Middle East Debt Capital Market Conference


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    KIPCO Valuation Model/ Info for Rating Advisory
  • Middle East Debt Capital Market Conference

    1. 1. 11 Middle East Debt Capital Market Conference April 2008
    2. 2. 22  Overview  Strategy  Financial Overview & Outlook Agenda  Liability Management  Annexures
    3. 3. 33 Excellent management track record & strong shareholder support Premier holding company focused on MENA Assets under management : ~ US$24 billion Presence across 21 countrie s Presence across 21 countrie s Key Verticals: Financial Services & Media Employees 7000+ KIPCO: Overview S&P Rating: BBB+ CI Rating: A- 16 years of continued profitability Among the most actively traded stock on KSE
    4. 4. 44 0 200 400 600 800 1000 1200 1400 Jan-02 Feb-03 Apr-04 Jun-05 Jul-06 Jul-07 0 20 40 60 80 100 120 140 KIPCO Volumes KIPCO Prices KIPCO: Ownership & Liquidity • KIPCO’s major shareholder, Al Futtooh Investment Company (AFI) is owned by prominent members of the Al-Sabah family *As on April 15, 2008; since March 26, 2007 KIPCO share price is trading ex-Dividend KIPCO Share – Price & Volume (2002-2008YTD) Source: KSE website • KIPCO is among the most actively traded stocks on KSE • KIPCO constitutes 1.9% of market cap* of KSE • Average daily trading volume in 2007 was 5.9 million shares • Since Jan 2002, KIPCO stock price has appreciated at a CAGR of 57% Apr-08 Total Outstanding Shares as on March 23, 2008: 1,049.6 million Shareholding Pattern – March 2008 Primary Promoter (AFI) 44.3% Treasury Shares 2.7% Investment Funds 6.2% Investment Companies 31.9% HNIs 7.2% Retail Investors 7.7%
    5. 5. 55 1994 1988 Acquisition of United Gulf Bank (UGB) Acquisition of stake in United Real Estate Company (UREC)1994 Acquisition of stake in Burgan Bank Establishment of United Industries Company (UIC)1996 Formation of Gulf DTH (Showtime)1995 1996 Acquisition of Saudia Dairy and Foodstuff Company (SADAFCO) by UIC 1996 Acquisition of stake in Gulf Insurance Company (GIC) Acquisition of stake in NMTC (Wataniya Telecom)1999 2003 Establishment of United Networks Company (UNC) 2005 Initial Public Offering of SADAFCO 2006 Established US$2 billion EMTN programme 2007 Sale of stake in Wataniya Telecom Sale of stake in United Aviation, Jet Aviation & United Fisheries of Kuwait (UFK)2007 1998 Formation of Kipco Asset Management Company (KAMCO) KIPCO: Key Milestones Credit rating upgraded by two notches to BBB+ by S&P - Highest rated Holding Company in the MENA Region2007
    6. 6. 66 3 Companies Media US$ 158 Million US$ 164 Million 10 companies Industrial US$ 1,138 Million US$ 283 Million Total Assets The KIPCO Group comprises over 50 companies across diversified sectors 21 Companies Financial Services 5 companies Management Services 5 Companies Real Estate US$ 18,092 Million US$ 1.8 Million Total Revenue US$ 2,053 Million US$ 1.2 Million Total Assets US$ 881 Million Total Revenue US$ 91 Million KIPCO Group Companies: Asset Composition On a 100% basis, Total Assets of the KIPCO Group Companies is over US$20 billion. Core Banking and Insurance assets account for 80% (US$16.4 billion) of the total assets of Group Companies. In addition assets of the KIPCO Parent* are US$3.6 billion. 12 Companies Medical & Others US$ 131 Million US$ 46 Million * Not included in the sectoral composition above
    7. 7. 77 Media 84.5% 63.3% 50.6% 65.0% Notes: 1. Stakes given are as on Dec 31, 2007 2. Overall group stake in Showtime is 78% 3. Overall group stake in United Gulf Bank is 87% Financial Services Geographic Presence in MENA 11 countries 6 countries Kuwait 22 countries Shareholding KIPCO: Core Operating Companies
    8. 8. 88  Overview  Strategy  Financial Overview & Outlook Agenda  Liability Management  In Summary  Annexures
    9. 9. 99 Building Businesses Strong managerial expertise Thought leadership Regional Outlook Investing in engines of growth Diversified revenue streams Beingfirst Intheregion M EN A Target RO E: 20% BalancedPortfolio Team approach KIPCO Strategy: Corner Stones
    10. 10. 1010 Invest in green field ventures to introduce new products & services in the region Invest through M&A transactions to regionalise, build scale & attain market leadership Invest in Our Success Invest in ‘What We Know’ Invest with Financial Discipline Invest primarily in MENA Region with selective global diversification KIPCO: Investment Philosophy
    11. 11. 1111  Listed Equity Portfolio  Private Equity/ Hedge Fund Portfolios  Listed Equity Portfolio  Rated Fixed Income  Private Equity  Seed Capital Investment  Invest or partner in regional products, Islamic & conventional products for the region  JVs/meaningful stakes in global companies New Businesses Existing Businesses GlobalRegional Focus on Financial Services Focus on Financial Services Selective Regional and Global Diversification Selective Regional and Global Diversification KIPCO Strategy: Looking AheadKIPCO Strategy: Looking Ahead  Increase ownership  Strengthen capital base  Deeper & faster regionalisation  Consolidation KIPCO: Looking Ahead
    12. 12. 1212  Overview  Strategy  Financial Overview & Outlook Agenda  Liability Management  In Summary  Annexures
    13. 13. 1313 2,402 569 724 801 2004 2005 2006 2007 Consolidated Equity* 406 247 552 3,203 2004 2005 2006 2007 US$ million 130 86 173 1,889 2004 2005 2006 2007 US$ million 15,222 4,698 2,763 3,643 2004 2005 2006 2007 US$ million US$ million KIPCO (Consolidated): Key Financials * Attributable to equity holders of the Parent Net Income*Total Revenues Consolidated Assets CAGR: 62%CAGR: 77% CAGR: 180% CAGR: 134%
    14. 14. 1414 29 74 193 173 33 244 187 112 GIC UGB BB KIPCO 2006 2007 KIPCO & Core Companies: 2007 Financials Net Income – KIPCO and Core Companies 29 102 193 173142 268 271 1,889 GIC UGB BB KIPCO 2006 2007 US$ million 991%163%389% 40% Net Income – KIPCO and Core Companies (Excluding Non-Recurring Gains**) US$ million 41%51%14% -3% ** Primarily on account of sale of NMTC (Wataniya Telecom)
    15. 15. 1515 KIPCO Outlook for 2008: Overview • MENA region fundamentals getting stronger in 2008 • KIPCO continues to regionalise  Organic growth through expansion in commercial banking, investment banking, asset management and insurance sectors  Consolidation opportunity in the media sector • Expanding financial services adjacencies  Long term savings and pension plan  Re takaful • Making a Difference Project  Education: K-12 Projects in India, GCC and broader MENA Region  Housing: Residential Housing in Algeria, Saudi Arabia, Egypt and Syria A focused strategy aimed at organic growth and continued margin expansion would result in an improved portfolio. This coupled with greater operational flexibility and continued discipline in capital allocation better positions KIPCO to take advantage of the growth opportunities in the region.
    16. 16. 1616 187 306 2007 Normalised 2008E 33 52 2007 Normalised 2008E 112 141 2007 Normalised 2008E Net Income – Burgan Bank Net Income - GIC Net Income - UGB US$ million EBITDA - Showtime US$ millionUS$ million US$ million 58% 26% 64% 3 26 2007A 2008E 671% Core Companies: Projections
    17. 17. 1717 244 388 2007A* 2008E Net Income US$ million On a normalised basis, KIPCO net income is projected to increase at a growth rate of 59% over 2007-08 59% * On a normalised basis KIPCO (Parent): Projections
    18. 18. 1818  Overview  Strategy  Financial Overview & Outlook Agenda  Liability Management  In Summary  Annexures
    19. 19. 1919 Financial Targets Well defined financial targets at the Parent Level  Target Debt/Equity: not to exceed 2.5x  Target Net debt/investments: 20-30% Financial Policies  Optimise sources of funds  Diversification of debt instruments from domestic to global markets  Extend maturity profile  Maintain adequate committed and uncommitted Lines of Credit to cover short term maturing debt  Proactive management of cost of funds to reduce spread vis-à-vis benchmark rates KIPCO (Parent): Financing Policies & Targets
    20. 20. 2020  Commercial bank term borrowing from Kuwaiti banks secured by collateral  Established money market lines from Kuwaiti and regional banks 1990  First bond issue of KD12 million (US$41 million) in Kuwait 1994  Term borrowing from regional banks  New borrowings only on unsecured basis2000  US$100 million debut international syndicated loan completed  No outstanding borrowings on secured basis 2004 Highlights  US$175 million international syndicated loan completed2005  Assigned investment grade rating by Standard & Poor’s  Set up US$2 billion EMTN programme  Drawdown of US$635 million in two tranches under the EMTN programme 2006  First issuer of KIBOR based floating rate bonds 2001  Net debt/investment portfolio ratio < 1%  Based on target net debt/ investment portfolio value, additional borrowing capacity of > US$1 billion 2007 KIPCO (Parent): Liability Management
    21. 21. 2121 Debt Type: Dec 2005* Maturity Profile: Dec 2005* Maturity Profile: Dec 2007* Debt Type: Dec 2007* MTN 65% Term Loan 14% KD Bonds 21% 1-2 yrs . 6% 2-3 yrs. 16% 3-4 yrs. 47% 0-1 yr. 31% * Assuming, the exercise of extension option on KD Bonds Total Gross Debt: US$ 963 million 0-1 yr. 34.8% 4-5 yrs. 25.4% 3-4 yrs. 8.6% 2-3 yrs. 10.6% 1-2 yrs. 20.7% Total Gross Debt: US$816 million KD Bonds 37.4% Money Market 3.5% Syndicated Loans 33.7% Committed Lines 25.5% Total Gross Debt: US$816 million Total Gross Debt: US$ 963 million KIPCO (Parent): Debt Profile
    22. 22. 2222 963952 824 2005 2006 2007 1,290 9551 2005 2006 2007 -327 857 773 2005 2006 2007 KIPCO is now a Net Placer of Funds Liquidity Position (C= A-B) Gross Debt (A) Cash and Liquid Assets (B) US$ million US$ million US$ million KIPCO (Parent): Net Placer of Funds
    23. 23. 2323 Key Rating Ratios December 2006 December 2007 Cash Coverage (ST Debt) 0.5x 3.1x Unutilised available lines coverage (ST Debt) 0.9x 1.4x Cash Coverage (upto 3 year debt) 0.2x 2.3x Unutilised available lines coverage (upto 3 year debt) 0.4x 1.1x Net Debt/Investment Portfolio 29% 0.5% Dividend/Interest Coverage 2.1x 8.7x Core Investments/Investment Portfolio 99% 91% KIPCO (Parent): Key Liquidity Ratios
    24. 24. 2424  Overview  Strategy  Financial Overview & Outlook  Liability Management  In Summary  Annexures Agenda
    25. 25. 2525 Diversification by industry and asset class  Widespread presence across financial services, media, industrial and real estate sector  Over 50 companies under management  Investment strategy continues to promote diversification across geography, industry and asset class Strong market conditions  Strong GDP growth registered by GCC economies (Kuwait:18.7% in 2006)  All GCC markets in positive territory on YTD basis (Kuwait market up 17.0%)  Strong oil prices, significant industrial & infrastructural investments drive economic growth Geographical diversification  Presence in 21 countries  As at December 31, 2007; 36% of assets are from outside Kuwait Excellent track record  16 years of continued profitability  Effected successful investments (greenfield/ acquisitions) and profitable exits Experienced management team  Average stay with KIPCO of the executive management is 9 years  Exec. Vice Chairman, Group COO & Group CFO have been with the Group for over 18 years  Recent inclusions have rich experience in varied sectors Key Strengths: Business profile
    26. 26. 2626  As at December 31, 2007, net debt/investments was 0.5% vis-à-vis the target 25-30%  Cash/debt due in 12 months of 3.1x  Large liquid asset base (62% of investment portfolio in listed/ liquid assets)  Liquidity monitored on a daily basis  Strong share price  Backed by strong and supportive shareholders with strong regional standing  Good access to domestic and international capital markets  Well developed lender base in Kuwait, region and the world  Balanced debt maturity profile Very low leverage Very good liquidity Funding flexibility  Target net debt/investment portfolio: 25%-30%  Dividends/interest + expenses coverage >2 times  Dividends/interest coverage >3 times Conservative financial policies Key Strengths: Financial profile
    27. 27. 2727 Moody’s FSR Rating: C- S&P: BBB+/Positive S&P: BBB+/Positive Moody’s: Baa3 Key Rating Considerations  Strong Profitability  Adequate Capitalisation  Growing Franchise  Improved Funding Profile Key Rating Considerations  Strong Operational Performance  Strong Competitive Position  Good Capitalisation  Improved Net Combined Ratio Key Rating Considerations  Strong Operational Performance  Comprehensive Risk Management  Adequate Capitalisation  Improved Asset Quality Key Strengths: High credit worthiness of Underlying Assets
    28. 28. 2828  Thought leadership in the MENA Region – holds many firsts to its credit  First 100% private owned company in MENA to hold highest credit rating (BBB+/Stable/A2) from S&P  Strong credit profile – diversified lender base and balanced maturity  High quality of underlying assets – financial services operating companies have investment grade rating  Strong track-record of execution by the operating companies  Clear strategy and quality of management team Why KIPCO?
    29. 29. 2929
    30. 30. 3030  Annexure 1: Management Team  Overview  Strategy  Financial Overview & Outlook  Liability Management  In Summary Agenda
    31. 31. 3131 Faisal Hamad Al Ayyar Executive Vice Chairman Mr. Al Ayyar was the Managing Director of the KIPCO Group for the last 17 years. He is one of the most well- known and successful entrepreneurs in the Gulf region. His focus on shareholder value has enabled KIPCO to become one of the leading groups in the MENA area. He has been strongly involved in the transformation of group companies such as United Gulf Bank (UGB), Gulf Insurance Company (GIC), Burgan Bank, SADAFCO and Showtime. Mr. Al Ayyar is a former fighter pilot of the Kuwait Air Force. Pinak Pani Maitra Group CFO Mr. Maitra has worked for the KIPCO Group for more than 18 years. He is a key member of the Group’s risk management and strategy development team. He is also responsible for performance analysis and budget evaluation of KIPCO and its companies. He is a non executive Board Director with a number of KIPCO’s operating subsidiary companies, including Showtime, Hunter Capital and Pulsar Knowledge Centre, Delhi. Prior to joining KIPCO, Mr. Maitra worked for the accountancy firms Arthur Andersen and Arthur Young. Ahmad Essa Al Ajeel Vice President, Marketing/R&D/PR Mr. Al Ajeel has worked for the KIPCO Group since 1994. His current responsibilities include financial institution relationship development and coordinating Group marketing activities. Prior to joining KIPCO, he worked for the Industrial Bank of Japan and the Kuwait Foreign Trading Contracting & Investment Company. Mr. Al Ajeel is a non-executive Board Director of United Networks, Kuwait. Samer Khanachet Chief Operating Officer Mr. Khanachet became Chief Operating Officer of KIPCO in 2008. For the previous 17 years, he was President of United Gulf Management, KIPCO’s subsidiary in the United States, where he identified strategic resources to support KIPCO’s activities in financial services, media and other sectors across the MENA region. He holds BSc degrees from the Massachusetts Institute of Technology (MIT) and an MBA from Harvard University. He sits on boards and committees at the American University of Kuwait, MIT, Harvard and the Forsyth Institute. Lakhdar Moussi Senior Vice President, Financial Services Mr. Moussi joined KIPCO Group in December 2005 to assist and advise on the Group’s expansion plans in the insurance, manufacturing and real estate sectors. He brings over 36 years experience in insurance, project finance, banking, investment, manufacturing, consulting and contracting. He has worked in Algeria, France, Bahrain and Canada. Over the last 16 years, he has been extensively involved in the region’s insurance industry through his association with ARIG, Bahrain. Declan Sawey Group Treasurer Mr. Sawey is a professional with over 16 years experience in treasury and investment management. Prior to joining KIPCO in 2007, Mr. Sawey was Head of Asset & Liability Management for HBOS Corporate. Mr Sawey also has extensive Middle East experience, having worked for Gulf Bank and the Kuwait Investment Authority. He is a Fellow of the Institute of Chartered Accountants in England and Wales, a Chartered Financial Analyst (CFA) Charter holder and a Member of the Association of Corporate Treasurers (MCT). Executive Management
    32. 32. 3232 Antony Miles Strover Advisor Corporate Finance Mr. Antony Miles Strover has been associated with the KIPCO Group since 1996. Mr. Strover has been involved in acquisitions, structuring and financing of various transactions of the KIPCO managed companies. He also advises the KIPCO management on investment structure, governance and control policy, and provides taxation-related advice to KIPCO companies. Mr. Strover is registered as an authorised auditor by the Ministry of Commerce of the State of Kuwait and is also a Fellow of the Institute of Chartered Accountants in England and Wales. Prior to joining KIPCO, Mr. Strover was a Partner in Peat Marwick Mitchell & Co. Mohsen Ali Hussain Group Chief Internal Auditor Mr. Hussain joined UGB in 2001. He was appointed as KIPCO Group Chief Internal Auditor in May 2006. He has over 15 years of experience in public accounting and internal auditing and was previously employed by KPMG, Arab Insurance Group (ARIG), National Bank of Bahrain and Ahli United Bank. He is a Certified Public Accountant (CPA), a Certified Information System Auditor (CISA), a Certified Internal Auditor (CIA) and hold a BSc in Accounting. Robert Drolet Senior Vice President, Technology & Media Mr. Drolet is responsible for the supervision, development and optimisation of KIPCO's communications and media portfolio. Prior to joining KIPCO in 2006, he led and advised on successful turnarounds, major merger and acquisition transactions and strategic alliances. Mr. Drolet has 14 years experience in the telecom and media industry – he was CEO of Continental Europe, CEO of US Communications Solutions and Global Chief Commercial Officer for Cable & Wireless, following senior positions in the UK cable industry and at Bell Canada International. He is a member of the Québec Bar and a Solicitor (England & Wales). Mazen Hawa Group Vice President, Finance & Operations Mr. Hawa joined KIPCO in 2001. His responsibilities include Group financial control and serving as advisor to a number of KIPCO’s operating subsidiaries. He is Vice Chairman of the United Pharmaceutical Company, Kuwait and a non-executive Board Director of the Fajr Al Gulf Insurance Company, Lebanon. He is a certified member of the American Institute of Certified Public Accountants and the Institute of Management Accountants. Prior to joining KIPCO, Mr. Hawa worked for the assurance and business advisory group of Arthur Andersen. Robert Hipkins Group Communication Director Mr. Hipkins has responsibility for KIPCO’s corporate communications. He joined KIPCO in February 2007 and was previously a senior consultant with Hill & Knowlton, one of the world’s leading public relations companies. Mr. Hipkins has over 20 years experience in public relations and marketing in the UK, the United States, Europe and the Middle East. He is a graduate of Edinburgh University, Scotland. Bibhau Tamang Group Vice President, Financial Control Mr. Tamang has been with KIPCO since 2000. He brings with him over 16 years of experience in strategic planning, debt capital markets, mergers and acquisitions, initial public offerings and greenfield projects. He has been instrumental in establishing Pulsar Knowledge Centre and is also on the Board. He has done his MBA from Brigham Young University, USA. Prior to joining KIPCO, Mr. Tamang worked at Novell Inc. Executive Management (Contd.)
    33. 33. 3333  Annexure 2 : Major Investments  Overview  Strategy  Financial Overview & Outlook  Liability Management  In Summary Agenda
    34. 34. 3434 0.0 0.5 1.0 1.5 2.0 2.5 Jan-02 Apr-03 Jul-04 Oct-05 Jan-07 Apr-08  Established as an offshore commercial bank in 1980, acquired by KIPCO in 1988 and transformed into a leading investment bank  Licensed as a universal wholesale bank  Operations include asset management, corporate finance, equity, real estate, treasury and commercial banking  Diversified asset base with assets under management of US$7.3 billion  Rated by Moody’s (Baa3/Stable)  Dual Listing on Kuwait Stock Exchange & Bahrain Stock exchange 101 81 43 268 2004 2005 2006 2007 CAGR: 84% 2.18 Source:Bloomberg,BahrainStock Exchange Source:Company US$ million US$Net Income Share Price Movement United Gulf Bank
    35. 35. 3535 0.0 1.0 2.0 3.0 4.0 Jan-02 Apr-03 Jul-04 Oct-05 Jan-07 Apr-08  Incorporated in 1962; acquired by KIPCO in 1996  Market leader in Kuwait in life, property and casualty insurance segments  Comprehensive offerings include life, health, motor, property, casualty, marine and aviation insurance  Network of 10 local branches and operations in six countries: Kuwait, Bahrain, Saudi Arabia, Lebanon, Egypt and Syria  Rated by Standard & Poor’s (BBB+/Positive)  Listed on Kuwait Stock Exchange Marine InsuranceAviation InsuranceCasualty Insurance Property InsuranceHealth Insurance Life Insurance 142 29 20 24 2004 2005 2006 2007 CAGR: 92% Source:Bloomberg,KuwaitStock Exchange Source:Company 2.98 US$ million US$Net Income Share Price Movement Gulf Insurance Company
    36. 36. 3636 0 1 2 3 4 5 Jan-02 Apr-03 Jul-04 Oct-05 Jan-07 Apr-08  Incorporated in 1975 and privatised in 1995  3rd fastest growing bank in terms of profitability  Fostering transparency and governance through international best practices  Technology-driven, innovative provider of financial services  Network of 20 branches, 42 ATMs, 6 K-Net ATMs and 24 Kiosks  Rated by Standard & Poor’s (BBB+/Positive) and by Moody’s (A1/Stable)  Listed on the Kuwait Stock Exchange Corporate Governance M-Commerce SolutionsBeebank ServicesTechnology Leader 271 193 145 101 2004 2005 2006 2007 Net Income Share Price Movement Source:Bloomberg,KuwaitStock Exchange Source:Company 3.99 US$ million CAGR: 38% US$ Burgan Bank
    37. 37. 3737 Highest Revenue22 Territories in MENA RegionOffering Over 50 Channels  Incorporated in 1995  Leading DTH Pay TV operator  Joint venture between KIPCO and Viacom Inc.  Widest range of program offerings: Over 50 channels  Operating licenses for 22 territories in the MENA region  Highest revenue among all TV platforms – Pay or Free to Air  Exclusive rights of FAPC for three seasons starting August 2007  Achieved positive EBITDA in 2007 Gulf DTH (Showtime)