masraf al rayan

1

woQod

2

mawashi

3

national leasing holding company

4

industries Qatar

5

Qatar industrial manufacturing company

6

Qatar national cement company

7

doha insurance company

8

doha bank

9

Qatar islamic insurance company
june 2012

10

Qatar today 37

cover story Qt top ten

after some respite in 2010, the global economy returned to sentiments of uncertainty in 2011, as focus switched from the private financial sector to individual countries, particularly in the us and europe. after a general improvement in the performance of most stock market indexes in 2010, fears of sovereign debt-default led to a regression in their performances in 2011. however, in a show of remarkable defiance, the Qatar exchange managed to buck that trend and was one of the only markets to finish the year in the black.

A
38 Qatar today
june 2012

t the end of 2011, the Qatar Exchange (QE) price index finished at 8,779.03 points – a gain of 1.12% on its closing value in 2010 and one of 26.2% on its 2009 closure. Major indicators such as the general index,

market value, total trading value, total trading volume and the number of transactions making up the traded volumes all increased in the twelve-month period. The total traded volume of shares (in 252 trading days) increased to 2.3 billion during 2011 – a 10% increase on 2010, which had one less trading day. The daily average of traded shares rose to 9.1 million compared with 8.3 million in 2010. The value of traded shares was QR83.4 billion in 2011 – a 24% increase on 2010, while the daily average traded value was QR331 million compared to QR268 million in 2010. Sixteen of the 42 companies listed finished the final day of trading in 2011 at a higher value, while 26 stocks declined from their end-2010 price. Total subscribed shares reached 9.663 billion, a 5% increase. The market capitalisation of the 42 listed companies increased to QR457 billion – an increase of 1.6% from 2010. So amidst all the global negativity, who were the drivers of all this growth on the QE? The QE is comprised of 42 listed companies with just 9% ownership interest from overseas – a statistic which may be analysed in more detail if the 2011 trend continues. Qatar Today and AlShall Economic Services provide your one-stop-shop on the most lucrative shares on the QE over the past five years. We have collaborated once again to review the QE’s Top Ten.

“We retained the same calculation methodology as in previous years,” said Camille Raphael, General Manager of AlShall Economic Services. “We tried to ascertain which companies would have brought an investor a better return had the investor bought one share in that company at the beginning of 2007 and sold it at the end of 2011, including any additional shares they may have received for free during this period.” Calculation methodology “To the share market price appreciation,” he continued, “we added the amount of cash that the company distributed to its shareholders from its net profits over the period under study as well as the attractiveness of the company’s shares based on revenue and net profit growth, with the rationale that the value of a company (hence its share price) could potentially increase if the company’s sales revenues and net profits keep increasing extraordinarily year over year. “Lastly, liquidity of the stock expressed in terms of average traded volume and number of transactions was taken into consideration, given that if someone would like to exit the investment, they should be able to do that with relative ease,” he added. For calculations of price per share, cash distributions, net profit and revenue growth, Al Shall looked at total shares held at the end of 2011 on the basis of the purchase of one share in that company at the beginning of 2007, and the computations were made on a per share basis. This was done to offset any ownership dilution from corporate actions such as mergers and acquisitions or capital increases. It should be noted that from time to time, Qatar listed companies distribute cash to their shareholders during the year, depending on their previous year’s performance (what is referred to as cash dividends), as well as free share dividends. “We also decided to measure all financial and trading performance as an average of the five-year period, to mitigate extraordinary one-time performances, and assess the listed companies during a period that has seen both boom and gloom,” said Raphael. AlShall understands that it calculated the rankings based on a selection of financial measurements, that

may or may not be the best criteria to assess the attractiveness of a company, but it feels it needs to use a holistic lens to be fair to all companies. “It is important to diversify the financial measurements in conjunction with statement analysis to achieve a more objective approach in determining a company’s rank,” said Raphael. Relevant to an investor’s point of view, the overall ranking of companies was based on seven financial indicators in line with their respective weighted average criteria. The weights used are 20% each for price growth, dividend yield and liquidity, while net profit growth, revenue growth, return on equity and return on assets are weighted at 10% each. Price growth Historical data on year-end share closing prices and share dividend distributions for the past five years are used to assess each company’s ranking in terms of price growth (or average yearly portfolio value increase based on one share purchased in each company at the beginning of 2007). Gulf Warehousing Company (59.7%) was by far the best in terms of price growth, followed by Mawashi and National Leasing Holding Co. Dividend yield Dividend yield demonstrates how much a company pays out in dividends each year in relation to its average market capitalisation. Masraf Al Rayan (7%) achieved the highest ranking in this category, followed by Doha Bank and Doha Insurance Co (both 5.4%). It is also evident that six of the Top Ten come from the financial sector. Liquidity The measure of liquidity should indicate how easily shares can be purchased or sold on the QE based on average trading volume per year and the number of trades per day. Generally speaking, companies with both a high daily volume of traded shares and a high number of trades have better liquidity than those with light trading volumes and a low number of trades. Masraf Al Rayan ranked first on this criterion, followed by last year’s top performer, Mawashi.
(con’D on P.42)

“it is important to diversify the financial measurements in conjunction with statement analysis to achieve a more objective approach in determining a company’s rank.”
Camille Raphael
General ManaGer
AlShAll Economic SErvicES

june 2012

Qatar today 39

cover story Qt top ten

QE is opEn for businEss
“one important thing in early 2012 was the readiness of the Qe venture market, which is the market established for small enterprises. we’ve created the environment and from a technical and regulatory perspective we’re ready to go. we’re now engaging with potential listing candidates.”

andre Went
cEo, QATAr EXchAnGE

he Qatar Exchange (QE) maintained its position as the bestperforming market in the GCC and Arab region in 2011. It is a well-regulated environment that uses state-of-the-art NYSE Euronext technology to support transparency and accuracy, which makes trading an efficient experience overall. The QE aims to support the country’s economy by providing a market for issuers to raise capital to grow their businesses and an environment for investors to cultivate the opportunities they see in the listed companies. The QE currently has 42 listed companies, which aggregate for a market capitalisation of QR457 billion ($126 billion). It understands that to grow, to attract more companies and investors to its table, it needs to set that table right, and QE Chief Executive Officer, Andre Went explains that reform and diversity are key to that drive. “We defined a five-year strategy in 2009 which incorporated three phases,” says Went. “Phase one was the reform of the cash market; phase two is to launch derivatives and a central counterparty, and phase three is to try to generate more international business development. We’re currently in phase one.”

t

Reform of the cash market Following a strategic partnership agreement in 2009 between Qatar Holding and NYSE Euronext, a EuroAmerican corporation that operates multiple securities exchanges, the Doha Securities Market (DSM) was renamed the Qatar Exchange. It was hoped NYSE Euronext’s experience and reputation would give the market some added features and credibility in a global context. “The partnership has three components,” says Went. “One is the shareholding partnership – NYSE Euronext has a 20% stake in the exchange, so they work in developing the exchange (the other 80% is represented by Qatar Holding); second is a technical aspect where IT services like Universal Trading Platform (UTP) are being arranged; and the third is a services agreement where ‘knowledge transfer’ is being done on an ongoing basis, so we have a number of experts coming from Europe, some on a consultancy basis. In all three areas, the partnership is going great.” Went is adamant that to improve the liquidity of the cash market and to secure the confidence of traders –both in Qatar and abroad – there had to be alignment with global standards in all areas, from the trading infrastructure to the settlement of transactions. Apart from attracting investors from Europe, Asia and the US, the exchange is also starting a campaign to attract more expatriates living in Qatar to look into investing in QE. So what changes has the QE implemented in the past 12 months to affect its strategy of enticing

40 Qatar today

june 2012

more investors to trade on the exchange? “In 2010, we started implementation of a new trading system called UTP, which is a state-of-the-art technology in line with international standards. We also made a change in the ‘post-trade’ – or the settlement of transactions – where in the past the monetary side of those transactions was handled by a private bank; it’s now handled by the Qatar Central Bank (QCB). We have also increased our number of registered brokers from seven to 10. “We also introduced a delivery-vs-payment (DVP) system, which is a set of rules on how a transaction is settled. It ensures you receive your shares at exactly the same time you pay for them, and of course the other way round – when you sell your shares you lose control of them at precisely the same time as you receive your settlement. Towards the end of 2011 we implemented the T-bills market, which is the very first step towards the development of a bond market. “Early last year we made some changes in terms of the trading hours,” Went adds. “A half-hour was added in the morning and the afternoon, so now we’re open from 9.30am to 1:00 pm for continuous trading; this adds a bit more overlap with the Asian and European markets. “We also decided to change the ‘tick sizes’ in the market – tick sizes are the smallest increment in which you can enter orders into our order book. It used to be ten dirhams, but we related it more to the price of the shares. For example, for low-priced shares up to QR25, the tick size is one dirham; for QR25-50 it’s 5 dirham and above QR50 it’s 10 dirhams.” Diversity of investment opportunities The QE is now past the half-way marker in its five-year plan, so where does Went see the exchange at this intermediate stage? How is it performing in line with its stated mission of offering diversity in the range of investment and trading opportunities? “We are seeing satisfactory progress in the cash markets - some things we would like to see done a little bit quicker, but then our T-bills market has been implemented ahead of time. The next major step will clearly be derivatives, but we first need to finalise the cash-market phase and ensure that sufficient liquidity is available in the market. “One important thing in early 2012 was the readiness of the QE Venture Market, which is the market established for small enterprises. We’ve created the environment, and from a technical and regulatory perspective we’re ready to go. We’re now engaging with potential listing candidates. This is the only such market in the region – it follows a similar principle to the Alternative Investment Market (AIM) of the London Stock Exchange, which allows smaller companies to float shares with a more flexible regulatory system than is allowed on the main market. “The bond market would fit very well in any situation financially,” says Went. “It’s a different way to raise capital and it hasn’t a high-risk profile – definitely not the bonds that are issued by the State of Qatar or Qatari companies; it’s very secure and well rated. I think the uncertainty after the financial crisis adds to the demand for these kinds of instruments. Bonds and sukuks, are very secure instruments which wouldn’t be impacted by the financial crisis; if anything, the demand for them increases.

“The hopes for the remainder of this year would be to launch exchange-traded funds (ETFs). We are in discussions with the regulator about the implementation of other instruments and measures, such as real estate investment trusts (REITs), liquidity provision, securities lending and borrowing, and direct electronic access, which will be important steps in the development of the exchange. Then going forward we will start looking at the derivatives market – we can’t focus on this until we see results in the cash market.” Went also reveals that the exchange is looking at a Sharia compliant index for those who require such an investment tool. “It is part of the product development – a Sharia-compliant index can be used to enhance and develop other products like ETFs, and further down the road derivatives that are linked to an index.” Performance There are 42 companies listed on the QE, but it has just 20 constituents. It’s normal for any market to have a so-called “bluechip index” that reflects the largest and the most actively traded companies. Inclusion is statistically determined by such factors as liquidity in the market, velocity and market capitalisation, and constituents are reviewed every six months. The QE maintained its position as the best-performing market in the GCC and Arab region in 2011. After a 24% increase in 2010, the index grew by 1.12% in 2011 – the only market in the region to post a positive return. The year ended with a total market capitalisation of QR457 billion ($126 billion) – a 1.59% increase on 2010. “We have seen some swings in the past, but 2011 brought a lot of stability, both on the QE Index and the Total Return Index (TRI),” says Went. “If you look at some of the other markets in the region, QE has clearly been the best-performing market in the region.” The exchange is being developed to attract traders and investors from Qatar and abroad, so how much is the market here being stimulated by foreign interest? “The economy of Qatar is clearly very attractive - it’s developing very well,” says Went. “Foreign investors (both institutional and retail) make up about 8% of the market capitalisation of QE, but in terms of annual turnover, they account for about 35%.” One aspect which encourages foreign investment is a wellregulated marketplace, where investors can feel at ease with the environment in which they are placing their money. The State of Qatar has been trying to get all regulatory authorities under the same umbrella for some years now and the plan is to have a single regulator in the near future. When asked for an outlook on the future, Went says: “The strength of QE is directly related to the strength of the Qatari economy and the integrity of the capital market in Qatar as the country continues to grow and develop in line with Vision 2030, and as liquidity continues to flow into Qatar the positive impact this will have on QE will only further enhance our strong and robust trading environment and give investors increasing confidence in our listed companies.” (Interviewed by Rory Coen)

june 2012

Qatar today 41

01
Gulf Warehousing co.
Average Price Growth 2007 –2011

59.7% 35.5%
Qatar co. for meat & livestock Trading (mawashi) national leasing holding co. Qatar Fuel (Woqod) Qatar cinema & Film Dist. co. Zad holding co.

02 03 04 28.2% 28.0% 26.6% 23.0%
medicare Group

42 Qatar today
Source:

cover story Qt top ten

(con’D From P. 39)

34.5%

price growth

05 06 07

Net profit growth Net profit growth is calculated on a cumulative shares held basis, to reflect whether the shareholder’s original claim over each company’s net profit has increased or decreased over the five-year period, and on average by how much. This is done to offset any possible dilution resulting from corporate action. Healthcare company, Medicare Group ranks the highest, achieving a remarkable 942% average increase per share held, with
08 17.3%
Qatar Gas Transport co. limited (nakilat) Qatar national Bank industries Qatar

AuDiTED FinAnciAl STATEmEnTS For ThE PAST FivE yEArS (2007-2011), QATAr EXchAnGE AnD AlShAll cAlculATionS

june 2012
09 10
medicare Group masraf Al rayan united Development co.

17.1% 17.1% 941.7% 178.3% 126.4% 107.5% 106.7%

01 02 03 04

Qatar Gas Transport co. limited (nakilat) Qatar co. for meat & livestock Trading

05 06

average net profit growth
Average Cumulative EPS Growth Including Share Dividends 2007 - 2011

national leasing holding co. Zad holding co. Qatar Gen. insurance & reinsurance co.

51.0% 50.7% 35.8%
Qatar Fuel (Woqod) Barwa real Estate co.

07 08 09

27.7% 24.8%

10

01 02
Doha insurance co. Doha Bank Ahli Bank Qatar industrial manufacturing co. Qatar Fuel (Woqod) national leasing holding co.

7.0%
masraf Al rayan

5.4% 5.4% 4.7% 4.5% 4.1% 4.0% 3.9% 3.9% 3.8%

03 04 05 06 07

average dividend yield

Masraf Al Rayan in second place on 178%.
08 09 10
Qatar co. for meat & livestock Trading (mawashi) Qatar insurance co. The commercial Bank of Qatar

Average Dividend Yield 2007 –2011

Qatari German co. for medical Devices

854.6%
Qatar Gas Transport co. limited (nakilat)

374.6%
masraf Al rayan

Net Revenue growth Revenue growth is one of the basic criteria to assess a company’s attractiveness, with the assumption that the higher the revenue growth, the more the potential for future profits. Qatari German Co. for Medical Devices significantly led the rankings in this category with its cumulative shares held multiplied by revenues per share growing at an average of 855%. Last year’s top performer in this catAverage Cumulative RPS Growth Including Share Dividends 2007-2011

145.2%
Gulf Warehousing co.

78.1%

national leasing holding co. united Development co. Qatar co. for meat & livestock Trading (mawashi) Qatari investors Group Barwa real Estate co. Qatar Telecom (Qtel)

72.1% 64.4% 62.2% 62.0% 61.1% 47.2%

net revenue growth
01
Qatar Fuel (Woqod)

62.6% 34.5%
industries Qatar Qatar Electricity & Water co.

02 03 04
united Development co. Qatar national Bank Qatar national cement co. Doha Bank Ahli Bank national leasing holding co. Qatar Telecom (Qtel) industries Qatar Qatar Fuel (Woqod)
Average ROE 2007 –2011

31.2% 25.7% 23.6% 23.0% 21.2% 21.2% 20.5% 20.3%

average return on eQuity

05 06 07 08 09 10 28.0% 23.4% 17.0%
Qatar national cement co. Qatar islamic insurance co. Qatar industrial manufacturing co.

01 02

egory, the gas transportation company Nakilat, slipped down one place despite registering an average growth of 375%.
03 04 16.6% 14.5%
Qatar co. for meat & livestock Trading Al Khaleej Takaful Group. national leasing holding co. Qatar cinema & Film Dist. co.
Average ROA 2007 –2011

Return on equity Return on equity measures the ability of the company to generate sufficient returns for the capital invested by its shareholders. Woqod (62.6%) and Industries Qatar (34.5%) maintained their top two positions as in last year’s ranking in this category.
05 06

average return on assets
masraf Al rayan Barwa real Estate co.

10.9% 9.9% 9.7% 9.7%
united Development co.

07 08 09 10

9.6%

Qatar co. for meat & livestock Trading (mawashi)

Financial sector inching up It is important to note that the rankings apply to only 32 of the
Qatar Gas Transport co. limited (nakilat) national leasing holding co. Qatari German co. for medical Devices medicare Group Qatari investors Group Qatar islamic Bank industries Qatar

Return on assets ROA determines the company’s ability to utilise its assets effectively and efficiently, thus earning a good return from them. In this criterion – crucial to asset-intensive companies – Industries Qatar (28%) ranked best followed by Woqod (23.4%), which was again similar to last year.

june 2012

liQuidity

Qatar today 43

cover story Qt top ten

19.8%

42.3%

25.3%

18.0%

16.3%

top 10 companies in terms of price growth 2011/2010
Price Growth 2011/2010

01

02

03

04

05

06

07

08

09

10

top 10 companies in terms of dividend yield 2011/2010
% Dividend Yield 2011/2010

72.1%

44.8%

national leasing holding co.

Qatar Gas Transport co. limited (nakilat)

Qatar Gen. insurance & reinsurance co.

Al meera consumer Goods company

masraf Al rayan

90.0%

Dlala Brokerage & invest. holding co.

industries Qatar

Qatar co. for meat & livestock Trading (mawashi)

106.8%

98.8%
Qatari German co. for medical Devices

Qatar co. for meat & livestock Trading (mawashi)

Qatar cinema & Film Dist. co.

Al meera consumer Goods company

Salam international investment limited

Salam international investment limited

Gulf Warehousing co.

527.5%

25.0%

EPS Growth 2011/2010

0.76%

Al Khaleej Takaful Group

Qatar co. for meat & livestock Trading (mawashi)

163.9%

The commercial Bank of Qatar

masraf Al rayan

143.7%

Qatar oman investment co.

united Development co.

masraf Al rayan

33.5%

Qatar international islamic Bank

medicare Group

Qatar Fuel (Woqod)

Doha insurance co.

1.66%

Qatar insurance co.

108.2%

56.1%

45.8%

Ahli Bank

Doha Bank

0.88%

35.1%

25.5%

0.81%

Ahli Bank

27.5%

0.84%

united Development co.

Ezdan real Estate co.

Gulf Warehousing co.

Doha insurance co.
RPS Growth 2011/2010

184.7%

0.74%

0.70%

0.65%

0.64%

01

02

03

04

05

06

07

08

09

10

top 10 companies in terms of earnings per share growth 2011/2010

01

02

03

04

05

06

07

08

09

SourcE: AuDiTED FinAnciAl STATEmEnTS For ThE PAST FivE yEArS (2007-2011), QATAr EXchAnGE AnD AlShAll cAlculATionS

42 listed companies on the QE, because only those that have been listed since the beginning of 2006 – and have at least five years of recorded public disclosure – were selected. So with the criteria defined and the 32 companies assessed in each one, who were the 2011 top-performing companies in the QE over the past five years? This year’s top performers came from various industries. Six of last year’s top 10 companies are included in this year’s rankings. Islamic Bank, Masraf Al Rayan – which was excluded from the

calculations last year given its recent listing – takes top spot from fuel supplier Woqod, which slips to second position. The financial sector showed a major improvement in terms of rankings with four companies in the Top Ten – Al Rayan, Doha Insurance Co., Doha Bank and Qatar Islamic Insurance Co. Woqod has consistently been in the Top Ten to date, while the industrial sector is represented by Industries Qatar and Qatar Industrial Manufacturing Co. Two companies come from the consumer services sector – Mawashi, the meat and livestock trading company, and National Leasing

44 Qatar today

june 2012

0.64%

10

257.2%

81.8%

26.0%

top 10 companies in terms of return on eQuity (roe) 2011/2010
ROE 2011/2010

01

02

03

04

05

06

07

08

09

10

top 10 companies in terms of liQuidity 2011/2010

34.3%

29.2%

59.2%

42.0%

37.1%

16.3%

15.3%

14.8%

12.9%

12.5%
mannai corporation

Qatar co. for meat & livestock Trading (mawashi)

Qatar co. for meat & livestock Trading (mawashi)

Qatar industrial manufacturing co.

united Development co.

Al meera consumer Goods company

national leasing holding co.

Ezdan real Estate co.

Qatar national cement co.

Qatar Fuel (Woqod)

Qatar islamic insurance co.

industries Qatar

national leasing holding co.

Aamal company

Qatar Fuel (Woqod)

industries Qatar

44.6%

25.0%

17.6%

17.0%

11.6%
Qatar co. for meat & livestock Trading (mawashi)

united Development co.

Qatar co. for meat & livestock Trading (mawashi)

Qatar Gas Transport co. limited (nakilat)

Al meera consumer Goods company

Qatar Electricity & Water co.

Qatar Fuel (Woqod)

national leasing holding co.

Barwa real Estate co.

masraf Al rayan

Al meera consumer Goods company

Qatar islamic insurance co.

The commercial Bank of Qatar

65.0%

mannai corporation

industries Qatar

Qatar national Bank

Qatar national Bank

industries Qatar

national leasing holding co.

39.2%

top 10 companies in terms of revenue per share growth 2011/2010

01

02

03

04

05

06

07

08

09

10

top 10 companies in terms of return on assets (roa) 2011/2010

Al ShAll Economic SErvicS QSc iS A PrivATE QATAri ShArEholDinG comPAny ProviDinG DiFFErEnT Economic, BuiSnESS AnD corPorATE FinAncE ADviSory SErvicES To locAl AnD rEGionAl inSTiTuTionS. iT hAS BEEn ESTABliShED in lATE 2002 By Al ShAll conSulTinG comPAny KScc, A KuWAiT-BASED PrivATE conSulTinG comPAny, AlonG WiTh oThEr PArTnErS, AS A STrATGic Arm in QATAr in orDEr To ProviDE ThE SAmE rAnGE oF ESTABliShED SErvicES in KuWAiT.

Holding Co. Comparative performance The QE finished 2011 with a 1.12% gain. The Dow Jones Index took the lead last year however, by gaining about 5.5% from the end of 2010, but this was an exception in a very poor year in the markets. Losses on other key markets included -24.6% in India and -21.7% in China.

In the GCC, the Bahraini market was the biggest loser with losses of about -20.1%. Conditions in all markets could have been much worse had it not been for the outcome of the December 9 Euroleaders’ summit conference, which provided some provisional assurance. Their failure could have resulted in more major regressions (Brief on each of the Top Ten companies from page 46)

Average ROA 2011/2010

june 2012

Qatar today 45

Qatar islamic Bank

38.3%

33.1%

30.5%

29.7%

29.4%

25.0%

26.1%

22.7%

cover story Qt top ten

MarkEt EfficiEncy
ver the past year, the value traded on the QE increased by about a quarter to reach QR83.5 billion. This increase was largely driven by the services and banking sectors. However Milhan Baig, Head of Valuation Services at Deloitte Qatar, intimates that since last year the number of transactions making up the traded volumes only increased by about 6% (1.05 million to 1.12 million transactions), which implies a relatively greater increase in the value per transaction compared to the actual number of transactions. “It may be argued that as the increase in traded value is driven by a relatively small number of transactions, the share values involved portray the sentiments of only a small number of investors, who may have, for example, greater confidence in or a better understanding of the market as opposed to the overall pool of potential investors,” says Baig. “Under the Efficient Market Hypothesis (EMH), at any given point in time the quoted prices of shares listed on an exchange in an efficient market should fully reflect all available information, and they should be appropriately priced based on the ‘overall’ sentiments of the market. If we conceptually consider QE in the context of the EMH and the key attributes of efficient markets, it might seem reasonable to assume that shares listed on QE might be priced differently if they were listed on more developed markets, given the following factors that impact the efficiency of a market: the availability of timely and relevant information; and the volume and frequency of transactions which capture the market’s reaction to that information,” says Baig. “The availability of financial and other relevant information that is made publicly available in a comprehensive and timely manner is vital to the proper functioning of a market, as it provides investors with the basis on which to form decisions to buy and sell quot-

o

“the availability of financial and other relevant information that is made publicly available in a comprehensive and timely manner is vital to the proper functioning of a market.”
milhan Baig
Head of Valuation SerViceS
DEloiTTE QATAr

ed shares, affecting demand, supply and ultimately pricing. As such, investor relationship management functions and adequate governance procedures, with transparency in financial reporting as well as ample existence of equity analyst reports, sustain the availability of quality information and contribute to the existence of a more efficient market overall. “Greater volumes (size) and frequency (timing) of transactions generally depict fluidity in a market, which leads to more up-to-date and relevant pricing of quoted shares, which gives investors a relatively higher level of confidence in the available market data,” he says. More efficiency through increased participation Baig argues that the level of transactions and information available is generally much lower than for more developed markets such as the LSE, NYSE, NASDAQ and Nikkei, and as such might be considered less efficient. An improvement in market efficiency may be achieved through increasing the number of companies listed on QE and providing more information relevant to those companies. This, as well as the introduction of margin trading and short-selling, could facilitate more transactions, which ultimately develops more market efficiency. “It is also interesting to note that of the total 42 companies listed on the QE, the average foreign ownership interest held in the companies is only around 9%. Allowing a larger pool of local and global investors to buy and sell shares listed on QE may be another way to increase the level of transactions,” he contends. In summary, Baig maintains that facilitating market efficiency should be a vital concern for any emerging economy and there are certain initiatives that can be taken to facilitate this. From a share pricing or valuation perspective, investors and speculators need to be, as ever, aware of the factors fundamental to market efficiency and should apply a degree of subjectivity when considering the valuation of listed company shares in an emerging economy such as Qatar. {The opinions expressed here are the views of Milhan Baig and do not necessarily reflect the views and opinions of Deloitte & Touche (M.E.)}

46 Qatar today

june 2012

1

n ot el igibl e
last year

DiviDenD yielD

1

liquiDity

1

net Profit growth

2

Masraf al rayan
failure not an option
masraf al rayan was launched in october 2006 and is primarily engaged in the provision of banking, financial and investment services in accordance with islamic sharia principles. its strategic vision of the future is to be a leading and innovative international islamic financial institution with corporate, retail, sme and private banking, as well as treasury. al rayan investment is the investment arm of masraf al rayan, which completes the circle for masraf al rayan as a full-fledged islamic bank. group ceo adel mustafawi discussed how the bank reached the #1 rating.

ow has Masraf Al Rayan performed in the past 12 months? We grew our total assets at a rate of 59.4% last year; our net profit also went up by 16.3% to QR1.41 billion, with earnings per share of QR1.88. (Please see attached tables.) How are you leveraging Qatar’s economic growth to perform the way you are doing? We are the fastest-growing bank in Qatar. Masraf Al Rayan has been sustaining this excellent growth trend since its inception, and this is something that we expect to maintain in both the short and the longer terms, as we are blessed with well-diversified customers in both sources and the use of funds. What were the key changes/decisions your company had to make recently to keep performing and how difficult was it to make these changes/decisions?

H

“we always finish #1 in the efficiency category in the local banking industry, so the word failure is not in our dictionary”
adel mustafawii
GrouP ceo
mASrAF Al rAyAn

When Masraf Al Rayan was established, there was a clear vision and strategy to implement a Sharia-compliant work environment to facilitate the best possible performance, versus the conventional, traditional methods. We are continuously being innovative and forward-looking in our strategies for delivering the best possible services to our customers whilst maintaining and providing internationally acclaimed standards in a familiar local environment. Have you noticed fresh competition? How do you feel about this, and what are you doing to keep on top of it? We operate in a free-market economy and we therefore, acknowledge that competition is an integral part of the landscape. It is also something that we welcome, as it creates more innovation in the industry and better services for customers. But we are continuously improving our market share by the day.

mASrAF Al rAyAn AchiEvED nET ProFiT oF Qr1,408 million – A 16.3% incrEASE on 2010. ToTAl ASSETS rEAchED Qr 55,271 million in 2011 – A GroWTh rATE oF 59.4% on 2010. FinAncinG AcTiviTiES incrEASED To Qr 34,766 million – uP 38.7% on 2010. cuSTomEr DEPoSiTS incrEASED To Qr 46,264 million – GroWTh oF 71.2%. ToTAl ShArEholDErS’ EQuiTy rEAchED Qr 8,504 million – uP 13.3% on 2010, WhilE ThE DiviDEnDS PAiD To ShArEholDErS For 2011 rEAchED Qr1.10 PEr ShArE.

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Are there any inhibitors to your growth here in Qatar? What changes would you like to see which might boost your own performance and that of your industry? No. The local economy is growing at a high double-digit rate, supported by the LNG expansion and the government’s huge infrastructure spending; banks are financing this historic growth and development for the country, as it is our duty to take part in the nation-building mission. What are your Company’s goals for the

coming year? Chief among our goals for 2012 is to sustain our current high growth levels on all our business books by aligning with the nominal GDP growth rate of the country. What makes a leader different from an entrepreneur? What qualities must one have to be an inspirational leader in a large organisation? Leaders inspire others to do the right thing. We also strategically think and plan for the institutions that we lead. Lastly, we lead by example and also

depend on the goodwill and reputation of our staff. At Masraf Al Rayan, we believe that our human resources are our greatest assets. How do you deal with failure? There s a perception that a  failure culture  within an institution is proactive, as it means staff are willing to try something different maybe a little too risky for the good of the company. We always finish #1 in the efficiency category in the local banking industry, so the word failure is not in our dictionary

2

last year

1

Price growth

4

DiviD enD yielD

5

avg return on assets

2

avg return on equity

1

net Profit growth

9

WoQod

fuelling energy needs
woQod is a public share company listed on the Qatar exchange since 2002. the company is responsible for the distribution of fuel within Qatar. this includes diesel, gasoline and aviation fuel through a fleet of more than 150 road tankers. it trades in ship-to-ship bunkering, bitumen importation and distribution, lubricants and modern service stations. woQod also distributes all lpg in Qatar.

oqod has been profitable since establishment and was the first Qatari company, to pay a dividend in its first financial year. Its strategy is to be the best downstream energy company in the region as measured in terms of customer and employee satisfaction and shareholder earnings.  “We pride ourselves on the continuation of the success and development that has been registered since the Company’s inception,” says Abdullah bin Hamad AlAttiyah, Chairman of Woqod. During the financial year ending

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December 31, 2011, Woqod managed to maintain positive net profit rates that exceeded 7.5% to reach QR1,155 million. Despite the 20% increase in the paidup capital of the company during 2010 through the distribution of bonus shares, earning per share (EPS) for 2011 increased by 7.5% to reach QR27.77 per share against QR25.83 in 2010.  “Based on the results achieved for this period and on our expectations for developments in the global economy and their impact on the local, regional and international levels during the upcoming period, and in view of the company s

“we pride ourselves on the continuation of the success and development that has been registered since the company’s inception.”
mohamed tuRki al-soBai
Vice-cHairMan and ManaGinG director
WoQoD

48 Qatar today

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future plans and projects,” Al-Attiyah continued,  “the Board of Directors recommended to distribute cash dividends of QR415.8 million according to a rate of 100 % of the value of the paid-up nominal capital, i.e. QR10 per share, in addition to 25% bonus shares. This recommendation takes into account the company’s current financial liquidity and the future funding needs for capital projects that were adopted for the year 2012.”  However, it reported that its net profit fell 10.5% to QR241 million in the first quarter this year. The decrease in net profit was due to a “decline in sales” for certain petroleum products following completion of the New Doha International Airport and gas projects, among others. Announcing the first quarter results

Woqod, Vice-Chairman and Managing Director Mohamed Turki Al-Sobai said the company’s assets totaled QR7.6 billion in March, up 20.6% on 2011, while equity reached QR4.6 billion in March, up 18% on 2011. As a result of the increase in capital base through the issuance of 25% bonus shares in 2011, earnings per share reached QR4.6 in Q1 2012 compared with QR6.5 in the same period last year. Al-Sobai said Woqod was currently engaged in some 31 key projects in Qatar. They include setting up new petrol stations, vehicle inspection centres and Sidra stores, Woqod Tower (Dafna), product supply pipelines, new deals for supply of lubricants and expansion of the LPG distribution network

DurinG ThE FinAnciAl yEAr EnDinG DEcEmBEr 31 2011, WoQoD mAinTAinED PoSiTivE nET ProFiT rATES ThAT EXcEEDED 7.5% To rEAch Qr1, 155 million. DESPiTE ThE 20% incrEASE in ThE PAiD-uP cAPiTAl oF ThE comPAny DurinG 2010 ThrouGh ThE DiSTriBuTion oF BonuS ShArES, EArninG PEr ShArE (EPS) For 2011 incrEASED By 7.5% To rEAch Qr27.77 AGAinST Qr25.83 in 2010.

3

last year

4

Price growth

2

DiviD enD yielD

8

avg return on assets

6

liquiDity

2

net revenue growth

7

net Profit growt h

5

MaWasHi
a journey of success
mawashi has successfully managed to turn what was perceived by the Qatari government to be an underperforming company into one that is highly profitable. in fact, there were plans for the government to step in to refocus the company. Qatar today met its managing director, ahmed nasser sraiya al-kaabi, to find out more about the abandoned takeover as well as its plans for the future.
ow has the company performed over the past 12 months? Last year saw a continuation of the successful journey that began in 2010, thanks to the efforts of the Mawashi team in all departments. Our profits doubled to QR64 million compared to the same period in 2010 and we are now focusing clearly on our future expansion plans. The idea of a company takeover in 2011 was a major challenge for the staff and made them feel insecure, but I confronted

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the challenge by raising morale and reassuring them that we were the best people to run the sector. In fact I made it clear to the government that we had manoeuvred a difficult corner and it rewarded the new Board of Directors by cancelling the takeover and entrusting them with continuing its work in this sector. But Hassad Food Company was actually instructed to begin the takeover process. What were the reasons for the intended takeover? Was it just a matter of the company’s declining profits or

“i don’t like the word failure – i prefer to say experience. an initial mistake is not a failure but a lesson, though if the mistake is repeated then it is a failure. “
ahmed nasseR sRaiya al-kaaBi
ManaGinG director
mAWAShi

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were there other reasons? At the end of 2009 profits were QR18 million and starting to decline, and for that reason the government decided to step in to protect shareholders’  equity. But thanks to the efforts of the new Board of Directors and staff at Mawashi, we turned things around to become the third most profitable company. Last year you were aiming to cover the whole Gulf market. How far have you got with this? Mawashi is made up of a parent company and some subsidiaries. The parent company signed an agreement to import Australian meat to the UAE under an exclusive distribution deal, and has also signed an agreement with Wellard, the world’s largest livestock transporter. We have other transport agreements but we really want to acquire some livestock carriers of our own, as we have the resources to invest here. We are planning to acquire two ships (with the capacity to carry 75,000 and 15,000 head of livestock respectively) to transport animals from neighbouring countries such as Sudan and Somalia. We intend to set up a specialist transportation company within Mawashi. Our investments in Georgia are growing and Georgian meat is already on sale in the market. We have focused this year on bringing in Georgian breeding females, which are highly regarded by Qatari breeders. We see this as a production line to increase Qatar’s animal stocks. What are the main changes or decisions the company has recently been forced to make to maintain its performance, and how hard has it been to make them? All our decisions follow exhaustive study as to whether they will increase our profits, and we will not abandon any of our traditions for financial reasons. Take the example of our decision this year to increase imports from Sudan. Last year we were only dealing in agricultural and animal products, but now we have started to export Sudanese sheep as well as various kinds of Sudanese fodder, including compounds. The company’s output was initially modest, but even that decision was only taken after research into the Sudanese market, and it shows in the Sudan project’s substantial profits. Have you noticed the emergence of any new competition? Competition in any sector always means better service for consumers. There are other companies working in the refrigerated meats trade and competition is good for innovation and development. We innovate when we see something missing in Qatar, such as meat processing. The distinguishing feature of our products is that they are fresh, whereas everything else in the market is frozen. We work on the basis that we have no competitors on the same scale as us, so we measure ourselves against international companies. Are there any obstacles to growth here in Qatar? What changes would you like to see to help improve the performance of Mawashi and the meat sector as a whole? The economy in Qatar is supportive and enso that Qatari investors can compete with the foreigners. How is a business leader different from an entrepreneur? What are the qualities a person needs to be an inspiring leader in a big corporation? A leader, in my view, is someone who can create and manage a team, outline an objective (or vision) and make it happen. A leader creates a kind of confidence in his employees so that they work enthusiastically and share the vision of the future of the business. The best leader was the Prophet Muhammad (pbuh), who communicated the idea of Paradise to his followers and made them see it as a reality. An entrepreneur, however, is an inventor; he needs someone with leadership qualities to keep his business going and translate his idea into reality. There is a view that a ‘culture of failure’  within an organisation is a positive thing, because it means the employees are prepared to try something different, even though it may be risky. What is your opinion on this? I have no time for failure and I don’t like the word failure  – I prefer to say experience . An initial mistake is not a failure but a lesson, though if the mistake is repeated then it is a failure. A person has to be allowed to fail in order to do anything, and if a leader is afraid of failure he simply won’t act at all. So let’s call it a ‘culture of experience’ . What are your goals for the year ahead? We have a poultry project here in Qatar where local production meets no more than 30% of requirements – which we are just starting to get up and running. We are also planning to get into food processing in liaison with the Qatar National Food Security Programme (QNFSP). 2011 was a year of focusing on our core activity. but now that we have established our success and boosted the company’s profits, there are no limits to our ambitions for the future

Mawashi’s profits:

QR18
2010 2011

2009

Million

QR32 QR64

Million

Million

couraging. Our monthly sales figures have been showing continuous growth, and we’ve been seeing a big increase in the number of companies coming here. We are optimistic about the prospect of a boom in real estate and construction, and foodstuffs activity. I hope that foreign capital will be allowed into the Qatari market and that the market will be open and free to flourish; that there will be a slight easing of the foreign investment laws; and that it will happen gradually

iT iS ThE SEconD TimE in iQ'S EiGhT yEAr hiSTory ThAT GrouP rEvEnuES EXcEEDED ThE Qr12 Billion mArK. ThE GrouP rEcorDED rEvEnuE oF Qr12.3 Billion For ThE yEAr EnDED DEcEmBEr 31, 2010, AnD Qr3.9 Billion in ThE FourTh QuArTEr, rEPrESEnTinG A yEAr-onyEAr incrEASE oF 25.1%. WiTh Full yEAr nET ProFiTS ToTAlinG Qr5.6 Billion, ThE GrouP hAS AchiEvED iTS SEconD hiGhEST EArninGS on rEcorD.

(Interviewed by Ezdhar Ali)

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4

last year

3

Price growth

3

DiviDenD yielD

7

avg return on assets

8

liquiDity

5

net revenue growth

5

net Profit growt h

6

national lEasing Holding coMpany
a calculated effort
national leasing holding company (nlhc) was established in 2003 as a Qatari shareholding company. its share capital in 2009 was Qr329, 868,000 comprising of 32,986,800 shares at Qr10 per share. it provides a wide range of products and services including facilities for lease and facilities for rent and renting leading to ownership for individuals and firms in accordance with islamic sharia regulations which suit the financial reQuirements of large, medium and small firms.

of 2011.   “NLHC witnessed a growth in profits in 2011 of QR215 million – an increase of 20% compared with QR179 million in 2010,” he said.   Total operating revenues reached QR602 million – an increase of 41% on 2010. Total equity increased by 17%, jumping to QR762 million, while earnings per share rose to QR6.53 per share, a 20% increase on 2010. The Board of Directors at NLHC also recommended approval of distributing a cash dividend of 35% (QR3.50 per share) – a total of QR115,453,800.   “Our success is not out of the void, nor was it reached with ease,” said NLHC Chief Executive Officer Hamad Abdulla Al-Emadi. “In fact, the strategic objectives were vigilantly set. The plans were meticulously laid down and processed with steadiness and faith towards attaining objectives which strictly complied with our values and principles.”

s

heikh Falah bin Jassim bin Jabr Al Thani, Chairman of the Board of Directors, recently revealed how the company performed up until the end

NLHC is aiming to expand the scope of its work and get involved in real estate development, infrastructural works, machinery, and hospitality services. “We all share a firm belief that the gigantic accomplishments attained in 2011 will sooner or later reflect their positive impact upon the company,” added Al-Emadi. “Our financial results during this year have been nothing but an actual translation of efforts. Our focal objective for 2012 is simplified to address the capability to elaborate a stablystructured company with the potential to withstand all challenges in the future.”  NLHC recently successfully completed a rights issue process to increase capital. The subscription was 245% of the offered shares, and they managed to collect QR1.2 billion, bringing the total to 41 million shares at QR29.50 per share. Sheikh Falah bin Jassim stated that NLHC had taken all necessary measures to ease the process of the rights issue for shareholders. The rights issue met with a massive response from the shareholders, showing their confidence in the strong equity of the company and its ability for continuous development and sustainable growth in accordance with its business plans

“our rights issue met with a massive response from the shareholders, showing their confidence in the strong eQuity of the company and its ability for continuous development and sustainable growth in accordance with its business plans”
sheikh falah Bin Jassim Bin JaBR al-thani
cHairMan and ManaGinG director
nATionAl lEASinG holDinG comPAny

nlhc WiTnESSED A GroWTh in ProFiTS in 2011, AmounTinG To Qr215 million – An incrEASE oF 20% comPArED WiTh Qr179 million in 2010. ToTAl oPErATinG rEvEnuES rEAchED Qr602 million – An incrEASE oF 41%. ToTAl EQuiTy incrEASED By 17%, WhilE EArninGS PEr ShArE roSE By 20%. ThE BoArD oF DirEcTorS rEcommEnDED APProvAl oF DiSTriBuTinG A cASh DiviDEnD oF 35% (Qr3.50 PEr ShArE) – A ToTAl oF Qr115,453,800.

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5

last year

2

Pric e growth

10

avg return on assets

1

avg return on equity

2

industriEs Qatar
riding the wave of success
industries Qatar was incorporated as a Qatari joint stock company in 2003 and has become an industrial giant with interests in the production, distribution and sale of a wide range of petrochemical fertilisers and steel products, the second largest of this type in the region. its products are sold in over one hundred countries worldwide.

ndustries Qatar (IQ) and Qatar Petroleum (QP) are intertwined by their ownership, operations and management, where QP holds 70% of the share capital of IQ and IQ’s board members are the same as the QP Board members. Furthermore, the Chairman and Managing Director of QP serves concurrently as Chairman and Managing Director of IQ, as well as Qatar’s Minister of Energy and Industry, to ensure full coordination between QP/IQ and key national policies. IQ recorded revenue of QR16.5 billion for the year ended December 31, 2011, representing a year-on-year increase of 34%. This increase can be primarily attributed to resilient prices across all key products as price inflation benefited the group by QR3.4 billion. The Board of Directors recommended a total annual dividend distribution for the year ended December 31, 2011 of QR 4.1 billion, equivalent to a payout of QR7.50 per share and representing 75% of nominal value. In addition to the record revenue, the group also registered its highest net profit. Full-year net profit of QR7.9 billion was significantly ahead of the previous record, in 2008, of QR 7.3 billion. Profit margins during the year were also extremely strong, averaging almost 48%.

i

“The financial year was noteworthy for the group as it contained a significant number of milestones and achievements,” said HE Dr Mohamed bin Saleh Al-Sada, Minister of Energy and Industry, and Chairman and Managing Director, IQ. “As we have promised, we have delivered,” he added. “In the financial and operational performances achieved, we witnessed further evidence of IQ’s ongoing quest for excellence. The group also proved its ability to execute and advance its various strategies, leading to greater financial and operational integration among group companies and enhanced the development of the domestic economy through the employment of qualified and trained nationals, while at the same time continuing to achieve strong financial results,” said Abdulrahman Ahmad Al-Shaibi, Chief Coordinator of IQ. “Last year was undoubtedly a decisive year as IQ recorded its highest revenue and net profit since its establishment, with revenue exceeding QR16 billion and net profit of approximately QR8 billion. And, with the completion of that year, we are now able to reflect with admiration on the goals achieved, the successive accomplishments and ongoing progress made,” he said. In early 2012, IQ received an AA- rating from Standard & Poor’s, in recognition of the group’s strong competitive advantages

“iQ proved its ability to execute and advance its various strategies, leading to greater financial and operational integration among group companies and enhanced the development of the domestic economy through the employment of Qualified and trained nationals.”
aBdulRahman ahmad al-shaiBi
cHief-coordinator
inDuSTriES QATAr

iQ rEcorDED rEvEnuE oF Qr16.5 Billion For 2011, rEPrESEnTinG A yEAr-on-yEAr incrEASE oF 34%. ThiS incrEASE cAn BE PrimArily ATTriBuTED To rESiliEnT PricES AcroSS All KEy ProDucTS AS PricE inFlATion BEnEFiTED ThE GrouP By Qr3.4 Billion. ThE BoArD oF DirEcTorS rEcommEnDED A ToTAl AnnuAl DiviDEnD DiSTriBuTion For ThE yEAr EnDED DEcEmBEr 31, 2011 oF Qr 4.1 Billion, EQuivAlEnT To A PAyouT oF Qr7.50 PEr ShArE AnD rEPrESEnTinG 75% oF nominAl vAluE.

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and debt protection metrics, to add to the Aa3 rating received from Moody’s in 2011. Both ratings were predicated on the group’s excellent cost positioning, largely due to competitively-priced gas feedstocks, product and end-market diversification, positive debt metrics and very important pub-

lic policy role. The ratings were assigned a “stable outlook”, reflecting the expectation that key assumptions, including the group’s importance, debt levels and cost position would not be materially compromised. Both ratings place IQ one notch below the sovereign rating of Qatar and in a very se-

lect group of international petrochemical and chemical companies. Moody’s rating reflects the highly competitive cost structure of the group’s ventures, and IQ’s role in enabling two key policies of Qatar: economic diversification and wealth distribution.

6
QiMc

last year

9

DiviDenD yielD

5

avg return on asset

5

strategies to keep pace with progress
Qatar industrial manufacturing company was established in 1990 with capital of Qr200 million ($55 million) held 20:80 by the state and the private sector, which was paid in full by 2002, then raised in 2006 to Qr300 million and in 2010 to Qr396 million. Qatar today met ceo abdulrahman bin abdullah al-ansari to find out more about the strategies that have made the company successful.

l-Ansari explained that QIMC is currently drawing up a new strategy to enable it to keep pace with the economic upswing in the country. This also applied to QIMC s subsidiary companies, for which a clear vision and new five-year strategies had to be set.  “Our new strategy calls for certain standards to be met,” said Al Ansari. “Our management has been trying to apply total quality standards and obtain ISO 9001:2008 certifications for QIMC and its subsidiaries.” QIMC is also applying for a credit rating, but purely for evaluation purposes and not with the aim of borrowing money. Investments QIMC commissioned a consultancy services bureau to review the company last

a

year. It had always been operating according to a particular strategic view with a particular set of policies and procedures, so it felt this needed to be re-examined. “We have put in place a new company structure and new policies and procedures,” said Al-Ansari. “We have also rebranded the company to reflect its strategic direction of improving its market position and expanding through small and medium-size projects, while remaining interested in entering into large-scale projects.” Aspirations Al-Ansari said: “QIMC has a broad industrial base covering petrochemicals, minerals, food processing and construction materials, and is continually working to diversify its portfolio of projects. The board promises shareholders that it is up to the task of revitalising the company and carry-

“Qimc is ready to keep pace with the coming economic boom. we have a lot of expansion projects initiated on the basis of market research and in anticipation of an economic boom.”
aBdulRahman Bin aBdullah al-ansaRi
cHief executiVe officer
QATAr inDuSTriAl mAnuFAcTurinG comPAny

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ing out future projects in a more expeditious manner.” He explained they had completed the first stage of four, that of reviewing the company’s position. The second stage is identifying options and alternatives; then drawing up the strategy is stage three before finally determining the overall organisational framework. New projects Al-Ansari talked about a number of expansion projects, initiated on the basis of market research and in anticipation of an economic boom. “We are ready to keep pace with the coming economic boom,” he said. “QIMC has a lot of projects lined up linked to development in Qatar.” He gave the example of the Qatar Sand Treatment Plant, which is geared to produce 40,000 tonnes of sand per day, compared with the country’s current daily consumption of 18,000 tonnes. Another example is the ongoing expansion at Qatar Acids Co.’s sulphuric acid plant to meet increasing consumption in Mesaieed Industrial City (MIC) and other key industries. He also said that Gasal Company, which specialises in manufacturing industrial gases, had been able to cover MIC’s overall requirements and was planning to invest hundreds of millions of dollars in setting up an industrial gas network to cover the entire Ras Laffan Industrial City. “We will set up industrial gas plants in Ras Laffan on the same lines as those in Mesaieed, and will supply the installations there with industrial gases,” he said. QIMC’s expansion plans include Qatar Plastic Products Co., along with a wooden tile-producing factory due to come into operation at the end of the year. Work on setting up the Qatar Aluminium Extrusion

2011 in figures

QR206
DiviDenD shareholDers’ equity

net profit

Million

QR118.8 QR1,253

Million

Million

Co. is now complete, and the project is waiting to be linked up to the national grid. The raw materials will be provided by Qatalum, making its output – 8,000 tonnes per year of it – 100% Qatari. “It is the only factory of its kind in Qatar,” said Al-Ansari. “We expect demand to increase in the period ahead, which is what led us to start thinking about expanding the project even before it actually entered production,” a reference to the fact that the aluminium extrusion plant has been built to accommodate production lines with a total capacity of 24 tonnes a year. “We are currently working to add two production lines alongside the existing one. The second line will be ready at the end of the current year, and the third during 2013.”  Meanwhile, the company has started to implement the KLJ Organic-Qatar project to produce chlorinated paraffin, caustic soda and hydrochloric acid, with an expected start date in the first quarter of 2014. Acquisitions Al-Ansari revealed a new activity that

QIMC intends to get into as part of its new strategy, which is acquisitions. “We have come to the view that acquiring existing enterprises that complement our own activities and fit with our strategy and aspirations could be of interest,” he explained. “We have appointed a team to work on this, and have made a start by taking a 51% stake in an Italian factory operating in Qatar. We are in the final stages of concluding the deal.” He indicated that the investment fund available for such acquisitions stood at around QR200 million, while QIMC’s total investment in its subsidiaries was roughly QR1 billion. “We have a number of acquisition projects under consideration that will be announced in the near future,” Al-Ansari continued. “There are negotiations going on to acquire companies both in Doha and elsewhere.” Furthermore, the CEO announced, the company would be setting up a 100,000 sq. metre project in the Industrial Area, “QIMC Logistics Village”, to provide logistical support to QIMC and its subsidiaries. First quarter results QIMC’s profits were up in the first quarter of this year and were expected to improve further by the end of the first half, the CEO said, but he was quick to point out that first quarter results don’t give a good idea of the company’s performance for the rest of the year because a lot of operational costs fall during the first quarter and do not recur during the rest of the year, thus depressing the Q1 profit margin compared with the remainder of the year. He noted that QIMC has companies due to come into production during the coming months, which again suggests that there will be a rise in returns and profits to come (Interviewed by Ezdhar Ali)

Qimc’S ProFiTS WErE uP in ThE FirST QuArTEr oF 2012 AnD WErE EXPEcTED To imProvE FurThEr By ThE EnD oF JunE, BuT FirST QuArTEr rESulTS Don’T GivE An AccurATE iDEA ThE comPAny’S PErFormAncE BEcAuSE A loT oF oPErATionAl coSTS FAll DurinG ThE FirST QuArTEr AnD Do noT rEcur DurinG ThE rEST oF ThE yEAr, ThuS DEPrESSinG ThE Q1 ProFiT mArGin comPArED WiTh ThE rEmAinDEr oF ThE yEAr.

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7

n ot el igibl e
last year

avg return on asset

3

avD return on equity

6

Qatar national cEMEnt coMpany
confronting challenges
despite the impact of the global financial crisis and new competition in the local market leading to a fall in revenue, Qatar national cement company (Qncc) met local demand for cement, washed sand and lime. Qatar today met Qncc general manager mohamed ali al-sulaiti to talk about the company’s achievements and its future plans.

ow has QNCC performed over the past 12 months? Sales income fell because of reduced demand for cement, washed sand and quicklime during the year in view of the negative impact of the global financial crisis on the local market and against a backdrop of new competition in the market, with the entry of another Qatari company producing appreciable quantities of cement, and another company producing washed sand. In addition, Qatar Steel ceased to take deliveries of quicklime last June, having previously been our principal quicklime customer. These factors had a direct effect of reducing the company’s sales income over the past year. However the company managed, through its own production lines, to meet the local market’s requirements for different products while maintaining the same high quality and stable prices, and this has made a tangible contribution to the development boom in Qatar. We set up a new calcium carbonate production unit with a capacity of 250 tonnes per day to meet Qatar Electricity and Water Company (QEWC)’s requirements, in

H

line with the government policy of trying to source strategic materials within the country. By the end of 2011 the project had reached the performance testing stage. We already had a contract with QEWC to supply all its calcium carbonate requirements, amounting to about 250,000 tonnes per year, for 25 years with an option to renew. What are the main changes or decisions QNCC has recently been forced to make to maintain its performance, and how hard has it been to make them? During the past year we have gone a long way towards meeting the corporate governance standards required by the Qatar Financial Markets Authority (QFMA) in order to achieve the desired objectives of transparency, openness and probity. We are one of the first public shareholding companies in Qatar to introduce the QFMA’s corporate governance regime. Our administration was overhauled, with the introduction of comprehensive modern systems covering various areas, by consultancy bureau Ernst & Young, which was appointed by the Board at its meeting last December. We also contracted Al Mannai Trading Company to install an Enterprise Resource Planning

“there is no such thing as failure, but there are challenges and risks. as far as we areconcerned at Qncc, we tend to go looking for challenges; we confront them and get to grips with them in order to make something out of every situation, even a negative situation. and the most important challenge we face is the issue of a healthy environment”
mohamed ali al-sulaiti
General ManaGer
QATAr nATionAl cEmEnT comPAny

SAlES incomE FEll BEcAuSE oF rEDucED DEmAnD For cEmEnT, WAShED SAnD AnD QuicKlimE DurinG ThE yEAr in viEW oF ThE nEGATivE imPAcT oF ThE GloBAl FinAnciAl criSiS on ThE locAl mArKET AnD AGAinST A BAcKDroP oF nEW comPETiTion in ThE mArKET, WiTh ThE EnTry oF AnoThEr QATAri comPAny ProDucinG APPrEciABlE QuAnTiTiES oF cEmEnT, AnD AnoThEr comPAny ProDucinG WAShED SAnD.

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(ERP) system to improve performance in the company s various activities, the positive benefits of which will be seen in the years to come. What changes would you like to see in Qatar to help improve the performance of QNCC and the building materials sector as a whole? The infrastructure for importing through the ports is still not meeting the country’s needs, and we would like to see Mesaieed Port expanded to keep up with the country’s development boom and avoid the current bottlenecks where ships have to queue up before they are allowed into the port to unload. We would also like the road network to be modernised, especially to and from production areas, and for special roads to be built for transporting heavy, bulky goods. What are your goals for the year? To keep pace with plans for the country’s development over the crucial years ahead, we are making efforts to raise the productive capacity of our cement plants. Management is looking at new options for increasing output, achieving maximum economy and efficiency in the various production operations, seizing every possible opportunity to increase sales of washed sand using the large quantities stored on site, and clearing the way to exploit the company’s available productive capacity so as to achieve an attractive economic return. We will also explore all available options to deal with the fallout from Qatar Steel’s termination of quicklime deliveries to prevent any further damage to the company. We will continue to implement the ERP IT system in all departments and sections to enhance performance within various business activities in all locations. How is a leader different from an entrepreneur? What are the qualities a person needs to be an inspiring leader in a big corporation? The most important qualities of an inspiring leader are that he should have a clear vision of the goals he is steering his workers firmly towards; that he should be skilled in the arts of communication, planning and motivation; that he should be able to win the confidence of others and be prepared to take risks; and that he should achieve his goals with the fewest possible losses. There is a view that a ‘culture of failure’ within an organisation is a positive thing, because it means the employees are prepared to try something different, even though it may be risky. What is your opinion on this? There is no such thing as failure, but there are challenges and risks. As far as we areconcerned at QNCC, we tend to go looking for challenges; we confront them and get to grips with them in order to make something out of every situation, even a negative situation. And the most important challenge we face is the issue of a healthy environment (Interviewed by Ezdhar Ali)

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doHa insurancE coMpany
insuring competitiveness
oha Insurance Company (DIC) is a Qatari shareholding company which is engaged in the business of insurance and reinsurance. Its capital base is QR234 million ($65 million). During 2006, DIC established an Islamic Takaful branch under the brand name “Doha Takaful” to carry out insurance and reinsur-

doha insurance company was formed in 2003, in response to the need for growth in the insurance sector. the company is still in its infancy but has great visions for expansion in strategic areas.

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ance activities in accordance with Islamic Sharia principles. DIC is the latest qualitative addition to the Qatari national insurance market. With a fresh approach to the concept of security and protection, DIC is sharply focused on delivering tailor-made products to suit the specific needs of clients. It has been assigned an interactive credit rating of BBB+ stable by Standard & Poor’s

DohA inSurAncE comPAny’S FinAnciAl STATEmEnTS For ThE yEAr EnDED DEcEmBEr 31, 2011 rEvEAlED A nET ProFiT oF Qr65.8m in 2011 vErSuS Qr60.7m in 2010. ThE comPAny’S EArninGS PEr ShArE AmounTED To Qr3.66 in 2011 comPArED To Qr3.37 in 2010. ThE FinAnciAl STATEmEnTS For ThE ThrEE monTh PErioD EnDED mArch 31, 2012 rEvEAlED A nET ProFiT oF Qr21.2 million in comPAriSon To Qr19.2 million For ThE corrESPonDinG PErioD in 2011ThE EArninGS PEr ShArE (EPS) AmounTED To Qr0.91 AS oF mArch 31, 2012 vErSuS Qr1.07 oF ThE SAmE PErioD in 2011.

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doHa bank

promoting innovative strategies
doha bank is the largest private commercial bank in Qatar. it commenced its domestic and international banking services in 1979. it provides individuals and commercial, corporate and institutional clients with ways to manage their financial lives.

oha Bank had a highly satisfying business year in 2011, according to R Seetharaman, Group Chief Executive Officer.   “We had demonstrated our resilience during the 2008 crisis, and in 2012 Doha Bank will continue to be mindful of global and regional risks,” he said. “Our results are largely attributable to the bank’s strategy to innovate, diversify and capitalise on market synergies, as it continues to increase shareholder value.” Doha Bank posted full-year net profit of QR1.24 billion in 2011, up 18% on the year before. The bank’s total assets rose to QR52.4 billion last year, an increase of 11% compared with 2010. Loans and advances rose to QR30.7 billion in 2011, representing growth of 15.7 %. Customers deposits grew by 2.8% to QR31.7 billion in 2011, while shareholders’ equity totalled QR7.1 billion in 2011, an increase of 17.3%. Earnings per share were QR6.03, while the average return on shareholders’  equity and the average return on assets were 22% and 2.49% respectively. The bank’s non-performing

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loans (NPLs) were 3.3% of total loans. Doha Bank’s quarterly results were announced recently, where net profits of QR390 million for the first quarter of 2012 marked a 7.4% increase on the same period last year. Loans and advances grew by 13.1% to reach QR29.5 billion, as at March 31, 2012, while total assets increased by QR5.9 billion, a growth of more than 12.8% since March 31, 2011. Customer deposits and unrestricted investment accounts registered growth of 11.8%. International rating agencies Moody’s, Standard & Poor’s, Capital Intelligence and Fitch Ratings assigned a stable outlook for the bank owing to its consistently strong financial fundamentals, asset quality and robust liquidity. In addition to this, Standard & Poor’s maintained the rating on Doha Bank Assurance Company. Doha Bank Assurance Company LLC (DBAC), has been given a counterparty credit and insurer financial strength rating of BBB with a stable outlook by Standard and Poor’s, on successful utilisation of its relationship with Doha Bank and continuation of its strong ratios

DohA BAnK PoSTED Full-yEAr nET ProFiT oF Qr1.24 Billion in 2011, uP 18% on 2010. ThE BAnK’S ToTAl ASSETS roSE To Qr52.4 Billion lAST yEAr, An incrEASE oF 11%. loAnS AnD ADvAncES roSE To Qr30.7 Billion in 2011, rEPrESEnTinG GroWTh oF 15.7%. cuSTomErS DEPoSiTS GrEW By 2.8% To Qr31.7 Billion in 2011, WhilE ShArEholDErS’ EQuiTy ToTAllED Qr7.1 Billion in 2011, An incrEASE oF 17.3%. EArninGS PEr ShArE WErE Qr6.03, WhilE ThE AvErAGE rETurn on ShArEholDErS’ EQuiTy AnD ThE AvErAGE rETurn on ASSETS WErE 22% AnD 2.49% rESPEcTivEly.

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Qatar islaMic insurancE coMpany (Qiic)

outstanding profits despite competition
Qatar islamic insurance company (Qiic) came in tenth place, having had to cope with the entry of a large number of competitors into the Qatari market, according to the company’s general manager, ali ibrahim al abdul ghani, who says that the company is trying to broaden its client base.

ow has QIIC performed over the past 12 months? QIIC’s performance has been excellent, with premium growth of roughly 17%, a 30% dividend to shareholders for 2011, and an insurance surplus refund to policyholders of 20% of subscriptions (premiums paid during 2011). Moreover, the company is doing all it can to reach the maximum possible number of companies and corporations within Qatar with the aim of broadening its service base. The growth we have achieved comes as a result of the prosperity and growth taking place in Qatar. Insurance moves in step

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with economic and urban development, since insurance services cover all stages from planning to completion. What are the main changes or decisions QIIC has recently been forced to make to maintain its performance, and how hard has it been to make them? Has the company had to abandon any of its traditional practices or beliefs in order to stay ahead of the competition? QIIC has lowered its premiums in order to be competitive, which is not something it has traditionally done. It regards the premiums policyholders pay as subscriptions, and at the end of each year, depending on the results of the insurance business, the

“in the insurance field success is measured by results, and it depends on following the basic technical rules of the business. failure to stick to these means failure in performance, as failing to follow the basics is taking a gamble that could lead to success for a short time but usually ends in failure.”
ali iBRahim al aBdul ghani
General ManaGer
QATAr iSlAmic inSurAncE comPAny

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company gives them back the surplus of these subscriptions, which in 2011 came to 20%. In other words, the subscriptions the company charges are only estimated, based on expected levels of risk. Have you noticed the emergence of any new competition? How do you feel about that, and what are you doing to beat your off rivals? Fifteen new entrants to the Qatari market have been licensed by the Qatar Financial Centre, some in insurance and some in reinsurance, and they have taken a large volume of various types of insurance, such as health and engineering. This is not a good sign for us, as they are not Qatari companies and are not investing in the local market, and there is no knowing whether they are in it for the long-term. In other words, if they make losses they might simply close their offices and leave. Are there any obstacles to growth here in Qatar? What changes would you like to see to help improve the performance of QIIC and the insurance sector as a whole? There are no obstacles to growth, because the Qatari economy is strong and vigorous,

but among the changes we would like from government agencies or companies is preferential treatment for Qatari companies over foreign ones, because the success of local companies is in the interests of the national economy. We would also like to see the formation of an umbrella group of Qatari insurance companies that would enable them to consult and work together to confront external challenges. It could be called the Association of Insurance Companies, or any other name the authorities were happy with, to make this umbrella grouping known. What are your goals for the year ahead? QIIC’s goals for the coming year are to expand its services to all economic, industrial and commercial sectors by developing its insurance programmes and improving its services. How is a business leader different from an entrepreneur? What are the qualities a person needs to be an inspiring leader in a big corporation? A successful leader is someone who achieves continuous, steady success, whereas an entrepreneur is a businessman with a number

of businesses, in some of which he is extremely successful while in others his performance is modest or weak. So a successful leader is also an entrepreneur, but not the other way around. The marks of an inspiring leader are constant improvement, precision in delivery, and close monitoring of every aspect of the work. There is a view that a “culture of failure” within an organisation is a positive thing, because it means the employees are prepared to try something different, even though it may be risky. What is your opinion on this? In the insurance field success is measured by results, and it depends on following the basic technical rules of the business. Failure to stick to these means failure in performance, as failing to follow the basics is taking a gamble that could lead to success for a short time but usually ends in failure. At QIIC we work according to the rules of Sharia law because they form the basis of our work as an Islamic insurance company. We see the company as a brick in the edifice of the Islamic economy that we believe is from Allah and holds good for all times and places

Qiic’S PErFormAncE hAS BEEn EXcEllEnT, WiTh PrEmium GroWTh oF rouGhly 17%, A 30% DiviDEnD To ShArEholDErS For 2011, AnD An inSurAncE SurPluS rEFunD To PolicyholDErS oF 20% oF SuBScriPTionS (PrEmiumS PAiD DurinG 2011). morEovEr, ThE comPAny iS DoinG All iT cAn To rEAch ThE mAXimum PoSSiBlE numBEr oF comPAniES AnD corPorATionS WiThin QATAr WiTh ThE Aim oF BroADEninG iTS SErvicE BASE.

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