qnbfs qatar equity strategy report 2015
TRANSCRIPT
Qatar Equity Strategy2015
–
According to QNB Group, Qatar’s economy is expected to remain resilient to lower oil prices
10,000
11,500
13,000
14,500
16,000
0
25
50
75
100
Jan-14
Mar-1
4
Jun-14
Aug-1
4
Oct-1
4
Jan-15
Volume mn (LHS) QSE Index (RHS)
UAE, Saudi Arabia and Bahrain call back theirenvoys from Qatar
Upbeat investor sentiment over Qatar's inclusion in MSCI's
FIIs turned net sellers concerned by Iraq crisis
Record budget of $62bn unveiled for 2014-15, gives a massive push to infrastructure
Full year results and dividend improve market sentiment
FIIs invested ~360mn. Turned net buyers consecutively for ~ a month
Advisory Council approves draft law on tax exemption for foreign investors
Investor buying interest continues despite generally soft 2Q2014 results
MSCI lifts weight of 3 Qatari stocks in its EM index on foreign ownership reform
Emir issues law allowing FIIs to own up to 49% of listed companies
MSCI removes the 0.5x limiting factor on QNBK, IQCD, CBQK & DHBK; adds GISS to its EM Index
Continuing fall in oil prices hit regionalequity markets
––
Present across a major portion of QP’s value
Much of the company’s drilling business
risk play deeply linked to Qatar’s growth story.company is Qatar’s leading listed electricity/desalinated
QGTS remains Qatar’s
Milaha’s business model is deeply linked to the Qatar growth story.
NS’ business is levered to Qatar’s economic growth through: 1)
DHBK’s loan portfolio vs. ~10% in 2008. During the same period,
a leading specialist insurer and reinsurer operating in the Lloyd’s
Focused on Qatar, KCBK’s management has set forth a 3strategy that would improve the bank’s market share
al assets (listed Shari’a complMARK has dominated the public sector Shari’a compliant segment.
Foundation), ABQK’s
Table of Contents
Introduction
Aggregate Bottom-Line to Grow at a Decent Pace of 13.2% in 2016 for Key Qatari Equities ............................................................ 5
Trading Performance Review (2014) ............................................................................................................................................................................ 6
Foreign Institutional Investors Remained Bullish in 2014 ................................................................................................................................ 9
QSE Remains an Attractive Relative Regional Play Despite a Strong Performance in 2014 ...........................................................12
Company Updates
Ahli Bank (ABQK)................................................................................................................................................................................................................14
Al Khalij Commercial Bank/Al Khaliji (KCBK) ......................................................................................................................................................16
Commercial Bank of Qatar (CBQK) .............................................................................................................................................................................18
Doha Bank (DHBK) .............................................................................................................................................................................................................20
Gulf International Services (GISS) ..............................................................................................................................................................................22
Gulf Warehousing Company (GWCS) .........................................................................................................................................................................24
Industries Qatar (IQCD) ....................................................................................................................................................................................................26
Mannai Corporation (MCCS) ..........................................................................................................................................................................................28
Masraf Al Rayan (MARK) ................................................................................................................................................................................................30
Qatar Electricity & Water Company (QEWS) .........................................................................................................................................................32
Qatar Gas Transport/Nakilat (QGTS) ........................................................................................................................................................................34
Qatar Insurance Company (QATI) ...............................................................................................................................................................................36
Qatar International Islamic Bank (QIIK) ..................................................................................................................................................................38
Qatar Islamic Bank (QIBK) ..............................................................................................................................................................................................40
Qatar National Cement Company (QNCD) ..............................................................................................................................................................42
Qatar Navigation/Milaha (QNNS) ..............................................................................................................................................................................44
Vodafone Qatar (VFQS) ....................................................................................................................................................................................................46
Appendix: Sector Recaps
Consumer Goods & Services Sector .............................................................................................................................................................................49
Industrials Sector .................................................................................................................................................................................................................50
Banking Sector ......................................................................................................................................................................................................................51
Insurance Sector ...................................................................................................................................................................................................................52
Telecoms Sector ....................................................................................................................................................................................................................53
Transportation Sector ........................................................................................................................................................................................................54
Real Estate Sector ................................................................................................................................................................................................................55
Financial Services Sector .......................................................................................................................................................... 56
positively toward 4Q2014’s aggregate bottom
pack. Qatar’s QSE Index was the top performer, surging by 18.36% (total ret
equities during 2014 buoyed by the MSCI and S&P Dow Jones’ decision to upgrade the Qatari market from Frontier Markets status
69.44
35.09
31.11
24.76
23.56
21.77
16.13
15.42
14.92
2.19
- 10 20 30 40 50 60 70 80
All Share Insurance Index
QSE Al Rayan Islamic Index
All Share Banks & Financial Services Index
All Share Transportation Index
QSE Total Return Index
QSE All Share Index
All Share Consumer Goods & Services Index
All Share Industrials Index
All Share Real Estate Index
All Share Telecoms Index
0.0
5.0
10.0
15.0
20.0
31-Dec-07 5-May-10 7-Sep-12 11-Jan-15
-
6.0
12.0
18.0
MC
CS
CB
QK
DH
BK
QN
NS
QN
B
QA
TI
KC
BK
QIIK
QG
TS
QIB
K
QN
CD
MA
RK
QE
WS
AB
QK
GW
CS
IQC
D
GIS
S
2015e 2016e
-12.0%
-2.0%
8.0%
18.0%
28.0%G
WC
S
MA
RK
QA
TI
QN
BK
QIIK
QIB
K
KC
BK
CB
QK
MC
CS
AB
QK
GIS
S
DH
BK
QG
TS
QN
CD
QN
NS
QE
WS
IQC
D
2015e 2016e
0.0%
3.0%
6.0%
9.0%
DH
BK
MC
CS
QG
TS
GIS
S
QIIK
QN
NS
IQC
D
KC
BK
QN
CD
MA
RK
QIB
K
AB
QK
QE
WS
QA
TI
QN
B
GW
CS
CB
QK
VF
QS
2015e 2016e
8.9 18.8 32.2 20.2 18.9
5.9 8.0 13.2 9.4 8.6
2.7 5.4 10.8 6.2
6.1
3.1 6.9 13.2 8.8 12.5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
4Q2013 1Q2014 2Q2014 3Q2014 4Q2014
% o
f T
ota
l Sel
lin
g
Qatari Individuals (QR bn) Qatari Inst itut ions (QR bn)
Non-Qatari Individuals (QR bn) Non-Qatari Inst itut ions (QR bn)
8.3 15.8 31.4 19.2 18.6
5.6 8.5 10.9 8.8
8.5
2.7 5.0 10.0 6.1
6.1
4.1 9.9 17.1 10.5 12.9
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
4Q2013 1Q2014 2Q2014 3Q2014 4Q2014
% o
f T
ota
l Bu
yin
g
Qatari Individuals (QR bn) Qatari Inst itut ions (QR bn)
Non-Qatari Individuals (QR bn) Non-Qatari Inst itut ions (QR bn)
17.3 34.6
63.6
39.3 37.5 11.6
16.5
24.1
18.2 17.1
5.4
10.4
20.8
12.4 12.1
7.2
16.8
30.3
19.3 25.5
-
25.0
50.0
75.0
100.0
125.0
150.0
4Q2013 1Q2014 2Q2014 3Q2014 4Q2014
QR
bn
Qatari Individuals Qatari Inst itut ions
Non-Qatari Individuals Non-Qatari Inst itut ions
(0.6)
(3.0)
(0.8)
(1.0)
(0.4)
(0.3)
0.4
(2.3)
(0.6)
(0.0)
(0.0)
(0.4)
(0.7)
(0.1)
(0.0)
0.9
3.0
3.9
1.7
0.4
4Q2013
1Q2014
2Q2014
3Q2014
4Q2014
Non-Qatari Inst itut ions Non-Qatari Individuals
Qatari Inst itut ions Qatari Individuals
Net Buying/ (Selling) by Investor Segment (QR bn)
Qatari Individuals’ Ownership Structure of Q
Qatari Institutions’ Owne
Qatari Individuals’ Ownership Structure of Q
Qatari Institutions’ Ownership St
2014 with Qatar leading the pack. Qatar’s QSE Index was the top performer, surging by 18.36% (total return: 23.56%) in 2014. ’s benchmark index rising by 14.2% in 2014 closely followed by Dubai’s DFMGI (+12.0%).
2014. On the other hand, Kuwait’s be
70
85
100
115
130
145
160
175
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Mar
-14
Apr
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15
Bahrain Kuwait Oman Saudi Qatar Dubai Abu Dhabi
Foundation), ABQK’s management has
Average Volume (‘000)
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105
120
135
150
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index ABQK QD
Shahan Keushgerian+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
listed banks). Focused on Qatar, KCBK’s management has set forth a 3 to 5 year strategy that would improve the bank’s market share and boost
assumptions on management’s strategy of focusing on core banking income vs.
%. KCBK’s LDR is expected to .3%, in line with QCB’s 100% policy.
m Average Volume (‘000)
90
105
120
135
150
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index KCBK QD
Shahan Keushgerian+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
management’s strategy for ABank (efforts underway to up stake to 75%) and 2)
’s
Bank’s PEG stands at
m Average Volume (‘000)
90
105
120
135
150
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index CBQK QD
Shahan Keushgerian+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
% of DHBK’s loan portfolio
%, Doha Bank’s PEG stands at 1.3
m Average Volume (‘000)
80
100
120
140
160
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index DHBK QD
Shahan Keushgerian+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
3. GISS’
However, much of the company’s drilling business remains secured through
become GDI’s 10
GISS’ Board of Directors announced a cash DPS of
80
130
180
230
280
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index GISS QD
Saugata Sarkar+974 4476 [email protected]
–
20.4% surge in 2017’s bottom
capitalized previously) in 2014. Overall, LVQ’s
m Average Volume (‘000)
80
100
120
140
160
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index GW CS QD
Abdullah Amin, CFA+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
with most of IQCD’s business exposed to constructio
have a direct detrimental impact on IQCD’s operations.
m Average Volume (‘000)
80
100
120
140
160
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index IQCD QD
Saugata Sarkar+974 4476 [email protected]
––
2017e. Currently, Damas’
In 2013, emerging markets’ currencies came under considerable pressure. In
90
105
120
135
150
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index MCCS QD
Abdullah Amin, CFA+974 4476 [email protected]
Shahan Keushgerian+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
303 306 1,781 1,831
3 4 1,124 1,443 1,211
21 - - 3,538 3,447 3,431
Shari’a Compliant Play in the Qatari Banking Sector
(listed Shari’a complpublic sector Shari’a compliant segment. We recommend a
, the bank’s board recommended a cash Dline with our estimate. The bank’s total assets surged 20.4%
erall, we expect MARK’s loan book to grow to
m Average Volume (‘000)
80
115
150
185
220
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index MARK QD
Abdullah Amin, CFA+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
Total Shareholders’ Equity and Minority Interests
risk play deeply linked to Qatar’s growth story.
Qatar’s electricity & water demand is set to grow by a CAGR of 8
Petroleum), practically Qatar’s sole power & water producer, should benefi
(36 MIGD), from 2H2015 adding ~14% to QEWS’ net water capacity. Further,
QEWS’ net electricity & water capacity by 27
Power, with QPI/QH. The partners are valuing QEWS’ assets in Oman & Jordon
in Ma’an Jordan
m Average Volume (‘000)
90
105
120
135
150
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index QEW S QD
Saugata Sarkar+974 4476 [email protected]
Employees’ End of Service Benefits
A Play on Qatar’s LNG
QGTS remains Qatar’s primary LNG carrier and benefits from stable/visible revenue
Qatar’s LNG carrier. player. Nakilat, the world’s largest LNG fleet owner (~15% share), forms a vital link between Qatar’s gas output and i
m Average Volume (‘000)
90
105
120
135
150
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index QGTS QD
Saugata Sarkar+974 4476 [email protected]
–
operating in the Lloyd’s market) that will increase its global footprint and allow it to
The company’s gross written premiums grew
Meanwhile, the company’s board of directors has recommended distribution of
–
80
110
140
170
200
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index QATI QD
Abdullah Amin, CFA+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
IK’s loan book to
m Average Volume (‘000)
80
100
120
140
160
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index QIIK QD
Abdullah Amin, CFA+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
Gain from Foreign Exchange Operations & Share of Associates’ Results
Largest Shari’a Compliant Bank in Qatar
m Avg. Volume (‘000)
80
110
140
170
200
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index QIBK QD
Abdullah Amin, CFA+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
Sukuk Holders’ Share of Profit
–
Total Shareholders’
Customers’ Deposits
A Play on Qatar’s Growth But Already in the Priceand the company’s
In order to cash in on Qatar’s anticipated
(‘000)
90
105
120
135
150
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index QNCD QD
Abdullah Amin, CFA+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
Milaha’s business model is deeply lWe continue to believe that QNNS’ business is levered to
Qatar’s economic growth through: 1) offshore oil & gas (27% of 2013 revenue); 2) the
de, QNNS’ 30% stake in QGTS remains a driving force behind QNNS’ bottom
sible progress in management’s
We maintain QNNS’ Market Perform rating and
prices; 4) A slowdown in Qatar’s economy/stock market and 5) Geopolitical crisis
m Average Volume (‘000)
90
105
120
135
150
Dec-13 Mar-14 May-14 Aug-14 Oct -14 Jan-15
QSE Index QNNS QD
Shahan Keushgerian+974 4476 [email protected]
Saugata Sarkar+974 4476 [email protected]
The company’s remains the only pureplay on the
line expansion as VFQS’ mobile base expands another
prepaid levels). The company’s subscriber base should continue to benefit from
m Avg. Volume (’000)
80
115
150
185
220
Dec-13 Feb-14 Apr-14 May-14 Jul-14 Aug-14 Oct -14 Nov-14 Jan-15
QSE Index VFQS QD
Saugata Sarkar+974 4476 [email protected]
SIIS’ Sequential Ne
Zad Holdings’
MERS’ gross profit grew by a healthy 11.2% QoQ with the gross margin climbing up
contract both QoQ and YoY. WDAM’s net profit dropped by 16.6% QoQ (down
x which is at a substantial premium to the QSE Index’s current P/E
Source: Company data; Note: Net income is in QR’000
5,500
6,000
6,500
7,000
7,500
8,000
Dec
-13
Feb
-14
Apr
-14
May
-14
Jul-
14
Au
g-14
Oct
-14
Nov
-14
Jan
-15
All Share Consumer Goods & Serv ices Index
GISS’ reported solid metrics that were in
Revenue growth was driven by the 100% consolidation of GISS’ drilling subsidiary
IQCD’s profitability was aided by a sharp improvement in capacity utilizationgroup’s 3Q2014 net income rose to QR1.88bn (+50.1% QoQ, +6.3% YoY) vs. our
which includes the company’s share of profits from petrochemicals and fertilizers,
QEWS’ profitability boosted by a one The group’s
Source: Company data; Note: Net income is in QR’000, *Unavailability of MPHC’s 3Q2013 net income skews YoY aggregat
3,400
3,800
4,200
4,600
5,000
Dec
-13
Feb
-14
Apr
-14
May
-14
Jul-
14
Au
g-14
Oct
-14
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-14
Jan
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All Share Indust rials Index
QNBK’s Stellar Performance Drives Sector Net Income
sector’s incremental net income in the quarter. QNBK’s net income grew by 11.2%
DHBK’s net income continued its
line. DHBK’s net interest i
biggest contributor with deposits increasing by QR6.1 QoQ. However, CBQK’s
Source: Company data; Note: Net income is in QR’000
2,200
2,600
3,000
3,400
3,800
Dec
-13
Feb
-14
Apr
-14
May
-14
Jul-
14
Au
g-14
Oct
-14
Nov
-14
Jan
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All Share Banks & Financial Serv ices Index
lines. Thus, even a significant surge in QGRI’s QoQ profitability (1,108.2%
The Insurance sector’s bottom QATI’s
impact of Antares’ 1H2014 results). Hence, a QoQ decline in the bottom
Source: Company data; Note: Net income is in QR’000
2,200
2,800
3,400
4,000
4,600
Dec
-13
Feb
-14
Apr
-14
May
-14
Jul-
14
Au
g-14
Oct
-14
Nov
-14
Jan
-15
All Share Insurance Index
The Telecoms sector’s bottomORDS’ net profit more than halved on a sequential basis while
sector. However, on a YoY basis, ORDS’ net profit grew 11.2% while VFQS also
ORDS’ r
. A sharp fall in Ooredoo’s
ORDS’ net profit slumps 54.1% QoQ to QR375.0mn in 3Q2014. ORDS’ QoQ bottom
ted ORDS’ bottom
despite ORDS’ customer base rising 1.1% QoQ and 6.8% YoY to 15.7mn.
QR551.2mn. VFQS’ customer base rose ~16% YoY to 1.372mn, while its ARPU grew . VFQS’
x, which is at a premium to the QSE index’s P/E multiple of
Source: Company data; Note: Revenue is in QR’000
Source: Company data; Note: Net income is in QR’000
1,200
1,400
1,600
1,800
2,000
Dec
-13
Feb
-14
Apr
-14
May
-14
Jul-
14
Au
g-14
Oct
-14
Nov
-14
Jan
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All Share Telecoms Index
which is at a discount to the QSE Index’s P/E mul
Milaha Capital and Milaha Gas & Petrochem propelled Milaha’s (QNNS) 3Q2014 net
QR721.0mn, up 33.7% QoQ (+44.3% YoY). Milaha Capital’s and MG&P’s net profit Y, respectively. Milaha Capital’s bottom
sturdy VLGC rates and robust performance from QNNS’ stake in Nakilat (QGTS).
profitability, respectively. On the other hand, offshore unit’s profitability declined
from the company’s LPG joint ventures. Revenue from wholly
GWCS’ net profit fell 10.4% QoQ (up by 52.1% YoY) to QR34.7mn in 3Q2014.
Source: Company data; Note: Net Income is in QR’000
1,600
1,850
2,100
2,350
2,600
Dec
-13
Feb
-14
Apr
-14
May
-14
Jul-
14
Au
g-14
Oct
-14
Nov
-14
Jan
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All Share Transportat ion Index
majority of the sector’s earnings, followed by UDCD. Ho
for 53.6% of the sector’s aggregate
Real Estate Co.’s (ERES) net profit jumped by 24.3% YoY (+15.3% QoQ) to e company’s bottom
basis ERES’ net profit increased by 15.3% mainly
(down 51.2% QoQ). The company’s revenue slipped by 1.4% YoY and 25.6%
Source: Company data; Note: Net income is in QR’000
1,800
2,200
2,600
3,000
3,400
Dec
-13
Feb
-14
Apr
-14
May
-14
Jul-
14
Au
g-14
Oct
-14
Nov
-14
Jan
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All Share Real Estate Index
accounted for 46.7% of the total sector’s profit. NLCS was the only company in the
DBIS’ net profit down 65.2% QoQ; grows by 7.1% YoY.
QR18.4mn, flat on a YoY basis and down 54.1% QoQ. The company’s bro
sector’s net income in 3Q2014, though down NLCS’ net
core business slipped 27.8% YoY to QR23mn. As a result, the company’s
, the company’s revenue plunged 31.1% and
Islamic Holding Group’s (IHGS) revenue surged
Source: Company data; Note: Net income is in QR’000
2,200
2,600
3,000
3,400
3,800
Dec
-13
Feb
-14
Apr
-14
May
-14
Jul-
14
Au
g-14
Oct
-14
Nov
-14
Jan
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All Share Banks & Financial Serv ices Index
–
–
This publication has been prepared by QNB Financial Services SPC (“QNBFS”) a wholly owned subsidiary of QNB SAQ (“QNB”). QNBFS is regulated by the
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Contacts
Saugata SarkarHead of ResearchTel: (+974) 4476 [email protected]
Abdullah Amin, CFASenior Research AnalystTel: (+974) 4476 [email protected]
Shahan KeushgerianSenior Research AnalystTel: (+974) 4476 [email protected]
Sahbi KasraouiManager – HNWITel: (+974) 4476 [email protected]
Ahmed Al-KhoudaryHead of Sales Trading – InstitutionalTel: (+974) 4476 [email protected]
QNB Financial Services SPCContact Center: (+974) 4476 6666PO Box 24025Doha, Qatar
QNB Financial Services S.P.C.P.O. Box 24025, Doha, Qatar
Tel: +974 4476 6666Fax: +974 4476 6660
qnbfs.com