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Kuwait Financial Centre’s Bond rating affirmed with a ‘Stable’ Outlook

: Thursday, March 20 - 2014 @ 12:46

Capital Intelligence (CI), the international rating agency, today affirms the rating of Kuwait Financial Centre’s (Markaz) bond at ‘BBB’. The rating is underpinned by the Company’s good liquidity position, its low leverage (coupled with a much improved debt maturity profile) and its improved earnings for the nine months to end Q3 2013. The rating also reflects the Company’s well established franchise and its conservative business model. Constraining the rating remains the Company’s potentially volatile earnings given the substantial holdings of financial investments, the concentration in its funding base and the relatively small size of its balance sheet and equity base. The Outlook is ‘Stable’.

Markaz’s financial profile strengthened in the first nine months of 2013, with improved earnings and a lower level of debt. Currently, the Company has no other borrowings except for this bond which matures in 2016. Although this does constitute a funding concentration, the related refinancing risk is mitigated to a considerable extent by the Company’s substantial liquid asset holdings and its unencumbered asset base. Markaz’s good debt maturity profile and its low leverage compares very favourably with its peers and are strong supporting factors for the Bond’s rating. The Company’s balance sheet also continues to exhibit a good liquidity profile as at end Q3 2013. Its investments remain fairly diversified in terms of industrial sectors and geography, although the largest proportion of these assets remained in the GCC and MENA – the region in which it knows best. Markaz’s financial ratios at end Q3 2013 were well within Central Bank of Kuwait guidelines and compared more than favourably with peers in the same sector.

The Company’s earnings encouragingly grew further over the first nine months of 2013, buoyed by the improving regional stock market as well as an asset sale. Nonetheless, an area of weakness for the Company remained its potentially volatile earnings, which are related to its substantial holding of financial investments. The recurring portion of income, mainly from its asset management and investment banking activities, continues to grow steadily – although remains modest in absolute money terms. The Company’s operating costs are generally well under control, and financing costs has fallen in line with the lower level of debt.

Markaz is a well established company with a conservative business model. It maintains a good reputation and is one of the top performers in the asset management arena amongst the investment companies in Kuwait. However, it remains a mid-size investment company and its relatively small balance sheet is a constraint on the rating.

Primary Analyst
Agnes Seah
Credit Analyst
Tel: +357 2534 2300

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Thursday, March 20- 2014 @ 12:46 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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