Nkosi Sikeleli Africa!

This week saw the RTA trial the world’s first autonomous pods, in cooperation with Next Future Transportation. Weighing 1.5k kg and carrying up to ten passengers, each pod can travel at 20 kph and can operate for three hours before the need to recharge. Dubai is keen to be able to have 25% of all local journeys autonomous by 2030.

To the surprise of a few, all fifty luxury apartments (of the 1.3k being built) in Dubai Science Park, with a Bitcoin price tag, have been snapped up. The US$ 300 million Aston Plaza project, developed by UK nationals, Michelle Mone and Doug Barrowman, was thought to be the first in the world to utilise cryptocurrency. With development under way, completion is slated for 2020.

Damac awarded its first major contract of the year – after spending US$ 954 million in 2017 – to Emirates Electrical Engineering LLC for the third 132/11KV substation in its Akoya Oxygen development; it will provide energy to 2.9k villas and 855 apartments for phases 6, 7 and 9 of the project that covers 55 million sq ft.

Ghantoot Gulf Contracting has been awarded a US$ 22 million Nakheel contract to build the Palm’s St. Regis Beach Club which will be part of the 289-room St. Regis Dubai hotel. The property is located in the 52-storey Palm Tower, due to open next year.

Following the January announcement of its new brand, Jumeirah Group has wasted no time in setting up Zabeel House by Jumeirah hotels. It will soon manage two properties, with a combined total of 350 keys, in Al Seef, adjacent to the Al Fahidi historical district.

January’s STR report provided good news for the Dubai hospitality sector, with RevPAR up 1.0% to US$ 192 and occupancy rate nudging 1.5% higher to 86.4%. It was a welcome change to see that demand at 5.5% exceeded the supply increase of 3.6%. One of the main factors for this turnaround was the introduction of visas on entry for certain nationalities that resulted in a 121% increase in the number of Russians over the year, with more Chinese also visiting the emirate. Indeed Dubai recorded a 64% increase in events and international conferences it hosted to 212. It is estimated that US$ 195 million in revenue was generated attracted 95k participants.

Dubai will be rocking in May as the emirate hosts the largest gathering of internal auditors. The international body is hosting 3k professionals from 110 countries who will be able to listen to 100 global speakers. Events like this should be the icing on the cake for the hospitality sector and no doubt MICE will continue to be a growing contributor to the progress of the local economy. Last year, Dubai recorded a 64% increase in events and international conferences it hosted to 212. It is estimated that US$ 195 million in revenue was generated, attracting 95k participants.

On Sunday, Emirates signed a US$ 16 billion Airbus contract for 20 A380 jumbos (with a further option for 16), with delivery commencing in 2020.

January’s Emirates NBD Dubai Economy Tracker rose 1.3 to 56.0 month on month – an indicator that the emirate’s non-oil economy is returning to robust health. The main drivers were gains in construction (ahead of Expo 2020), as well as increased activity in the wholesale and retail sectors. The introduction of VAT in January placed pressure on both input and output prices but the recent uptick in oil prices brought more confidence into the market. The three best performing sectors were wholesale/retail, travel/tourism and construction – at 56.1, 55.7 and 55.2 respectively.

Having just acquired Union Properties PJSC’s 50% stake in Emicool for US$ 136 million, thus taking full control of the provider of cooling services, Dubai Investments is reportedly interested in divesting 30% of the company in an IPO later this year. It is estimated that the company could be valued at between US$ 354 million to US$ 408 million. Another potential IPO could see DIC’s real estate investment trust being listed on either of Dubai’s bourses. It is estimated that the company has up to US$ 2.5 billion of projects in its books of which US$ 1.4 billion are under construction, with the balance in either the tender or design stage.

Meanwhile the holding company reported an 18.0% decline in 2017 profits to US$ 272 million, caused mainly by some late year transactions being held over until this year.

The DMCC confirmed that it had granted a licence to Dubai gold trader Regal RA DMCC to trade cryptocurrencies – the first company in the region to do so officially.

Emaar Entertainments is set to open the region’s first visual reality park in Dubai Mall. The facility will feature attractions, allowing visitors to interact using immersive rides, educational journeys and games.

Al Ahli Holding Group announced that it had received an Islamic US$ 340 million financing package so as to extend its Dubai Outlet Mall.  The expansion, covering some 3 million sq ft, will be completed by Q4 2019 which will then make the facility, which already has a built-up area of 1.1 million sq ft, one of the largest in the world.

With the reporting deadline being today (15 February), there has been a raft of results from listed companies on the DFM – some good, some not so.

After two years of losses, including US$ 926 million in 2016, Arabtec Holding posted a US$ 34 million profit last year, as revenue increased by 12.0% to US$ 2.5 billion. The contractor also intimated that it had a backlog of US$ 4.7 billion at year end.

Dubai Holding’s Emirates International Telecommunications is reportedly in discussions to raise US$ 572 million to refinance loans due to mature in 2020. The company that has stakes in Axiom, Du and Telecom, agreed in December to sell its 35% share of Tunisie Telecom to Dubai-based Abraaj Group, Its net operating profit dipped 21.9% to US$ 343 million, as a result of a 2016 profit on the sale of a subsidiary. Q4 profits were 53.5% lower at US$ 47 million.

Damac Properties announced a 25.2% decline in 2017 profits to US$ 752 million, although revenue was 4.1% higher at US$ 2.0 billion. The Dubai-based developer pointed to higher cost of sales (20.9% up to over US$ 1.0 billion) and a 23.3% hike in general expenses to US$ 299 million, as root causes for the deficit.

Amlak Finance had a disappointing year as 2017 net income was down 52.0% to US$ 14 million (and operating profit 24.9% lower at US$ 48 million) with revenue also lower – by 44.4% to US$ 118 million. Reasons for the decline appear to be a softer property market and low oil prices for most of the year.

Etisalat posted a 12.1% decline in Q4 profits to US$ 537 million as 2017 surplus remained flat at US$ 2.3 billion. Annual revenue was down 1.3%, mainly because of the unfavourable impact of the Egyptian pound against the dirham.

Emaar Properties came in with a healthy 16.0% boost in 2017 profits to US$ 1.6 billion, with revenue 21.0% up at US$ 5.1 billion. Interestingly, non-UAE operations now account for 19.0% of the company’s turnover. In November, it hived off 20.0% in a listing of unit Emaar Development which raised US$ 1.3 billion. This unit, basically responsible for its hospitality & leisure, commercial leasing and entertainment business, posted an annual 29.9% hike in profit to US$ 741 million.

Emaar Malls returned impressive Q4 and annual 2017 results with both revenue up 35.0% to US$ 308 million (and US$ 989 million for the year) and profit 27.0% to US$ 156 million (and 11.0% to US$ 566 million).  Its Dubai Mall was again the world’s most popular mall with 80 million visitors and occupancy across its portfolio was at 94%. The company expects to continue its expansion of The Dubai Mall Fashion Avenue and open its New Springs Village this year.

Maybe Drake & Scull could have turned the corner after a torrid time. Q4 saw the company just about break even with a wafer thin profit, compared to a US$ 98 million loss in the same period in 2016; quarterly revenue was 18.4% up at US$ 118 million. However, over the whole year both revenue and profit headed south; turnover was 17.0% lower at US$ 736 million, whilst losses worsened 71.2% to US$ 380 million.

Gulf Navigation registered a 7.0% hike in gross profit to US$ 13 million, whilst its total asset value increased by 12.2% to US$ 293 million over the year.

DXB Entertainments posted disappointing figures with losses in both Q4 – US$ 69 million (US$ 79 million a year earlier) – and for the year posting a US$ 304 million deficit compared to a US$ 132 million loss in 2016. Its 2.3 million visitors last year were well short of its annual 6.7 million target number. The park operator is reportedly in discussions with lenders to restructure its 2014 US$ 1.15 billion loan facility, initially used to build the facility.

Aramex posted a 14.0% hike in Q4 revenue to US$ 360 million, as profit surged by 25.2% to US$ 45 million. For the year, the Dubai-based courier saw profit up 2.1% to US$ 118 million, with revenue 8.8% higher at US$ 1.286 billion.

Having to close various non-profitable stores, retailer Marka reported a worsening of its losses to US$ 59 million – 44.7% higher than in 2016 – as revenue sank by 67.9% to US$ 26 million. The company, which has never made a profit since its 2014 début on the local bourse, has been badly hit by falling disposable income and the rising cost of tourism. It introduced a major restructuring programme last year that has seen an improvement inasmuch that H2 losses of US$ 18 million accounted for just 30.5% of the annual deficit.

Amanat Holdings posted a 10.0% hike in 2017 profits to US$ 11 million, as revenue pushed 6.0% higher to US$ 24 million; income from its associate businesses, excluding a one-off charge, increased 65.0% to US$ 9 million. Specialising in healthcare and educational investments, the Dubai-listed company now holds a 21.7% stake in Taaleem Holdings, having bought an additional 5.3% share in October for US$ 14 million.

Although CBD posted an 11.8% hike in Q4 profits to US$ 92 million, its annual figure was flat at US$ 273 million – an indication that the bank was recovering from disappointing nine-month figures that had seen a 5.2% decline in profits to US$ 181 million. Operating expenses were 3.5% higher at US$ 181 million.

The DFM opened on Sunday (11 February), at 3326, and having shed 291 points the previous four weeks managed to just stop the haemorrhaging – up 4 points to close at 3330 by Thursday, 15 February. Emaar Properties was down US$ 0.07 at US$ 1.70, with Arabtec falling US$ 0.02 to US$ 0.70.  Volumes continued on the low side at 186 million shares traded on Thursday, valued at US$ 81 million (compared to 159 million shares worth US$ 107 million the previous Thursday – 08 February).

By Thursday, Brent Crude had a flat week trading only US$ 0.02 lower at US$ 64.33, with gold heading the other direction – up US$ 35 (2.6%) to US$ 1,355 by 15 February 2018.

Uber reported slightly better Q4 results, with revenue 11.8% higher at US$ 2.2 billion and its loss narrowing to US$ 1.1 billion. During the quarter, the car ride hailing company raised US$ 14.0 billion in new funding, as a consortium led by Japan’s SoftBank, became a leading stakeholder with 17.5% of the company.

Despite a US$ 1.6 billion charge (as well as US$ 2.7 billion in 2016) on its troubled A400M military aircraft, Airbus posted a near tripling of 2017 profit to US$ 3.6 billion, despite revenue being flat at US$ 86.0 billion. The main factors behind these impressive results included record deliveries of 718 (688 – 2016), a net capital gain of US$ 754 million from the divestment of its defence electronic business and favourable exchange rates (as the US$ weakens).

Lotte Group is now looking for a new chairman, as the current holder has been sentenced by South Korean courts to thirty month in prison for bribery. Shin Dong-bin was found guilty of offering millions of dollars in bribes to Choi Soon-sil, a friend and adviser to former president Park Geun-hye.

As far back as 2008, at the height of the GFC, Barclays made a US$ 3.0 billion loan to Qatar Holding which in turn used the funds to buy shares in the bank. Now a decade later, the UK’s Serious Fraud Squad is to charge the bank for unlawful financial assistance. Last June, the SFO took action against the bank’s holding company and four executives. This time, the banking unit is being charged – and if found guilty, there could be major repercussions for Barclays including severe sanctions.

Another bank in ongoing trouble is RBS. Not only will it soon post its tenth consecutive annual loss, it will also find out how much it will have to pay US authorities over the misspelling of residential mortgage-backed securities, that could be as high as US$ 5 billion; it has already set aside US$ 3.3 billion. Last year, a settlement with the US Federal Housing Finance Agency cost the bank US$ 5.5 billion. The bank, which is actually finally trading in the black, is still 71% owned by UK taxpayers and the Chancellor, Philip Hammond is reluctant to do anything until the US fine is confirmed. Whatever happens, the UK taxpayer, as appears to be the norm, will pick up the tab.

Yet another bank in trouble is Punjab National Bank, India’s second largest stake-run bank. It has been the subject of a US$ 1.8 billion scam, equivalent to 50 times its latest quarterly profit figure and a third of its market value. There are fears that the scam, which is linked to a single Mumbai branch and benefits only a handful of people, could affect other banks and hurt confidence in the country’s already tarnished banking system.

In Australia it is not one bank but all of them who are involved in a royal commission into their past wrongdoing. They have been accused of customer exploitation and corporate fraud among other scandals – and if true then one can understand why they are among the most profitable in the world. The enquiry is expected to examine misleading and deceptive behaviour in the industry and conduct which fell “below community standards and expectations”. The commission will also examine the pension, insurance and wealth management industries and will inevitably find that the general public has not only been let down but also ripped off by unscrupulous practitioners. Whether public trust can ever be restored is unlikely.

Bitcoin has had an impact on many individuals as its value has gone from a US$ 20k high down to US$ 6k and then back to its current level of just over US$ 10k – all over the past two months. Now its effect is being felt in several countries including Iceland, a country with a population of just 336k; electricity use at Bitcoin mining supply data centre computers  and cooling systems (at 840 gigawatt hours) is greater than the 700  gigawatt hours used by the country’s homes.

December US wholesale stock piles beat forecasts, increasing by a further 0.4%, having jumped 0.6% the previous month. For the year 2017, the figure came in at 3.4%.

China’s influence on the US economy continues to cause worries as reports indicate that it is holding US bonds, notes and bills, totalling US$ 1.28 trillion  – 12.0% higher than at the end of 2016; its global balance stands at US$ 3.16 trillion. This could be a trump card for the Chinese authorities as bilateral trade tensions between the two super powers appear to be worsening.

Both the EU and the eurozone saw their economies grow at the fastest pace – 2.5% – in a decade last year, whilst both blocs recorded 0.6% growth in Q4.

Driven by higher fuel import prices and net EU trade declining (with imports being greater than exports),the UK’s trade deficit grew by US$ 1.7 billion to US$ 15.0 billion and by US$ 10.0 billion for the quarter.

A Visa Index report indicated that UK consumer spend in January was 1.2% lower than the same month last year – the first time there has been a January fall since 2013; the main drivers seem to be lower spending in the high street and transport. This trend is expected to continue until wage growth exceeds the inflation rate – little chance in the short term since latest inflation remains at 3.0%, whilst wage growth is nearer 2%.

The global equity markets continue to trade under volatile conditions with the current environment continuing at least in the short-term. The three US bourses have all shown positive YTD results, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all higher at 25,200 (1.9% – 24,719 on 01 January), 2,731 (2.1% – 2,674) and 7,256 (5.1% – 6,903).

It seems likely that Cyril Ramaphosa will replace Jacob Zuma as the next president of South Africa. Following nine years of apparent misrule, which saw the country skip from one scandal to another and with nepotism running wild, there was an air of inevitability that he would be pushed. The biggest challenges facing the incumbent will be to tackle corruption at all levels and to restore confidence in the besmirched criminal prosecution system. Somehow the country has to quadruple its current miserable 1.4% growth rate, introduce measures to slash the 27% unemployment level and try and regain international confidence which has seen global agencies cut the country’s debt to junk status. Nkosi Sikeleli Africa!

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:

WordPress.com Logo

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

Twitter picture

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

Facebook photo

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

Google+ photo

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

Connecting to %s