(Uncensored) Middle East Monetary Musings

Marka Holding: Facing a Storm

Time for an update on the UAE’s (only) pure-play retail stock, Marka Holding. We’ve written about the company and its somewhat ambitious growth targets here. In this post we’re going to take a look at how Marka’s doing seeing as 2016 financials are available. So let’s kick off with the top line.

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An Update on Beehive’s First Default

This summer we were first to identify the UAE’s first p2p default on the Beehive platform which occurred on 15th August 2016. Four months later Beehive have finally updated investors as to the status of the AED 350,000 loan its investors made to Radiant Engineering, a renewable energy contracting firm.

As per previous communications Radiant Engineering FZC did not make its installment payment on 16 July 2016 and has missed all subsequent installments. We have been working closely with the business owner to assist him restart the business and therefore commence repayments of Beehive’s finance. The owner has restructured his large creditors (the freezone and key bank lines) and we have seen proof of this and the office will be reopened next week. The business has been closed for nearly 6 months and the owner needs to complete orders and obtain payments so that Radiant can restart monthly installment repayments. The owner has agreed repayments of the bank loans to commence in April 2017 and it looks likely that this will also be when Beehive repayments will start again. The owner has agreed that all investors will be made good for the time during which the loan has been on a standstill and an additional interest payment will be made on restarting monthly repayments to reflect this.

A couple of observations.

  1. It’s very clear that the seniority of the loan that Beehive originated is below that of bank debt. The mention of “freezone and key bank lines” presumes that Radiant may have outstanding dues to the Sharjah Airport International Freezone (SAIF) in which it’s based. Our assumption is that Beehive’s unsecured loan is probably just before equity holders, with little to no recourse to any of Radiant’s assets (be they fixed or receivables).
  2. There’s been no disclose of just how Radiant is going to get itself out of trouble. Apparently it’s just needed a bit of time to get things in order (9 months). One wonders as to the level of diligence that Beehive actually carried out, particularly when it comes to cash-flow management.

There isn’t much else to go on at this point. One risk we think is material is should Radiant’s clients smell blood. If clients suspect that Radiant may cease trading just 4 -5 months from now, they may just hold out on the hope that the company goes bust before they pay Radiant for work completed.

Gulf Airlines Waging a Price War

There’s been plenty of talk about competition between Gulf airline carriers, let alone accusations from decrepit US carriers, envious of better business models, cost structures and operating efficiency.

Some recent price comparisons led us to a few interesting observations. We looked at return flights travelling on business class, departing December 1st, returning December 7th from Gulf’s largest hub, Dubai, to three of the world’s top destinations for business or pleasure, New York, London and Hong Kong.

The results are rather incredible, in fact this is what we’d call a price war.


Qatar Airways is 28% cheaper than Emirates, which is flying direct. Qatar Airways and Etihad entail a short transit via Doha and Abu Dhabi respectively.

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Update: Emirates REIT

A couple of months ago we did a write up on Emirates REIT with a focus on their fee structure. Whilst the summer months are notoriously slow for new business activity, we thought to evaluate how they’ve done with regards to attracting new business formations to Index Tower.

The following new company formations have taken out leases at Index Tower.

New Index Tower Tenants

The shaded areas show quarterly segments, and the highlighted blue addresses indicate where multiple tenants have registered to the same address.

From Q2 2016 to date we’ve seen around 22 new tenants take up space at Index Tower. Most of the leases appear to be on Level 5, which is where the smaller fitted out offices are. These offices have asking prices in the 400-450 AED psqft range, much higher than core and shell floors. Although it’s nice to see Emirates REIT taking on higher margin tenants, a lot of these offices are between 500 and 1,500 sqft which implies it will take a while to fill up the remaining floors with this approach.

We find these multi-tenant office registrations interesting as it appears several of these companies are Special Purpose Companies, i.e. likely established to hold assets or partake in a specific financial transaction. This implies they’re not big employers in terms of numbers of staff and hence offer minimal growth prospects.

Below is a chart of new business formation registered to Index Tower offices. Note that the data set doesn’t reflect existing DIFC registered companies that re-locate to Index Tower. That’s something we should probably work on including.

Chart of New Tenants


With all the news around regulatory changes in the UAE affecting car-hailing apps Uber and Careem, we though to take a look at the numbers behind our regional champion.

When Careem started in 2012 we thought the “winner takes all” endgame determined by the likes of Uber would cap the startup’s prospects for material growth; we’ve been wrong so far.

Fast-forward to 2016 and see Careem has been growing its user base at a break-neck 25-30% month on month. We note however that we lack definition of what classifies an active user. In a worst case scenario we could assume this to be sign-ups – still impressive.

Careem Active Users Q1 2016

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A Review of Marka Holding

Marka Holding (“Marka”) claims to be “the UAE’s first publicly traded retail operator focusing exclusively on the Fashion, Hospitality and Sports segments”. Marka was started by Khaled AlMheiri the co-founder of Dubai investment boutique Evolvence Capital.

The company began its life as one of three UAE greenfield IPOs that took place in 2014 (companies that had no previous trading history, Dubai Parks and Amanat were the other two). In each case the process started with a private placement to founding shareholders, then a public share offering followed by an immediate listing after the close of the offer.

All three IPOs were oversubscribed several times over however Dubai Parks and Amanat both immediately traded well below par value once listed. Marka has managed to stay above par since listed in 2014, albeit on very low volume partly due to the offering’s lock-up terms (which we’ll discuss later). 

A total of $1.2bn in equity capital was raised in the formation of Marka, Amanat and Dubai Parks.

As an aside, in early 2015 the regulator, the UAE Securities and Commodities Authority (“SCA”), subsequently indicated that it wished to review greenfield IPO regulations, restricting them to institutional and sophisticated investors.

The focus of this article will be a review of the formation and Marka’s progress since inception, around 2 years ago.

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A Saudi Consumer Crunch

As a follow on to our Saudi Commercial Banks post we thought to take a look at how consumers are fairing. The Tadawul Retail Index has 17 stocks in it that cover consumer electronics, bookstores, healthcare, supermarkets and clinics.

Saudi Retail Sector

The 2 year return for the Retail sector is -46% and it’s back at 2013 levels. In the same data set used to look at commercial banks, SAMA also publishes some great time series that look at Point of Sale transactions.

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Saudi Commercial Banks

SAMA published their July 2016 statistics at the start of the week and much of the mainstream press have highlighted the 16% y-o-y decline in Net Foreign Assets.

Given the bloodbath in Saudi financial stocks, we wanted to see how their balance sheets were coping with skittish local depositors and a public sector hungry for financing.

Saudi Bank Performance

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Emirates REIT, the Fee Machine


The Emirates REIT (EREIT) IPO took place with fanfare in late spring of 2014, marking the first IPO since the 2009 financial crisis. It was also the first ever UAE REIT, offering investors exposure to Dubai’s commercial property market in a more liquid format.

There are plenty of aspects of EREIT worth covering in due course, such as how it was formed, its liquidity since it started trading and its actual performance. This article however primarily focuses on EREIT’s fee structure.

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The UAE’s First p2p Default?

Beehive p2p

Beehive, the UAE’s p2p online lending platform, appears to be facing its first loan default.

Launched in late 2014 by Craig Moore and former EmiratesNBD CEO Rick Pudner, the group in its first year issued around AED 25mn in loans to 48 SMEs in the UAE. By 2016 the platform had signed up around 2,000 investors and provided AED 30mn in loans to about 60 SMEs.

Trouble first appeared on the 18th July 2016, when investors received the following message from Beehive.

The payment for Radiant Engineering FZC is currently delayed due to administrative reasons with their bank. We apologise for the delay, we will update you with an expected payment date within the next 48 hours.

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