems inevitable that the bank will leave its London base, probably for Hong Kong, as UK lenders are suffering from the government’s Bank Levy. In 2012, the bank expensed US$ 4.2 billion to cover costs associated with past illegal activity – US$ 2.3 billion for misselling products in the UK and US$ 1.9 billion for money laundering. It is reported that the bank still employs 5k legal consultants just to keep up with all the flak. (Despite these problems that year, the bank’s top 16 executives averaged an annual remuneration of US$ 4.9 million). It still faces massive penalties from US regulators, for forex manipulation, and is still involved with the Swiss tax evasion issue.

It seems odd that it takes two months for the US authorities to finally arrive at its Q1 GDP figures. The end result is that the economy actually contracted by 0.7% as opposed to the original release of marginal 0.2% growth. Bad weather and a rising dollar were the main attributes for the disappointing figures as most indicators were further revised downwards, such as consumer spending, business inventory and trade balance. The Q2 outlook is for sluggish growth as the two main drivers – weather and a strong greenback – are still in play.

Indicators are that the UK economy is also softening with Q1 growth of 0.3% – half of what it was in Q4 – its lowest in four years. Its latest overseas trade deficit has also jumped 37.5% to US$ 20.2 billion. In a similar vein, but on a bigger scale, China’s growth slowed to 7.0% and the economy has not been helped by disappointing PMI data and weak retail sales.

Australia’s trade deficit more than trebled in April to almost US$ 3 billion from its March level of US$ 945 million. Exports fell 6% and imports were also down 4%, as retail spending remained flat at US$ 18.5 billion. At the same time, the OECD issued a warning that there could be a risk of a sharp correction in the housing market as cheap credit (2.0%), housing shortage and over-generous tax breaks continue to inflate the asset bubble.

This time last year, three major economies were suffering. Now India is outpacing China, with latest 7.3% growth figures, despite the government having lowered their forecast to 6.6% last December. (However the method of calculating the country’s GDP has recently changed and this may be distorting data returns).

Japan and eurozone are slowly heading in same northerly direction, reporting encouraging data with Q1 annualised growth of 2.4% and 1.6% respectively. Both have reaped the benefits of a combination of low oil prices, weak currencies v the US$ and QE stimulus.

Greece has moved one step closer to Grexit as it will not make its US$ 335 million IMF payment tomorrow (05 June) but intends to pay a combination of four outstanding payments, totalling US$ 2.5 billion,at the end of the month. The Tsipras-led government is dissatisfied with the IMF demands for further austerity measures before any more funds are released.

Whilst FIFA’s reputation lays in tatters, the same cannot be said of the English Premier League which recorded record profits in season 2013-14. The 20 teams’ revenue was up 29.0% to US$ 5.0 billion – US$ 1.5 billion more than its nearest rival, Germany’s Bundesliga. The biggest revenue earner was the US$ 2.6 billion paid for broadcast rights.

The FIFA debacle will continue until the cancer is cut away. BBC reports that, between 2011 – 2015, this registered charity made a profit of US$ 338 million based on a revenue of US$ 5.72 billion and expenses of US$ 5.38 billion. The prime profit driver is the World Cup with US$ 2.50 billion, based on revenue of US$ 4.83 billion and expenses of US$ 2.31 billion. And what about all the money that has gone the way of graft, scams and kickbacks to Blatter’s cronies? No doubt when all is said and done, this figure could be greater than US$ 1 billion.

With Emirates pulling out last year, FIFA has five main sponsors – Adidas, Coca Cola, Hyundai/Kia, McDonalds and Visa – who each contribute about US$ 30 million per annum. The value of marketing rights to FIFA is US$ 1.6 billion and if sponsors were to follow Emirates’ example and pull out, this would put even more pressure on the organisation to take note and start the process of long needed reforms and urgent management changes. (But with Blatter still pulling the strings, it is the equivalent of putting Dracula in charge of a blood bank). 

Even more damaging would be for the TV companies, who pay US$ 2.4 billion for broadcast rights, to refuse to show the competition.  Now that the self-proclaimed, hypocritical “commander” has jumped his sinking ship, whatever happens hereon, the scandal-hit sporting body quickly needs both something and Somebody New! 

This entry was posted in Finance and tagged , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s