Waha Capital PJSC, a leading investment company based in Abu Dhabi (ADX: WAHA), has reported a preliminary net profit of DHS 1.138 billion for the second quarter of 2014, up from Dhs 38.4 million recorded in the corresponding period a year earlier.
The record quarterly net profit for the company — the first time quarterly net profit has exceeded the Dhs 1 billion mark — was largely due to the unlocking of part of the value in Waha Capital’s stake in AerCap Holdings NV following the New York-listed company’s acquisition of International Lease Finance Corporation (ILFC), a transaction that closed in May this year.
Waha Capital booked a one-off gain related to the transaction, and recorded a higher earnings contribution from AerCap, because of the increase in scale, valuation and earnings per share at the aircraft leasing company. Other Waha Capital portfolio companies also displayed steady performances, with Anglo Arabian Healthcare and Dunia Finance, continuing their promising business development.
Half-year net profit reached Dhs 1.289 billion, representing a 9-fold year-on-year increase.
Commenting on the results, His Excellency Hussain Jasim Al Nowais, Chairman of Waha Capital, said: “These exceptional results are a testament to Waha Capital’s strong financial position and sound investment process. The company is in an excellent position to take advantage of attractive investment opportunities in high potential sectors in the local and regional economy.”
Al Nowais added: “We will continue to focus on maintaining a healthy pace of growth in our core activities. I am confident that Waha Capital has the right level of expertise and the financial capacity to continue to maximize shareholder value.”
Salem Rashid Al Noaimi, CEO and Managing Director of Waha Capital said: “Our diversified investment strategy is yielding strong results. It is important to note that one-off gains, such as that recorded from the AerCap-ILFC transaction are infrequent in the short term, but based on our strong track record, we are confident that our strategy for value creation will produce return on equity which we believe will continue to exceed that of our local and regional peers.”
He added: “Waha Capital is very well funded and we are looking to commit further capital in high potential areas of the economy, in particular healthcare, energy and infrastructure. At the same time, we will continue to develop our capital markets investment business, which is establishing a strong track-record of outperformance in global credit markets, and most recently in equities.”
The value of Waha Capital’s assets increased 24% to Dhs 6.5 billion as of the end of the second quarter, up from Dhs 5.2 billion as at December 31 2013, with total shareholder equity increasing to Dhs 3.7 billion from Dhs 2.5 billion during the same period.
At the end of March, Waha Capital completed the refinancing of its credit facilities, with 13 local and international banks participating. The company obtained a five-year US$750 million facility comprising a term loan for US$375 million and a revolving loan for the same amount. This replaces a previous US$505 million facility secured in 2011.
In June, the company announced the establishment of a new unit to drive its future investments in the energy sector across the Middle East and North Africa region. The unit, which is part of Waha Capital’s Principal Investments division, has made its first investment — in National Petroleum Services (NPS) — as part of a consortium that has acquired a controlling stake in the UAE-headquartered oil and gas services company.
The NPS transaction, which closed on 26 June 2014, has a total equity value of $370 million (Dhs 1.36 billion), with Waha Capital taking a 20.56 percent equity stake for $76 million (Dhs 280 million). Contributions from NPS will be included in the company’s third quarter earnings of this year.
Investments perform well
New York-listed AerCap Holdings NV has expanded significantly through the acquisition of ILFC from American International Group, Inc. (AIG), a transaction that closed in May this year. The transaction delivered immediate shareholder value through a large increase in scale and earnings.
Through the transaction, which AerCap partially funded through the issuance of new equity to AIG, Waha Capital’s stake in AerCap was reduced to 14.1 percent from 26.3 percent. As a result of this dilution, the company booked a one-off non-cash gain for deemed disposal on the 12.2 percent stake reduction.
Waha Capital is also benefitting from a greater earnings contribution from AerCap. Earnings per share for AerCap are forecast to rise to US$ 3.01 in 2014 and US$ 4.15 in 2015, according to Bloomberg consensus estimates, compared to US$ 2.54 achieved in 2013.
As a result of the acquisition, AerCap has become the global leader in aircraft leasing, more than tripling its fleet to 1,300 owned and managed aircraft. The company, which serves over 200 customers in more than 90 countries, has over $25 billion of future aircraft deliveries on its newly combined order book.
In the second quarter, AerCap signed lease agreements for 36 aircraft, delivered 28 aircraft under contracted lease agreements, purchased 10 new aircraft, and closed the sale of 48 aircraft.
Dunia Finance, a UAE-based consumer finance company in which Waha Capital owns a 25 percent stake, continued to produce very strong results in the second quarter, with net profits up by 48.5 percent year on year to Dhs 82.7 million. Dunia’s loan book expanded 20.3 percent in the six months to end of June 2014, with customer deposits growing 20.6 percent in the same timeframe. The company had a customer base of 150,400 as at 30 June 2014.
The capital markets division at Waha Capital continued to grow its contribution to the company’s profits. It has been increasing its exposure to global credit markets over the last two years, and has begun to invest successfully in regional equities.
The Anglo Arabian Healthcare (AAH) Group performed well, having already broken even in the first quarter, less than a year after its acquisition by Waha Capital. The six clinics operated by the group have increased their volumes of patient visits significantly. AAH continues to pursue a number of potential acquisitions and is making steady progress on its greenfield hospital and clinic projects.
Waha Capital continues to benefit from its stable investment in MENA Infrastructure Fund, a $300m private equity infrastructure fund with assets spread across Saudi Arabia, Oman, and Egypt.
Stanford Marine Group (SMG), which charters and operates offshore supply vessels (OSVs) and in which Waha Capital holds a 49 percent stake, maintained stable profits in the quarter with its fleet of 40 vessels achieving an average utilisation rate of 91 percent. In the first six months of this year, SMG took delivery of one anchor handling tug supply vessel and one platform supply vessel. The company’s Grandweld Shipyard has also delivered four ships and completed 174 repair and maintenance jobs.
Waha Capital’s industrial real estate development, ALMARKAZ, has seen good leasing demand due to the project’s high-quality infrastructure, strategic location, flexibility and scale. ALMARKAZ continued to receive growing interest from light industrial processing, manufacturing and logistics businesses attracted by the development’s international standard infrastructure and warehouse facilities.
As of the end of the second quarter, 79 percent of the 90,000 sq. m. of Small Industrial Units (SIUs) had been leased. ALMARKAZ is exploring a number of growth plans including the expansion of SIU space, and development of new products such as warehouses and light industrial units on the remaining 0.8 sq. km of serviced land within Phase I of the development.
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