Second-quarter profit quadruples for Dubai’s Shuaa Capital

Dubai investment bank Shuaa Capital jumps fourfold in second quarter amid capital markets renaissance

Sheikh Maktoum Hasher Al Maktoum, the executive chairman of Shuaa Capital, noted the company's continuous lending to small and medium-sized enterprises. Jaime Puebla / The National

Shuaa Capital, Dubai's oldest investment bank, said its second quarter profit more than quadrupled as it continued to benefit from a revival in the country's capital markets following years of stagnation in the aftermath of the 2008 financial crisis.

Net income advanced for the fifth straight quarter to Dh6.2 million from Dh1.3m in the same period last year, Shuaa said. Revenue increased to Dh52m from Dh43.4m. Those gains were mostly bolstered by the firm’s asset management, investment banking and lending divisions.

On the Dubai Financial Market yesterday, Shuaa shares gained 7.4 per cent, or 9 fils, to close at Dh1.30 each. Volume was heavy at 4.97m shares.

The shares’ price over the past year has ranged from a high of Dh1.72 in April to a low of Dh0.988 on July 1. Their year-to-date gain is 26.2 per cent.

"Shuaa has had a strong first half with continued improvement in both top and bottom line results, further supporting our return to sustained profitability," said Sheikh Maktoum Hasher Al Maktoum, the executive chairman of Shuaa Capital. "This is a result of our earlier decision to keep investing balance sheet resources into small and medium-sized enterprises (SMEs) lending and to position the business to capture improved capital market activity."

The firm’s lending to SMEs in the Emirates and Saudi Arabia has boomed as it focuses on generating revenue from lending after a restructuring that closed its retail brokerage division down in 2011 amid a drought of initial public offerings and thin trading volume.

However, stock and bond markets in the UAE have undergone a renaissance in the past year-and-a-half amid government spending on infrastructure, increased trade and tourism receipts, and inflows of investments from other beleaguered emerging markets such as Russia. Dubai’s main benchmark more than doubled last year and has gained 41 per cent this year, making it the world’s best performing index. Other benchmarks in the region have also posted double-digit advances this year.

Shuaa’s asset management division reported a profit of Dh4.2m. Meanwhile, the firm’s investment banking division had a net profit of Dh4.5m in a period when Shuaa managed the initial public offering of Emirates Reit.

While many businesses in the country have shied away from public offerings in recent years, the stellar performance of stock indexes in 2013 has made many companies reconsider amid rising valuations. Shuaa said it has been hired by a number of clients who may take their companies public.

Lending to small and medium enterprises yielded a profit of Dh7m in the second quarter amid growth in the market for such loans. The UAE decreed earlier this year that 10 per cent of all government contracts must be awarded to Emirati-owned businesses in this segment.

“The economic outlook for the UAE remains strong and gives us confidence that we can continue to build out our market positions as we look ahead to the second half of 2014,” Sheikh Maktoum said.

“To the backdrop of increased client activity, we have expanded our core businesses and hired new talent. We believe that we are in a strong competitive position to increase our market share as institutional investors look to access our markets and local businesses continue to execute on their growth plans.”

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