Agility well-placed to capitalise on emerging market growth



Agility, the Kuwaiti storage and logistics provider, looks well positioned to capitalise on growth in emerging markets, according to Rasmala Investment Bank, based in Dubai.

"The strength of the logistics industry is significantly affected by economic growth," said Daniel Abood and Aly Mansour in a note to clients. "Agility's competitive advantage lies in its emerging-market platform, which we expect to experience high growth in the future," the analysts said.

A report from the UN Conference on Trade and Development said developed economies were expected to post growth rates of up to 2 per cent this year. Emerging markets, however, were expected to have much stronger growth, at more than 6 per cent.

Agility has two business lines. Its commercial segment, headquartered in Switzerland, provides supply chain management services that include freight forwarding, contract, chemical and project logistics.

The business has made significant investments in building its infrastructure in the Middle East, South East Asia, Africa and South America, which are expected to drive growth.

"We estimate that the business will contribute about 90 per cent of the company's revenues in the forecast period from 2012 to 2016," the analysts said.

Agility's second business line, the defence and government business, has suffered after a legal dispute dating back to November 2009 with the US justice department having accused the company of overcharging the US army at least US$68 million for food supplies in Iraq and Kuwait from 2003 to last year.

"The market, in our view, has already priced in the loss of Agility's defence operations and a fine larger than we estimate, $750m in a bear-case scenario, " the analysts said.

Agility was initiated with a "buy" rating and share price estimate set at 470 fils. The stock traded 2.5 per cent higher at 355 fils on the Kuwait Stock Exchange yesterday.

The company paid a cash dividend of 0.04 Kuwaiti dinars, a yield of 11.6 per cent, for last year.

Company Profile

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Started: Sept 2017
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Industry: FinTech
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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