Shuaa eyes acquisition after swinging to net profit in first quarter

26/04/2017 05:58 AST

Shuaa Capital swung back into net profits its chairman said on Tuesday, after registering losses in the past seven quarters. They also announced they are planning to buy a listed financial services firm in the GCC.

Shuaa Capital recorded a net profit of Dh24.77 million in the first quarter, compared to a loss of Dh27.50 million in the same quarter of last year.

"The results are mainly driven by lending division, in which we have spent a lot of time restructuring. We have significantly reduced the bleeding of the SME legacy portfolio," Jassim Al Seddiqi, Chairman of Shuaa Capital told reporters at a press conference. "We expect profitability in lending business and Shuaa overall to continue this year."

Revenues, however, dipped to Dh31.7 million in the three months to March, compared to Dh45.4 million in the same period last year because of its lending unit called Gulf Finance company. GFC went on a lending spree and amassed a portfolio of Dh750 million of SME loans, which later turned out to be toxic, and the company lost Dh400 million.

"GFC's legacy portfolio was a large portfolio and we are mothballing it because it's a toxic portfolio," he added.

The collections have increased tremendously in the lending unit and provisions have decreased due to restructuring and re-optimisation. "We have done a lot of work at GFC in turning around the portfolio, and stop the bleeding," Al Seddiqi said, adding "we are managing the turbulent legacy portfolio, and turning this into an opportunity and trying to salvage value."

From now on, the company will focus on secured asset backed lending with double digit returns.

Acquisitions

The company is planning to buy a listed firm in financial services in the GCC. "We are still under discussions on stake," Al Seddiqi said.

The company is also in the process of finalising the acquisitions of Integrated Capital and Integrated Securities subject to regulatory approvals.

"We would announce something in the next few weeks," he added. Shuaa would be looking scale and synergies from acquisitions.

Opportunities:

Shuaa is planning to expand in its focus markets like Saudi Arabia and Egypt. They are planning to launch a real estate fund of 1 billion Saudi Riyals.

"We would be announcing a fund that has been fully paid up and committed, that would be around 1 billion Saudi Riyals to invest in the real estate sector. This is positive. We are also discussing with the Tadawul to list REIT in Saudi," Al Seddiqi said. In Egypt, Shuaa is "opportunistically looking at opportunities."

"It's better to be early than to be late to the party," Al Seddiqi said, when asked about the recent devaluation would hamper its plans to operate in the country.

Gulfnews