By Anil Bhoyrul
In a candid interview at his offices in Riyadh, the prince explains why he has been vindicated with the investments he made - and those he didn’t
Half way through the interview with HRH Prince Alwaleed, there is a surreal moment. We are discussing the phenomenal 147 percent rise in Kingdom Holding’s share price over the past twelve months, when he drops his bombshell.
“You know something? My salary is actually very reasonable. I get paid one riyal a year, and also I charge Kingdom Holding one riyal a year to lease this floor at Kingdom Centre. So in six years since going public, I have earned just twelve riyals.”
That’s it? Twelve riyals? Are things really that bad? “Well, I say twelve riyals, but they haven’t even paid me yet! Kingdom still owes me the money — and feel free to put that in your story.”
But there is no need to feel sorry for the prince any more than the American people felt sorry for President Kennedy when he dispensed with his presidential salary and took only one dollar as his annual compensation. The rapid rise in the price of KHC stock means that the prince’s 95 percent stake in the company, together with his private assets, which include real estate and other local, regional and international assets, and Rotana, which is 80 percent owned by the prince now bring his total wealth to $25.9bn (see page 24). For the ninth year running, he has topped the Arabian Business Rich List. Coming on the back of his pole position for nine successive years on the Arabian Business Power List, there aren’t any bigger and better success stories to be found. Power. Fame. Fortune. He’s got the lot, and things just seem to get better each year.
But it’s the last twelve months that have, even by his standards, been extraordinary, with KH’s investment strategy across thirteen different sectors paying off big time. He withstood calls to withdraw from News Corp after the phone hacking scandal, and has now seen its share price hit a five-year high. He resisted the pressure to jump on the Facebook bandwagon before its disastrous IPO, and was savvy enough to nab a $300m investment in Twitter last December, which observers suggest has rocketed in value. And his decision to stick with Citigroup through many years of thick and thin also now looks completely vindicated.
We meet on the 66th floor of Kingdom Centre in Riyadh, where the prince is, as always, surrounded by rows of TV screens showing the latest market news from around the globe, cameras that record his every media interview, and his core staff. But he looks relaxed and upbeat, and, if anything, a little mischievous. I hand him a piece of paper charting the rise in his stock price over the past twelve months, and he reads it carefully. “Frankly speaking, when you gave me this I didn’t know it was 147 percent up because I don’t calculate that every day.”
Seriously? “Ok,” he says with a smile. “I know I am up but I didn’t know by this much — but it’s a very pleasant number and we welcome it as it shows that my shareholders at Kingdom have benefited too.”
He adds: “For any chairman or CEO of a company, the main yardstick of the success comes from the strength of his balance sheet, the growth in income and the performance of his share price. These are the three indicators of success at the end of the year. In all these three, I say thanks to KH members — I never use the word employees. They number 24 people. That’s it. This is to the credit of all the members who contributed to this success. The share-price movement reflects the performance of the company.”
Few can argue with the numbers: second-quarter results for this year show a net profit of SR178.9m ($47.70m), compared to SR163.5m in the same period a year earlier. That equates to a 9.4 percent rise, while first-quarter profits went up 11.3 percent, thanks in part to the sales of its stake in Toronto’s Four Seasons Hotel and its share of the Oasis Kingdom project in Riyadh.
He explains: “We are long-term investors, we are not short term. When the crisis hit the whole world, many companies were forced to liquidate and sell many of their assets. We have a very diversified portfolio, and so we were able to withstand the major meltdown in the international markets. We did not really sell, we are in thirteen industries; financial services, real estate, hotel management, hotel real estate, aviation, petrochemical, media and publishing, entertainment, private equity, healthcare and education, consumer and retail, agriculture, various African investments and we are not obliged to sell.”
But he must be aware of the remarkable rise in his personal wealth to $25.9bn over the past twelve months? I hand him another chart, showing his ranking at fourteen in the Bloomberg Billionaires Index. He is the second highest riser on the list, with Bloomberg putting his wealth up by 44.7 percent. Even legendary investor Warren Buffett couldn't manage a rise more than 9.3 percent.
“I am aware of it, yes. Look, at the end of the day, a person performs his duties and the market decides where he deserves to be. I take the responsibility very seriously I come to work every day as if this is the first time in my life I have come to work. But if I were to look at this list every day, it would deviate me from my job. Financial success — no matter how successful you are, if your balance sheet is not solid, if your income statement does not grow and your share price does not move upwards, then you feel like you’ve done nothing. These are the indicators of the year at the end of the year. Clearly, if they remain where they are, then you are not very pleased. I like to simplify things: It’s like you study for a PhD all year and then at the end of the year you study for an exam. If you don’t do well you don’t pass. If you do well, you pass. Clearly you are happy if you pass.”
It’s fair to say KH has passed 2012 with flying colours, and the prince and his shareholders have many reasons to be happy. Looking at his portfolio, he is clearly a man who sticks by his investments and knows how to hold his nerve in the face of a gathering storm. Take News Corp — the prince had no shortage of television cameras stuck in front of his face in 2011 when the company was engulfed in the phone hacking scandal, with everyone wanting to know if he would cut his ties with the company. He didn’t. This year, News Corp’s shares have risen by 34 percent to a five-year high of $25 a share, largely on the back of the company’s demerger plans. It all makes Kingdom Holding’s seven percent stake in News Corp look very wise.
The prince has no doubts that he was right to stick with Rupert Murdoch, News Corp’s founder, chairman and CEO.
“When you have a conglomerate like News Corp, inevitably you will have a bad apple. The fact that there were some issues at News International doesn’t mean at all that News Corp is a bad company. There were some issues and I believe that the other media outlets ballooned this whole thing and blew it out of proportion, because they were not able to attack News Corp in its core businesses. They could not get at it in the normal competitive arena, so they tried to get at it by exaggerating what happened in News International.”
So does he feel vindicated?
“Yes. We were vindicated, because we don’t run away from our companies in times of crisis. Especially Rupert Murdoch. He is an honourable man. Clearly what took place is not right but Rupert is out of this whole thing and we’ve been vindicated.”
If his News Corp investment looks strong, then his move into Twitter last December looks even stronger. The prince stuck $300m into the company, and though he won’t say, sources suggest he holds close to four percent of Twitter’s equity. That would give Twitter a valuation of $7.5bn as of last December, though most experts put a price tag closer to $10bn today. That $300m may now be worth $500m. Not bad for a year’s work. “We entered at the right time. We will get our return on investment. We entered Twitter when it moved into a growth company,” he says.
With stakes in giants such as News Corp, Twitter, Apple and Citi, many onlookers had long wondered about the missing link — Facebook. Given KH’s habit of picking media stars, a stake in Mark Zuckerberg’s company before its flotation seemed a certainty. Prince Alwaleed didn’t take one, and again has been vindicated by the collapse in Facebook’s share price. He says: “To be honest, it’s nice to be humble but also to be honest. We did monitor the company very well, but we did not feel very comfortable from the beginning. I mean, Facebook is a spectacular company, but we felt uncomfortable with the pricing. It was priced at an extremely high side at $38. When we invest in a company we like to get good returns to our shareholders. So we put our returns and then calculate backwards. So at the price of the IPO, I can tell you that we did not see good returns.”
Is there a price at which he would get into Facebook? “We are happy with our portfolio,” he says, adding: “We are always looking for the next big thing. But if you do something, you have to do it right and we have to have major projects because small projects will not move our Richter scale. But we are not forced to do big deals, and we don’t want to make mistakes. Kingdom Holding is on solid ground but we see how the world economy is facing difficulty. Europe is hovering around zero growth. That creates problems but we have to keep pressure on our companies to extract the maximum from each country.”
Since going public in 2007, analysts and investors have long admired the way the prince has spent a great deal of time on corporate governance. His point about only being paid one riyal a year is actually a serious one, all part of what he describes as the “umbrella of ethics, morals and corporate governance.”
“That’s my salary — I take no more. I have no stock options, I take nothing. Never. To me, corporate governance is very important, it is crucial. Now all banks admire Kingdom Holding because we practise what we preach in corporate governance and they know that. I believe it is important that the chairman should be the role model to the members of his entity. Others are not the same because they work for a salary. But I have a big stake in the company and I benefit from the share price going up. I believe they should follow suit. I believe any chairman, CEO or high-ranking official in the company should have his or her package linked directly to the performance of the company.”
Is he advocating that other bosses also just take a nominal salary if they have a significant share stake in the company? “Definitely, definitely. You cannot apply this to everyone because some people are not in the front office. You apply this to income generators. I believe they should bite the bullet and only be heavily rewarded if they succeed. A chairman should be rewarded more than what he would get if he were only taking a salary.”
One of the remarkable things about the prince’s organisation is, despite its global reach, it is managed by a core staff of just 24 people, many of whom have been with him for over a decade and even two decades.
He describes the process of getting a job with Kingdom Holding as “tough”, pointing out that each member of his team accounts for four percent of the company. It takes several months of interviews, and no one gets a job without Prince Alwaleed personally vetting that person first.
Yet despite the apparent intensity of the organisation, his staff all look highly enthused and motivated, something that clearly comes from the top. Nobody is messing around, but you sense everyone is having fun. He explains: “I have been here doing this for 32 years, one third of a century, every day, every day and every day. Some people say to me I am acting like it’s my first day and I say that’s how it should be, you should act like you are beginning from scratch and creating your company. That’s how it should be. That’s the way. And I always try to make all the people working around me happy and satisfied and have a rewarding experience.”
In fact, during those 32 years, apart from planned holidays, the prince has never once taken a day off. He works close to eighteen hours a day, which includes around six hours of solid reading, and still manages to fit in at least one hour of working out each day. He looks perplexed when I suggest that he must have sometimes felt like putting his feet up in the morning and have a lie in, rather than go to work.
“Never! Never! Never, never. I am too consistent and I love that. I feel I need to deliver every day. I was sick a few weeks ago. I had a temperature of 39 degrees, but I just came to work. Never had a day off, never! It’s never happened. I have a doctor and if I get sick he knows that the next day the temperature had better go down to 37 degrees. He knows that and he does it. We do it. I have a very structured life: every day the same thing. That it is like I am on autopilot and why should I change it? It is a recipe for success. If it ain’t broke, why fix it?”
As the interview ends, we discuss his plans for 2013, and what the world can expect from Kingdom Holding in the next twelve months. Again, he looks rather bemused at the suggestion that anything big will take that long to achieve. “You know something? It’s amazing what you can do in 24 hours.”
How true.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
:) Love this article
Any one can success in their life if they have a proper plan and will power to implement his ideas in proper ways, same time he needs to have proper financial back up & luck.Fortunately this prince has all the supporting factors to achieve this position in his life.Wishing him more success in future.
Some people are much more motivated than others and that's the existential question nobody can answer - why? The critical reality is that we are not hostage to some naturally granted talent of talent. We can make ourselves what we will - perseverance is the key word:-)
Almost 17 years ago we reviewed the prince's fortune in Gulf Business magazine and he was worth around $11 billion. Has he even kept up with inflation over that time? Considering the massive boom in the GCC since 1996 you might have expected something more. Sticking with Citibank was a huge mistake.
What is the point of this interview? To write about his net worth and growing stock price? I could have found this on yahoo finance. Try writing about his investment style or strategy in future. May be more educational. Even for you.