TIDMQIF
RNS Number : 9073Q
Qatar Investment Fund PLC
27 October 2011
27 October 2011
Qatar Investment Fund PLC ("QIF" or the "Company")
Interim Management Statement and Q3 Investment Report
Qatar Investment Fund PLC (LSE: QIF), today issues the following
Interim Management Statement in accordance with the UK Listing
Authority's Disclosure Rules and Transparency Rules, for the period
1 July 2011 to 30 September 2011.
The Company has also issued its Q3 Investment Report for the
period 1 July 2011 to 30 September 2011, a pdf copy of which can be
obtained from QIF's website at: www.qatarinvestmentfund.com
QIF was established to capitalize on the investment
opportunities in Qatar and the Gulf Cooperation Council ("GCC")
region, arising from the economic growth being experienced in the
area. The Company invests in quoted Qatari equities listed on the
Qatar Exchange ("QE") in addition to companies soon to be listed,
with a possible allocation of up to 15% in other listed companies
elsewhere in the GCC region. The Investment Adviser invests using a
top-down screening process combined with fundamental industry and
company analysis.
Overview of Key Developments in Q3 2011
-- By the end of Q3 2011 NAV had increased by 0.21% on a year to
date basis versus a -3.3% return for the QE Index.
-- Qatar was the best performing stock market in the GCC region
having outperformed the Bloomberg GCC200 index by 7.1% since the
beginning of the year. It also outperformed the MSCI World index by
8.2% during the period.
-- Qatari companies are expected to maintain earnings momentum
during H2 2011 after reporting a strong 17% y-o-y growth for H1
2011.
-- According to the Qatar Statistical Authority (QSA) Qatar's H1
nominal GDP grew by an estimated 34.8%, while the full year 2011
IMF forecast for real GDP growth was revised to 18.7%.
-- Qatar continues to increase its gas exports into new markets
in Latin America, Europe and Asia. This year QatarGas delivered its
first LNG cargo to PetroChina, sent its first shipment to Greece
and secured a long term contract with Argentina's state energy
company, ENARSA.
-- Official estimates of Liquefied Petroleum Gas (LPG) exports
suggest that there will be an increase of c.30.0% in export volumes
during 2011 from 8.5 million tonnes in 2010
Performance and Portfolio Structure
As of the 29(th) of September 2011 the QIF NAV was US$1.040, an
increase of 0.77% over the quarter, and a 0.37% outperformance
relative to the QE Index. For the first three quarters of the year
the NAV rose by 0.21%, significantly ahead of the QE Index which
returned a negative 3.31% for the period.
The chart below shows the NAV compared to the share price. At
the end of Q3 2011 the share price was trading at a -16.3% discount
to NAV.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting NAV and share
price performance.
Historic Performance against the QE Index:
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a table depicting historic
performance against the QE index.
Historic Performance against Local and International
Indices:
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a table depicting historic
performance against local and international indices.
Portfolio Structure
Top 5 Holdings
As at 29(th) September 2011, the top five investments of the
Company constituted 60.9% of NAV, down from 62.3% at the end of
June 2011.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a table depicting the top 5
holdings.
Country Allocation
The Investment Adviser believes that Qatar remains the most
attractive market in the GCC due to a combination of exceptional
growth prospects and political stability. The Investment Adviser
believes that the valuation, at a forward PER of 10.3x 2012, and a
2011 forecasted dividend yield of 4.4%, remains undemanding.
As of the end of Q3 2011, QIF was invested in 17 companies, of
which 16 were listed in Doha and 1 in Muscat.
The country allocation as at 29(th) September 2011 is shown
below:
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting the country
allocation.
95.8% of the Company's investments are in Qatar, with non-Qatari
investments constituting 0.6% of the portfolio and the balance held
in cash.
Sector Allocation
The sector allocation has only evolved slightly this quarter.
Exposure to the Banks sector was 57.1% at the end of Q3 2011
compared to 56.2% at the end of Q2 2011, while the allocation to
the Services and Industrial sectors was trimmed by 3.9% in favour
of cash, which rose from 0.5% to 3.6% over the quarter in
anticipation of the Company's dividend payment of 2.7cents per
share made in Q4 2011.
The sector allocation as of 29(th) September 2011 is shown
below:
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting the sector
allocation.
The increased weighting of the Banks sector was mainly due to
the positive relative performance of the underlying stocks. The
Investment Adviser remains positive on the outlook of the Banks
sector and believes that banks continue to represent an attractive
leveraged play on the macroeconomic outlook of Qatar. The
investment case for Qatari banks is further strengthened by the
expected recovery in earnings due to a combination of healthy
volume growth and an improvement in asset quality.
The Services sector, which is defined broadly and includes
Telecoms and Utilities, accounts for 18.1% of the portfolio.
Exposure to the Real Estate sector was 6.4% at the end of Q3 2011.
The Industries and Insurance sectors accounted for a further 11.3%
and 3.5% respectively, mainly due to holdings in Industries Qatar
and Qatar Insurance Company.
Regional Equity Market Overview
During the last quarter global equity markets have undergone a
correction as a result of heightened concerns relating to the
outlook for economic growth in the developed world and policy
responses aimed at reducing debt in both the US and the Eurozone.
Although developing economies, with their robust government,
corporate and household balance sheets, are increasingly driven by
the domestic consumer, the GCC markets have not been immune to the
recent rise in risk aversion. However, the low correlation of GCC
markets with developed markets has been reflected in their recent
relative outperformance.
The resilience of GCC markets has largely been driven by the
region's macroeconomic stability, healthy banking sectors and large
government reserves which were swiftly mobilised in response to the
uncertainty.
Although the short term absolute performance of regional markets
has been negative, the Investment Adviser believes they continue to
look well-placed to outperform developed markets, underlying their
attraction as a relative safe haven during times of global market
volatility.
During the third quarter the Qatar Exchange, up 0.4%, was the
only positive performer in the GCC region. The performance of the
other GCC markets is shown below:
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a table depicting the GCC quarterly
equity market performance.
The Investment Adviser believes that Qatar remains the most
attractive market in the GCC region. Moreover, the growth prospects
of the GCC economies as a whole have generally improved during the
course of the year as a result of substantial new spending
commitments on the part of the regional governments.
Valuations
Despite undemanding valuations and a considerable improvement in
corporate profitability during 2011 GCC equity markets have been
negatively impacted by the perceived increase in regional and in
particular political risk.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a table depicting the GCC
valuations.
Qatari companies are expected to maintain earnings momentum
during Q4 2011 after reporting a strong 17% y-o-y growth for H1
2011. The Qatari market continues to offer attractive valuations,
relative to its earnings growth potential and profitability. Within
Qatar, the Investment Adviser remains optimistic about the banking,
industrial, energy and utilities sectors.
H1 Corporate Profitability
The majority of the listed Qatari companies were profitable
during H1 2011, reporting a combined net profit of QAR17.9bn
(US$4.9bn) for the period. This represents an improvement of 16.9%
over H1 2010 when reported net profits were QAR15.3bn (US$4.2bn).
For Q2 2011 the combined reported net profits were QAR8.9bn
(US$2.4bn), an increase of 21.6% compared to the QAR7.3bn
(US$2.0bn) reported during the same period in 2010.
During H1 2011, 31 companies recorded higher earnings, against 9
companies which reported a decline in profits, and one company
incurred a loss versus H1 2010. The Industrial sector posted the
strongest gain in earnings, up 43.0%, with the Insurance and
Banking & Financial sector also posting gains during the first
half of the year. The services sector reported a decline of 6.6%
compared to the same period last year.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a table depicting the Qatar
corporate profitability.
Banking & Financial Sector
The Qatari banks improved their financial performance during H1
2011 due to robust core earnings which reflect the strong growth in
the country's economy. The eight banks reported a growth of 24.8%,
reaching QAR7.4bn (US$2.0bn) in H1 2011 compared to QAR5.9bn
(US$1.6bn) in H1 2010. The sector accounted for 41.2% of the total
profit of the market during the first half of the year.
All the Qatari banks recorded growth in net profit for H1 2011
compared to H1 2010, despite the Central Bank of Qatar's recent
restrictions on personal borrowings: lending to expatriates was
capped at QAR0.40m (US$0.11m) and borrowing for nationals were
limited to QAR2.0m (US$0.55m). The largest bank in the sector,
Qatar National Bank, reported an earnings increase of 30.1% over
the first half of 2010 which represents just under half of the
banking sector profits, at QAR3.5bn (US$1.0bn). Al Khaliji Bank
posted the largest earnings increase in the sector with profits
rising 122.4% from QAR0.11bn (US$0.03bn) to QAR0.25bn (US$0.07bn)
in the same period.
Industrial Sector
The industrial sector recorded the largest increase in earnings
in H1 2011 with an increase from QAR3.4bn (US$0.9bn) to QAR4.9bn
(US$1.4bn), representing a 43.0% gain. The sector accounted for
27.4% of the total profit of the market during the first half of
the year. The main factors driving this healthy growth included
higher oil prices, increased prices of petrochemical products in
general, improved capacity utilisation and an increase in
production based on the start of new commercial operations. The
region's second-largest chemical producer by market value,
Industries Qatar, contributed about 85% of the sector's net profit
and profitability registered a y-o-y growth of 58.4% at QAR4.2bn
(US$1.2bn) compared to QAR2.6bn (US$0.7bn) in H1 2010.
Insurance Sector
The profitability of the insurance sector slowed in H1 2011,
with the sector's cumulative net profit increasing by only 1.7%
compared to H1 2010. The five insurance companies reported a
cumulative net profit of QAR0.55bn (US$0.15bn) in H1 2011 against
QAR0.54bn (US$0.15bn) in H1 2010, with 3 companies posting gains
and 2 generating losses for the period. The largest company in the
sector in terms of market capitalisation, Qatar Insurance Company,
reported a 1.8% growth in net profits to QAR0.34bn (US$0.09bn) for
the period and contributed almost 63% of the sector's net
profit.
Services Sector
The services sector reported a decline in net profits of 6.6% in
H1 2011, down from QAR5.3bn (US$1.46bn) in H1 2010 to the current
level of QAR5.1bn (US$1.40bn). Of the 21 services companies, 16
companies reported gains, while 5 companies recorded lower earnings
over the period.
The largest absolute contributor was Barwa Real Estate, which
generated a gain in net profits of 50.1%, an increase from QAR498m
(US$137m) in H1 2010 to QAR753m (US$207m) in Q1 2011. This increase
was more than offset by the large fall in earnings reported by
Qatar Navigation & Qatar Telecom which saw net profits fall by
56.1% and 19.5% respectively over the first half of the year.
Macroeconomic Update
The GCC economies remain well positioned by global standards to
deal with any renewed economic instability. The recovery of oil
prices from their 2008 lows has restored fiscal balances and
replenished reserves, with the IMF expecting the aggregate budget
surplus of the GCC countries to increase from US$136bn in 2010 to
US$304bn in 2011.
According to the Qatar Statistics Authority, Qatar's economy
grew 41.8% at current prices in the second quarter of this year
compared to last year on the back of increased production of gas
and gas-related products as well as high energy prices. Estimated
nominal gross domestic product increased substantially to
QAR153.7bn (US$42.2 billion) from QAR108.4bn (US$29.9bn) in the
second quarter of last year.
Qatar continues to increase its gas exports into new markets in
Latin America, Europe and Asia. New shipments from QatarGas this
year include delivery of its first LNG cargo to PetroChina and its
first shipment to Greece. These contracts continue to reduce
current spare capacity which has been falling since early 2011 as
global demand for liquefied natural gas (LNG) has increased. Qatar
has also secured a long-term agreement to supply the Argentine
state company, Energia Argentina Sociedad Anonima (ENARSA), with
the delivery of 5 million tonnes per year of LNG for 20 years
starting in 2014. Further, official estimates of Liquefied
Petroleum Gas (LPG) exports suggest that there will be an increase
of c. 30.0% in export volumes during 2011 from 8.5 million tonnes
in 2010.
Total credit extended by Qatari banks continued to accelerate,
rising to 18.7% y-o-y in August 2011 from 13.9% y-o-y in July 2011.
The increase in total credit was largely driven by the private
sector, in line with QCB rate cuts which brought the benchmark
lending rate down by a cumulative 100 bps to 4.5%. The latest data
from the Qatar Central Bank shows that private sector credit jumped
by 18.8% y-o-y in August 2011, the highest level in 26 months,
after a 17.0% y-o-y increase during the previous month. Growth in
bank lending to the public sector has also strengthened to 18.4%
y-o-y in August 2011, up from 8.4% y-o-y in July 2011, reflecting
higher working capital and project financing requirements by
quasi-government entities. Going forward, the Investment Adviser
believes that lower rates will continue to encourage private sector
credit growth, especially in the context of recently higher
inflation (2.1% y-o-y in August 2011), implying lower lending rates
in real terms.
Outlook
No significant negative surprises are expected during the Q3
2011 reporting season, and most companies should improve on
previous quarterly figures. Further profit growth is also expected
through Q4 2011. The Investment Adviser believes that global
economic and regional political concerns have resulted in investors
ignoring strong local economic fundamentals, and that the Qatari
stock market remains undervalued, providing highly attractive
investment opportunities in the short term and medium term.
For further information, please contact:
Ian Dungate/Suzanne Jones +44 (0) 1624 692600
Galileo Fund Services Limited
Andrew Potts/Callum Stewart +44 (0) 20 7459 3600
Panmure Gordon
Joe Winkley/Neil Winward +44 (0) 20 7710 7800
Oriel Securities
William Clutterbuck/Sam Turvey +44 (0) 20 7379 5151
Maitland
This information is provided by RNS
The company news service from the London Stock Exchange
END
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