Wednesday, March 28, 2007

KIPCO's Sellout

Why is KIPCO selling its assets? First they sold Wataniya Telecom to Qtel then Sadafco. I am not sure what’s the status of Showtime which they were hoping to sell for a while now. What’s next? And what is this all about? There are few theories. The official response from KIPCO is that it is normal disposal of investments for attractive returns and realignment of strategy. But this did not stop the speculation. Some say KIPCO is attempting to divest out of Kuwait in light of increased political pressure and scrutiny because of its close connections (owned by the son of the Emir). Others take the divestment to be a negative outlook on the Kuwaiti market which worries many.

So is a negative outlook justified? According to recent Merrill Lynch report the answer is no. The chart below shows forward P/E ratios and current account balances relative to GDP. Accordingly Kuwait’s stock market is one of the most attractive in the region. This is based on large relative current account surplus (driven by oil revenue) which indicates higher potential economic growth. In addition, valuation is relatively inexpensive based on forward price earnings ratios. So why is KIPCO selling out? That’s anyone’s guess.


Anonymous said...

kipco is divesting out of kuwait, pure and simple. but i dont think it has anything to do with political tensions.

they did say that they were heading into more if a financial/banking/investment direction which is probably the best thing to do in a country flooded with excess cash. so far alot of the companies they own have been retail type firms, wataniya, showtime, their medical services and even their construction company's can be said to be aimed more at the retail end of things.

while yes it does show a lack of confidence in kuwait, which is mainly due to the small population and the fact that the loans situation last year opened everyones eyes to the true state of the average person,.... the upside is that there is now going to be a kuwaiti equivalent to dubai holdings, which there wasnt before.

if they are serious about turning kuwait intoa financial hub, as funny as that may sound, then this is the way to go.

i mean why start any other business when kuwait only really produces oil and therefore money? hamad cant really touch the oil directly, but the money is up for grabs so investment banking makes sense.

and yes alot of the big families are moving out. theres a new generation taking over who are thinking globally.

now that could be good or it could be bad, only time will tell.

Unknown said...

I smell a rat

they know something that we dont

Anonymous said...

Apparently, they must be planning something big. The huge number of companies are no matter what difficult to run. The trend of Kuwait is opening to construction projects. You need a huge cash money to bit and launch such projects. It is likely they will want share of third license operator, but construction and share of the new huge projects coming is something else they might really want to get into.

bored said...

I bet conspiracy theorists will find some way to link this to the Iranian situation. some people have too much time on their hands and not a lot of intelligence bs fal7een with unsupported speculation, like how some people find the movie 300 a pre cursor to the imminent US invasion of Iran. btw nice blog

Bu Ziyad said...

skunk: thanks for your response.. it would be interesting to see the kuwaiti version of dubai holding.. a private -well kind of- entity that compete even with KIA! who knows..

mosan: all is possible.. glad we got enough cats roaming around :p

bashar: KIPCO mentioned they are not interested in third mobile opperator.. only time will tell..

bored: conspiracy theory is in our blood! and thanks :)

Spicy Pepper said...

Everything has a price!! Global's selling of kathema (shell company with no activity). NRE's negotiations with UAE group to sell thier agility shares (very hot at the moment) KIPCO has always maintained that they are a holding company and if any of thier investments gets an attractive offer they will sell. i think they will use the money to establish an investment bank. I think time will tell. Nice blog :)

Bu Ziyad said...

spicy pepper: ur right.. and KIPCO has sold assets previously such as KDD.. that's a good sign that companies are not emotionally attached to their investments and can make rational decisions.. thanks :)

Anonymous said...

I think that KIPCO really is changing course from local to international as mentioned by skunk, only to come back again. They might acquire an influential stake at a foreign (Swiss?) bank/company and from there try to control Kuwait Airways should it be privatized.

Bu Ziyad said...

abdulmohsen: burgan (part of kipco group) is already considering foreign acquisition.. and kipco has established/establishing national airways..

Anonymous said...

There is obviously a lot to know about this. I think you made some good points in Features also.