TIDMQIF
RNS Number : 0528J
Qatar Investment Fund PLC
11 July 2013
11 July 2013
Qatar Investment Fund PLC ("QIF" or the "Company")
Q2 2013 Investment Report
Qatar Investment Fund PLC (LSE: QIF), today issues its Q2 2013
Investment Report (covering the period 1 April 2013 to 30 June 2013
corresponding to the Company's financial fourth quarter), 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.
For further information:
Qatar Investment Fund plc +44 (0) 1624 622 851
Nick Wilson
Panmure Gordon - +44 (0) 20 7886 2500
Andrew Potts
Maitland - +44 (0) 20 7379 5151
William Clutterbuck/Robbie Hynes
Highlights
-- Qatar Investment Fund plc's ("QIF" or "the Company") net
asset value (NAV) increased by 16.5% to US$1.1672 (including
dividends received) as at 27 June 2013 from US$1.0022 as at 31
December 2012. The Qatar Exchange Index rose by 11.2% during the
same period, representing an outperformance of 5.3%.
-- On 25 June 2013, the Emir of Qatar, Sheikh Hamad bin Khalifa
Al Thani, handed over power to his 33 year old son, Sheikh Tamim
bin Hamad Al Thani.
-- Qatari listed companies reported Q1 2013 profit figures which
showed an aggregate rise of 11.4% on Q1 2012.
-- Qatari banks continued to accelerate lending, with loans
increasing 19.1% in the five months to the end of May 2013 compared
to the same period in 2012.
-- Infrastructure project awards ticked up, including Qatar
Railway Company awarding contracts worth more than QAR30 billion
(US$8.2 billion) in June.
-- MSCI upgraded Qatar and UAE to 'Emerging Market' status from
'Frontier Market'. Market commentators have suggested that this may
lead to additional investment inflows of up to US$430 million into
the Qatar stock market.
Performance
In the second quarter of 2013 the QIF NAV rose 8.5% to US$1.1672
(28 March 2013: US$1.0758). As at 27 June 2013, the QIF share price
was trading at a 12.6% discount to NAV.
QIF vs QE Index
2007 (5M) 2008 2009 2010 2011 2012 6M 2013
=========== ========== ======== ======= ======= ====== ======= ========
QIF (NAV) 13.87% -36.42% 10.40% 29.86% 1.29% -4.64% 16.46%
=========== ========== ======== ======= ======= ====== ======= ========
QE Index 27.00% -28.80% 1.10% 24.80% 1.10% -5.33% 11.24%
=========== ========== ======== ======= ======= ====== ======= ========
Source: Bloomberg, Qatar Insurance Company
QIF Portfolio
Top 10 holdings
% Share of
Company Name Sector NAV
===================== =================== ===========
Banks & Financial
Qatar National Bank Services 19.3%
===================== =================== ===========
Industries Qatar Industrial 12.4%
===================== =================== ===========
Banks & Financial
Masraf Al Rayan Services 9.9%
===================== =================== ===========
Commercial Bank of Banks & Financial
Qatar Services 8.1%
===================== =================== ===========
Barwa Real Estate Real Estate 6.7%
===================== =================== ===========
Qatar Electricity
& Water Co Industrial 5.6%
===================== =================== ===========
Qatar Telecom Telecom 5.1%
===================== =================== ===========
Banks & Financial
Doha Bank Services 4.4%
===================== =================== ===========
Qatar Navigation Transportation 4.1%
===================== =================== ===========
Qatar Insurance Insurance 3.7%
===================== =================== ===========
Source: Bloomberg, Qatar Insurance Company
During the quarter, Qatar Insurance Company replaced Qatar
Islamic Bank in the top 10 holdings.
Country allocation
At the end of the second quarter QIF had 29 holdings: 18 in
Qatar, 7 in UAE, 3 in Oman and one in Kuwait. Cash was 3.2% of NAV
(Q1 2013: 2.7%).
Qatar continues to be the Investment Adviser's favourite market
in the GCC region because of the impetus for growth from the Qatar
government's significant infrastructure development plan and
Qatar's relatively stable political environment.
Sector allocation
Embedded image removed - please refer to the IMS on the
Company's website
www.qatarinvestmentfund.com/publications/quarterly-reports/ for a
chart depicting the overall portfolio allocation by sector as at 30
June 2013.
The banking sector (including financial services) remains the
most attractive sector with a 57.0% weighting in the Company, up
from 50.9% in Q1 2013. Qatar National Bank is the Company's largest
holding (19.3% of NAV).
The second largest weighting in the Company, at 18.4%, is the
industrial sector; particularly Industries Qatar (12.4% of NAV);
followed by the telecoms sector which increased to 5.1% weighting
at the end of Q2 2013 from 4.9% in Q1.
The real estate sector weighting has been reduced from 10.0% in
Q1 to 3.0% at the end of Q2 2013. Similarly the transportation
sector decreased to 4.5% at the end of Q2 2013.
The allocation to the insurance sector rose to 3.7%, while the
Company added two more sectors: engineering & construction
services (1.0% of NAV) and energy (0.1% of NAV) during the
quarter.
Regional market overview
GCC markets rose in tandem with global markets, with the
Bloomberg GCC200 Index gaining 5.9% in Q2. Dubai, Abu Dhabi and
Kuwait markets performed strongly growing 21.5%, 17.4% and 15.6%,
respectively, while Saudi Arabia and Oman markets performed below
other GCC peers. Money inflows from MENA countries experiencing
unrest have favoured the UAE due to its safe haven status in the
GCC region.
Saudi Arabia's Tadawul Index continues to lag other GCC peers,
gaining 5.2% in Q2. Concern that oil production may exceed demand
in the world market put pressure on the world's largest oil
exporter.
The Qatar Index rose 8.14% in Q2, led by the real estate sector
which gained 20.88%. The transportation and insurance sectors rose
14.87% and 12.56%, respectively.
Despite simmering political issues and lack of liquidity, the
Bahrain Index rose 8.81%. Oman's growth of 5.82% was led by the
industrials sector which grew 11.87%.
Qatar: corporate profitability increased 11.4%
Qatari-listed companies' net profits rose 11.4% in Q1 2013
compared to Q1 2012, to QAR10.2 billion (US$2.8 billion).
Sector profitability (net profit/loss in $000s)
Sector Q1 2012 Q1 2013 % Change
=========================== ========== ========== =========
Banking & Financial 1,126,518 1,169,493 3.8%
=========================== ========== ========== =========
Insurance 83,376 104,665 25.5%
=========================== ========== ========== =========
Industrial 720,079 890,385 23.7%
=========================== ========== ========== =========
Services & Consumer Goods 104,127 101,673 -2.4%
=========================== ========== ========== =========
Real Estate 160,728 171,065 6.4%
=========================== ========== ========== =========
Telecoms 195,448 222,096 13.6%
=========================== ========== ========== =========
Transportation 131,485 148,965 13.3%
=========================== ========== ========== =========
Total 2,521,761 2,808,342 11.4%
=========================== ========== ========== =========
Source: Qatar Exchange
Profits in the banking & financial sector increased 3.8% in
Q1 2013 compared to Q1 2012. This growth was largely driven by
increased lending, particularly to the public sector, which has
increased 6.8% so far in 2013. However, the 4% growth in bank
profits was slower than in 2012 as a result of slower
project/contract awards in Q1 2013. Lending to the public sector is
expected to increase going forward as project/ contract awards
gather pace. Sector heavyweight Qatar National Bank, QIF's largest
holding, reported slower growth in net profits at 6.7%. Commercial
Bank of Qatar and Masraf Al Rayan Bank reported 7.3% and 13.2%
rises in profits, respectively. Qatar Islamic Bank's profits fell
24.9% in Q1. Going forward, loan growth in the Qatari banking
sector is expected to remain strong, underpinned by rising
infrastructure spending and a pick-up in contract awards, leading
to increased lending to the corporate sector.
Industrials sector profits grew 23.7% in Q1 2013 compared to Q1
2012. The industrial sector now contributes 31.7% of the total
Qatar market's profits. Growth accelerated during Q1, and this was
mainly driven by increased profits from heavyweights such as
Industries Qatar, one of the largest chemical producers in the GCC
region, which reported a 33.6% jump in Q1 2013 profits.
In Q1 2013 insurance sector profits increased faster than any
other sector, by 25.5%, compared to the same period in 2012. Again,
growth was led by the sector's largest company, the Qatar Insurance
Company which reported a 35.6% rise in profit.
Net profits in the services & consumer goods sector declined
2.4%. The largest profit contributor was Qatar Fuel Company, which
reported flat profits of QAR0.24 billion (US$0.07 billion).
After a poor performance in 2012 the real estate sector profits
rose 6.4% in Q1 2013 compared to Q1 2012, mainly helped by profit
growth from United Development Company and Ezdan Holding Group.
After reporting losses for 2012, United Development Company (UDC)
posted a 51.4% growth in profits in Q1 compared to the same quarter
in 2012.
The telecoms sector comprises two companies, Vodafone Qatar and
Qatar Telecom. Vodafone Qatar was excluded from this profits
comparison, since its fiscal year ends on March 31. Qatar Telecom
reported a 13.6% rise in profit for Q1.
In the transportation sector profits rose 13.3%, with all three
companies in the sector reporting higher profits. The largest
company, Qatar Navigation, led with 21.4% year-on-year growth.
Recent Developments
Inclusion of the Qatar market in the MSCI Emerging Market
index
MSCI has promoted UAE and Qatar from 'Frontier Market' to
'Emerging Market' status, effective from May 2014. This is the
result of Qatar's powerful economic, regulatory and financial
progress in recent years, and continuing efforts to address the low
foreign ownership limits on many Qatari companies. Regulators in
Qatar have encouraged companies to increase their limits.
The move to emerging market status is expected to increase the
shares available to foreign investors, as companies are changing
their foreign ownership limits. In Qatar, Doha Bank recently raised
its foreign ownership limits to 25%, while The Commercial Bank of
Qatar and Qatar Islamic Bank have applied for an increase. This
should encourage inward capital flows (HSBC expect additional
investment inflows of US$430 million) and mean these markets are
accessible to more funds across the world. The change is effective
from May 2014, when the UAE and Qatar markets are expected to
represent 0.40% and 0.45%, respectively, of the MSCI Emerging
Markets Index.
This change should attract a broad mix of international
investors to the wider GCC region, from long-term foreign investors
to hedge funds, and is expected to improve liquidity.
Foreign fund inflows in the MENA region
In May the MENA region experienced inflows of QAR2.4 billion
(US$655 million) from foreign funds, according to a report by
Deutsche Bank. Of this, Qatar attracted fund inflows of QAR477
million (US$131 million). For Qatar, this encouraging trend is the
opposite of the approximately US$1.3 billion of foreign fund
outflows in 2011-2012.
Project activity gathering momentum
Construction and infrastructure contract awards are increasing
in the GCC. Contracts worth US$15.9 billion were awarded between
April and June 2013 compared to US$13.4 billion worth awarded in
the first quarter of 2013.
The most recent months have seen an uptick in infrastructure
project awards in Qatar. In June Qatar Railways Company awarded
four contracts worth in total more than QAR30 billion (US$8.2
billion) as part of phase 1 of the Doha Metro. Phase 1 includes
construction of four rail lines and an underground railway in the
centre of Doha. Qatar Rail also recently released further tenders
for additional elevated sections of rail line.
Furthermore, Qatar's Public Works Authority (Ashghal) recently
awarded new contracts worth QAR7.2 billion (US$2 billion) for the
construction of 24 roads across Doha.
Credit growth accelerates
Credit growth in Qatar and adjacent markets remains strong.
Total credit extended by Qatari banks continued to accelerate,
rising 19.1% in May 2013 compared to May 2012. Total credit
extended by Qatari banks has grown 5.5% year to date. Public sector
credit jumped by 6.8% year to date (May 2013). The private sector
reported growth of 5.3% during the same period.
Banks in Qatar have been experiencing a strong growth
environment underpinned by the ongoing infrastructure plan and
non-oil sector growth.
Political changes in Qatar
On 25 June 2013, the Emir of Qatar, Sheikh Hamad bin Khalifa Al
Thani, handed over power to his 33 year old son, Sheikh Tamim bin
Hamad Al Thani. Sheikh Hamad introduced political and economic
liberalization and is credited with Qatar's emergence as a major
player in regional diplomacy.
In his first speech to the nation as the new Emir, Sheikh Tamim
underscored the importance of continuity, raising expectations that
the progressive policies laid out by his father would continue.
Macroeconomic update
As forecast, economic growth in Qatar is continuing at lower
levels than that witnessed during the rapid economic growth of the
last decade which occurred principally from investment in oil and
gas production. Growth in the years ahead should largely come from
the non-oil sectors: construction, consumer durables and banking as
the government continues its significant infrastructure development
program ahead of the FIFA 2022 World Cup. According to the IMF,
Qatar's real GDP is estimated to grow 5.2% in CY2013 and 5.0% in
CY2014.
The government plans to spend over US$150 billion on
infrastructure and related projects as they seek to diversify the
economy. The expansionary budget announced by the Qatari government
shows a strong commitment to speed up and complete its planned
infrastructure projects before 2022.
Qatar nominal GDP grew 6.1% in the first quarter of 2013
compared to Q1 2012; when compared to Q4 2012 growth was 2.4%.
Non-hydrocarbon sectors continued to drive the growth with a 13.1%
increase in Q1 2013, while the hydrocarbon sector reported only a
1.5% increase.
Qatar's population continues to grow at a healthy pace, with the
overall level expanding 9.3% to 1.96 million at the end of May
2013. Steady growth in population coupled with rising income levels
is encouraging for the domestic consumer sector and services sector
companies.
GCC Market valuations
Market Cap. P/E (x) P/B (x) Dividend Yield
(%)
============== ============ ============== ======== ===============
US$ Mn 2013E 2014E 2013E 2013E
============== ============ ====== ====== ======== ===============
Saudi Arabia 399,127 12.3x 10.2x 1.6x 4.1%
============== ============ ====== ====== ======== ===============
UAE 136,508 10.8x 8.5x 1.0x 3.8%
============== ============ ====== ====== ======== ===============
Qatar 109,381 11.3x 10.5x 1.4x 5.7%
============== ============ ====== ====== ======== ===============
Kuwait 105,490 13.2x 11.7x 1.5x 3.3%
============== ============ ====== ====== ======== ===============
Oman 16,734 9.9x 9.5x 1.2x 5.1%
============== ============ ====== ====== ======== ===============
Bahrain 17,414 10.5x 9.1x 0.9x 5.7%
============== ============ ====== ====== ======== ===============
Egypt 22,588 9.9x 6.5x 1.2x 4.5%
============== ============ ====== ====== ======== ===============
Jordan 23,811 7.7x 6.9x 0.8x 4.7%
============== ============ ====== ====== ======== ===============
Overall MENA 831,053 11.3x 9.7x 1.4x 4.5%
============== ============ ====== ====== ======== ===============
Source: Bloomberg Finance LP, Deutsche Bank, Prices as at 1 July
2013
Despite recent strong performance the Investment Adviser
believes that the Qatar market still offers an attractive
combination of appealing valuations, high dividend yields, and
strong prospects for profit growth.
Outlook
Qatar listed companies reported reasonable profit growth in the
first quarter of 2013 after a marginal decline for 2012 as a whole.
This earnings momentum is expected to continue in the coming
quarters, driven by increasing infrastructure development activity
leading to strong credit growth.
Qatar's economy is growing satisfactorily, with future growth
expected to be driven by the non-hydrocarbon sector. The banking
sector is expected to benefit from government infrastructure
spending and the growth in the non-hydrocarbon sectors, and the
Investment Adviser favours selected banks.
Steady growth in population coupled with rising income levels
leading to higher disposable income and increased government
spending should bode well for domestic banks and consumer, real
estate, utilities, manufacturing and transport sector
companies.
The recent upgrade of the Qatar market to the 'Emerging Market'
status should provide a significant impetus to the financial market
and should encourage additional foreign fund inflows, as more
global investors can now consider investing in the Qatari
market.
The Investment Adviser believes Qatar and the Qatari exchange
are well positioned for future growth.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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