SHUAA Capital announced financial results for the first quarter 2014, reporting the fourth consecutive quarterly profit. Total revenues reached Dhs64 million, a 77% increase on Q1 2013 of Dhs36 million. The significant jump in year-on-year quarterly numbers was due to improved client activity across all core divisions with growth in interest income as well as fees and commissions. Interest income increased by 37% to Dhs30.7 million from Dhs22.4 million in Q1 2013 and net fees and commissions rose 135% to Dhs15.8 million from Dhs6.7 million a year earlier. Investments in SHUAA managed funds saw gains of Dhs17.8 million as compared to Dhs7.0 million in Q1 2013.
Overall net profit was Dhs8.2 million representing a significant positive result from a net loss of Dhs5.9 million in Q1 2013 and a 118% increase on the profit of Dhs3.8 million generated in Q4 2013. This solid result reflected contributions from all income generating businesses.
As at 31 March 2014, SHUAA had total assets of Dhs1.49 billion, fractionally down on the 2013 year-end figure. Net assets rose to Dhs1.13 billion from Dhs1.11 billion at 31 December 2013 due to a drop in bank debt and payables. SHUAA’s leverage ratio at the end of Q1 2014 was 0.22x.
HH Sheikh Maktoum Hasher Al Maktoum, Executive Chairman of SHUAA Capital, commented: “We have generated a robust first quarter financial performance, with all income generating business divisions posting a net profit. We have further expanded our loan portfolio, completed a number of significant investment banking transactions, improved asset quality while ensuring that we build out our competitive market position. We also installed a new sales and trading technology platform.
We are seeing an improved investment banking pipeline and a larger pool of companies wanting to go public, improving the possibility of more transactions being executed by SHUAA. We anticipate increased demand for lending following the recent decree in UAE requiring 10% of all government contracts to be awarded to SMEs.
The Lending division posted a 47% year-on-year quarterly increase in revenues to Dhs30.8 million (Q1 2013: Dhs20.9 m) and almost tripled profits to Dhs7.4 million (Q1 2013: Dhs2.6 m). Provisions increased to Dhs7.8 million (Q1 2013: Dhs4.3 m) but were down compared to AED13.2 million in Q4 2013.
The loan book increased by Dhs9.7 million to Dhs823.8 million as of 31 March 2014 as SHUAA’s SME financing subsidiaries, the UAE’s Gulf Finance and Saudi Arabia’s Gulf Installments, continued to build out their portfolios.
At the end of the first quarter 2014, the loan portfolio consisted of: Manufacturing 21.8%, Power, Oil, Gas & Water 16.0%, Logistics 14.7%, Infrastructure 7.0%, Printing & Media 6.0%, Marine 5.0%, Wholesale 4.9%, Sport, Leisure & Hospitality 4.1%, Healthcare 2.7%, Construction 2.5% and other 15.3%. Geographically, 86% of the loan book was in the UAE and the balance of 14% in Saudi Arabia.
The Asset Management unit increased revenues by 16% and booked quarterly revenues of Dhs4.8 million (Q1 2013: Dhs4.1m). Net profit increased by 65% to Dhs3.1 million (Q1 2013: Dhs1.9m) as net fees increased and G&A expenses dropped on a year-on-year comparative basis.
SHUAA’s Emirates Gateway Fund generated 17.3% over the first quarter, outperforming its benchmark. The Arab Gateway Fund returned 9.6% over the first quarter in line with its benchmark as regional equities continue to outpace their international counterparts on strong macro-economic data.
The Emirates Gateway Fund was also named the best UAE Equity Fund for the third year running by MENA FM magazine, posting an annual return of 87.4% in 2013.
The Investment Banking division recorded strong revenue growth. During the first quarter the division posted revenues of Dhs6.4 million, up from Dhs0.1 million in Q1 2013, and a net profit of Dhs8.0 million (Q1 2013: loss of Dhs0.9m) after reversal of some provisions.
During the quarter, the investment banking team worked as financial and sell-side advisor to the shareholders of CSEH Investment (the holding company for CosmeSurge and Emirates Hospital). It was also engaged for the execution and placement of the IPO of Emirates REIT.
The Capital Markets team saw revenues of Dhs3.3 million (Q1 2013: Dhs2.1m) and net profits of AED1.5 million (Q1 2013: Dhs1.9m). In the first quarter, the division carried on investing in its technical capability implementing SunGard’s Front Arena, an advanced sales and trading system that provides a transparent and reliable platform with fully-integrated access to regional and global markets. SunGard Front Arena enables SHUAA to offer global institutional standard DVP, DMA and Market Making. This will increase net fees and commissions in the long term and will help offset higher G&A costs.
The Corporate unit reported revenues of Dhs18.9 million (Q1 2013: Dhs8.9m), with gains from investments in SHUAA managed funds totalling Dhs17.8 million (Q1 2013: Dhs7.0m) making up the bulk of the income. Net losses for the quarter were Dhs11.8 million (Q1 2013: Dhs11.4m) in line with budget.
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