Qatar Investment Fund plc 2011 pot

Qatar Investment Fund plc October 2011 www.qatarinvestmentfund.com Page 2 Contents Macroeconomic Overview Snapshot Page 3 GDP Growth & Capital Expenditure Page 4 Infrastructure Spending Page 5 Qatar and the Other GCC Countries Page 6 National Development Strategy 2011-2016 Page 7 Qatar Exchange (QE) Increasing Market Depth Page 9 Current Sectoral Breakdown Page 10 Market Performance Page 11 Qatar Investment Fund plc (QIF) Investment Case Page 13 Investment Team – Qatar Insurance Company Page 14 Investment Performance Page 15 Sectoral Exposure Page 16 Banking Sector – Government Support Page 17 Top Holdings Page 18-19 Conclusion Page 20 www.qatarinvestmentfund.com Page 3 Macroeconomic Overview: Snapshot • Qatar owns the world’s third largest natural gas reserves after Russia and Iran. By next year, as gas production continues to ramp up, Qatar will be in oil equivalents the world’s fourth-largest hydrocarbon producer after Saudi Arabia, Russia, and the US. • Production of raw liquid hydrocarbons, crude oil, condensates and natural gas liquid totaled 1.57m bpd in 2010 and is forecast to grow to 1.90m bpd in 2012. • Expanding energy revenues continue to underpin stellar GDP growth rates (the IMF expects Qatar to be the world’s fastest growing economy in 2011). This year, Qatari GDP per capita is expected to be the highest in the world. • The Qatari Government invests a large proportion of energy revenues in improving the country’s infrastructure, and diversifying and expanding its economic base. Foreign and domestic private capital is encouraged through privatizations, outsourcing of public services and the development of industrial zones. • Qatar is planning US$225bn of investment in 2011-16. www.qatarinvestmentfund.com Page 4 Macroeconomic Overview: GDP Growth & Capital Expenditure • Qatar’s nominal Gross Domestic Product (GDP) growth averaged 25.5% over the past five years (2006-2010) and is expected to reach $160bn in 2011. The Non-Oil and Gas sector is predicted to account for 40% of GDP in 2011. • Qatar unveiled its budget for the 2011/2012 fiscal year that forecasts 22.5 billion QR ($6.2 billion) in surplus revenues. • Total government capital expenditure, as a proportion of total revenues, has increased from 28% in 2005/06 to a budgeted 40% in 2010/11. The public projects include the New Doha Port, the metro system and the completion of New Doha International Airport. • The combination of budget surpluses, increases in export volumes, and the various price floors and ceilings in the long-term gas contracts, should ensure that Government expenditure in the domestic economy will be largely unaffected by all but the most dramatic and sustained fall in oil spot prices. Source: IMF* Preliminary ,** Forecast Strong GDP growth supported by the non hydrocarbon sector Source: QIC, Qatar Central Bank Capital expenditure program to continue ($ Million) 2007 2008 2009 2010* 2011** Oil & Gas Sector 45,781 59,080 45,419 70,776 96,623 % Change 28.0% 29.1% -23.1% 55.8% 36.5% Non-Oil & Gas Sector 34,970 51,632 52,894 56,079 63,850 % Change 41.4% 47.6% 2.4% 6.0% 13.9% Total GDP 80,751 110,712 98,313 126,856 160,473 GDP per capita ($) 65,854 76,435 59,990 74,621 90,765 Qatar State Budget ($m) 2010/11 2011/12 % Change Revenue 35,027 44,643 27% Expenditures 32,390 38,434 19% Salaries & rents 6,291 6,923 10% Current 12,500 13,626 9% Capital 1,648 1,978 20% Public projects 11,951 15,934 33% Balance 2,665 6,181 132% www.qatarinvestmentfund.com Page 5 Macroeconomic Overview: Infrastructure Spending • The total value of projects in Qatar, both current and planned, is US$185bn. The majority of projects are related to infrastructure, construction, water and power. The largest project in progress is the development of the national rail system, which aims to relieve congestion in Doha. • Phase 1 of the new US$10bn airport in Doha is scheduled for completion in 2011. Other prominent projects include a US$7bn deep water seaport and a US$1bn crossing to link the new airport with projects in the northern part of Doha. An additional US$20bn will also be spent on improving the road network. • A number of housing projects are currently underway and further plans are being drawn up to accommodate Qatar’s rising population, which at 1.7 million has witnessed a 128 per cent increase since 2004. • The preparations for the FIFA World Cup in 2022 will entail substantial infrastructure spending over the next decade. To host the tournament officials estimate infrastructure spending to be around US$55bn, which is over and above the total expenditure earmarked above. However the analyst community expects the actual cost of hosting the World Cup to be in the region of US$65-100bn. Source: MEED Projects Selected non-hydrocarbon mega projects Cost ($bn) Scope Completion Date Qatar National Railway System 25 300km Doha metro, light rail, freight and high speed lines, passenger stations 2025 New Doha International Airport 10 Handle 50 million passengers. Phase 1 expected in 2011 to handle 24 million. 2015 New Doha Port 7 Port with a capacity of 6 million 20 foot equivalent units 2027 Dohaland 5.5 Spread over 750,000 m2, 226 buildings to house 28,000 residents, parks, schools and hotels with around 700 rooms 2017 Qatar Bahrain causeway 4 Road and rail bridge from Qatar to Bahrain 2015 Doha Bay crossing 1 12 km crossing and associated works 2014 www.qatarinvestmentfund.com Page 6 Macroeconomic Overview: Qatar and the Other GCC Countries • The table above shows the real GDP growth rates for the 6 countries that make up the Gulf Cooperation Council (GCC). • The extent of Qatar’s outperformance is clear: in real GDP terms Qatar grew by 16.3% in 2010 and is forecast to grow by 20.0% in 2011 and by 7.1% in 2012, far in excess of the forecasted growth rates of the other GCC countries. • We believe that Qatar offers the most attractive investment opportunities among the GCC economies, in view of the its strong growth prospects and economic fundamentals. Source: IMF Qatar’s Real GDP growth expected to continue at a healthy pace Real GDP Growth (%) 2006 2007 2008 2009 2010 2011(F) 2012(F) Qatar 18.6 26.8 25.4 8.6 16.3 20.0 7.1 Saudi Arabia 3.2 2.0 4.2 0.6 3.7 7.5 3.0 Kuwait 5.3 4.5 5.5 (4.8) 2.0 5.3 5.1 UAE 8.7 6.1 5.1 (2.5) 3.2 3.3 3.3 Bahrain 6.7 8.4 6.3 3.1 4.1 3.1 5.1 Oman 5.5 6.8 12.8 3.6 4.2 4.4 4.1 www.qatarinvestmentfund.com Page 7 Macroeconomic Overview: National Development Strategy 2011-2016 • The five year National Development Strategy for 2011-2016 predicts gross domestic investment will reach QR820bn (US$225bn) with almost half of the investment earmarked for the non-hydrocarbon sector. • Total investment by the government is estimated at QR347bn (US$95.3bn), private sector hydrocarbon investment is expected to reach QR85bn (US$23.4bn) with the remaining QR389bn (US$107bn) being spent by the private sector into non-hydrocarbon industries. • The strategy highlights the importance of private investment outside the hydrocarbon sector in driving growth over the period. The baseline scenario assumes that non-hydrocarbon investment will mainly be driven by spending by large government linked Qatari companies, such as Barwa Real Estate, Qatar Diar, Qatar National Bank and Qatalum. 389 347 85 0 50 100 150 200 250 300 350 400 Private, nonhydrocarbon sector Public, central government Private, hydrocarbon sector Cumulative gross domestic investment, 2011–2016 (QR billions) Source: National Development Strategy 2011–2016 estimate www.qatarinvestmentfund.com Page 8 Qatar Exchange (QE) www.qatarinvestmentfund.com Page 9 QE: Increasing Market Depth • The Qatari Government is taking a number of steps to enhance the attractiveness of the QE as an investment destination: • Creating a robust regulatory environment through the development of a unified regulator and improving the legal framework of the local market. • Encouraging companies to list on the QE. Recent stock market introductions (Vodafone Qatar, Al Meera Consumer Goods Co., Mazaya Qatar) bring to 42 the number of companies currently listed on the Qatar Exchange. • Following the acquisition of a 20% stake in the QE, NYSE Euronext has introduced their Universal Trading Platform which will provide enhanced scalability, capacity, low latency, functionality and resiliency to the exchange. • Since inception the market capitalisation has risen from QR 9.4bn in 1997 ($2.5bn) to c.QR 445bn ($122bn) at the end of June 2011. The 30 day average volumes for the index have increased over 3 fold in the last 5 years from 1.3m to 4.4m shares. Source: QE,QIC 0 50 100 150 200 250 300 350 400 450 500 Market Capitalization (QR. Bln) www.qatarinvestmentfund.com Page 10 QE: Current Sectoral Breakdown • The QE Index is the local benchmark, made up of 20 stocks; its composition reviewed semi-annually. The market capitalisation of the stocks in the index is currently c. QR 338bn ($93bn) and represents 76% of the total market. • Listed companies are divided into four sectors: Banking, Insurance, Industrial and Services. The 5 largest companies (Qatar National Bank, Industries Qatar, Commercial Bank of Qatar , Qatar Islamic Bank and Rayan Bank) constitute 55.3% of the QE Index. • The Banking sector represents 56% of the QE Index and has been a major contributor to its positive performance over the last 12 months. Source: QIC, Bloomberg Banking 56% Services 28% Industrial 13% Insurance 3% % Weight in the QE Index [...]... Estate www.qatarinvestmentfund.com Page 11 Qatar Investment Fund plc (QIF) www.qatarinvestmentfund.com Page 12 QIF: Investment Case • QIF is a LSE listed (QIF LN Equity), closed end, long only vehicle investing primarily in quoted Qatari equities, and up to 15% in regional (GCC) equities The Company as of 8th September 2011 has net assets of c.$242m • The Company benefits from the 40 years plus investment. .. shareholders on the register on 7 October 2011 This represents an increase of 8 per cent over the 2010 dividend of 2.5 cents per share www.qatarinvestmentfund.com Page 13 QIF: Investment Team – Qatar Insurance Company • The Qatar Insurance Company (QIC), established in 1964, is one of the oldest property and casualty insurers in the region QIC’s investment department manages the investment and treasury functions... compelling • • Qatari economy continued strong economic growth and attractive economic fundamentals underpin investment in Qatar Despite stronger economic growth and average company earnings, stocks in Qatar continue to trade at a discount to the MENA average There remains the potential for a re-rating Market structure, depth, liquidity and regulatory environment are improving www.qatarinvestmentfund.com... line www.qatarinvestmentfund.com EPS (QAR) EPS Growth DPS (QAR) ROE (%) EBITDA margin % Source: HSBC Global Research Page 18 QIF: Top Holdings Top Three investments cont… Masraf Al Rayan (12.2% of NAV) • Founded in January 2006, the bank offers Islamic commercial and investment banking services Masraf Al Rayan 2010A 2011E • Masraf Al Rayan has strong ties with the government through the Qatar Investment. .. 10% capital injection to the banking sector in 2011 • These measures initiated a process of consolidation among a number of listed and unlisted Qatari enterprises, in order to ensure their continued competitiveness www.qatarinvestmentfund.com Page 17 QIF: Top Holdings Top Three investments Qatar National Bank (18.1% of NAV) • High quality proxy stock for Qatari economic growth given its strong ties with... QNB 2010A 2011E Revenues (in QAR m) 7,609 7,814 Net Profit (in QAR m) 5,702 5,889 EPS (QAR) 14.60 15.04 EPS Growth 36.44 16.50 5.0 3.01 23.50 22.60 DPS (QAR) ROE (%) Source: Deutsche Bank Qatar Banks Report Industries Qatar (13.6% of NAV) • IQ is a holding company with interests in petrochemicals via 80% owned Qatar Industries Qatar 2010E 2011E Petrochemical Co., fertilizers via 75% owned Qatar Fertilizer... performance summary to 08/09/11 2011 YTD 3M 6M 9M 12M 24M Full Investment (07/02/08) QIF NAV 0.0% 1.2% 4.2% -0.1% 12.6% 21.0% QE Index -3.8% 0.3% 2.0% -4.4% 10.5% 14.4% Source: QIC, Bloomberg www.qatarinvestmentfund.com QIF annual performance summary 2010 2009 2008 -9.8% QIF NAV 29.9% 10.4% -36.4% -16.8% QE Index 24.8% 1.1% -31.4% Excluding dividend reinvestment Excluding dividend reinvestment Page 15 QIF:... profits • The department directly manages an investment (including cash) portfolio of $1.3bn out of which a total of $421m is invested in the local Qatari equity market • The key members of the investment team are: Sunil Talwar Sandeep Nanda Jubin M Jose www.qatarinvestmentfund.com Deputy-CEO of QIC Sunil has had overall responsibility for QIC’s global investment portfolio for over 20 years Chartered... dividend yield of 5.4% • Positive outlook for the equity market in Qatar The Qatar stock market looks undervalued compared to a basket of its GCC peers • In June 2011 MSCI announced the extension of the review period for the potential reclassification of the U.A.E and Qatar MSCI indices from frontier to emerging market status until December 2011 Earnings Growth ($ M) 2006 2007 2008 2009 2010 Banks 1,484... the Doha based QIC team has acquired in Qatar and the GCC markets • It represents a unique, actively-managed way to access the Qatar equity market and has out performed the QE Index by 6.6% since achieving full investment in Q1 2008 • For the financial year to June 2011, and in line with the Board’s progressive dividend policy, it is proposed to pay on 4 November 2011 a dividend of 2.7 cents per ordinary . 14.3 Source: Deutsche Bank www.qatarinvestmentfund.com Page 12 Qatar Investment Fund plc (QIF) www.qatarinvestmentfund.com Page 13 QIF: Investment Case • QIF is. 10 Market Performance Page 11 Qatar Investment Fund plc (QIF) Investment Case Page 13 Investment Team – Qatar Insurance Company Page 14 Investment Performance