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Wed 31 Mar 2010 07:46 AM

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Shuaa to reduce investments and focus on fees

CEO says current share price 'undervalued', plans to rejuvenate it with new focus.

Shuaa Capital plans to turnaround its share price valuation by reducing its loss-making investment division and focusing on its fee-generating business, the CEO of the UAE's biggest investment bank said on Tuesday.

2008 and 2009 were described as a “perfect storm” by Shuaa's CEO Sameer Al-Ansari, who was appointed in August after his predecessor Iyad Duwaji resigned following a dispute with Dubai Banking Group, which resulted in DBG acquiring a 48.4 percent of Shuaa.

Shuaa made a loss of AED889.6m ($242.1m) in 2008 and AED529.8m ($144.2m) in 2009 and Al Ansari said the market “still thinks we are losing money.”

He said he believes the current share price is “undervalued” and he plans to rejuvenate it by focusing on its fee-generating sectors, such as asset management, brokerage, private equity and finance.

The company is also planning to “complete the exit strategy of its principal investments and legacy portfolio”, and Al Ansari said, it had already begun this process and exits and provisions had reduced its investments to AED1.2bn ($326m), a drop of around 50 percent.

He added that Shuaa was currently in the process of selling its stakes in Kuwaiti firm Alkout Industrial Projects, Qatar’s Amwal, and UAE-based Septech Holdings.

Within the initial public offering market, Al Ansari said he believes Shuaa will recover in the second quarter of this year and that the firm is currently managing three mandates, one of which is expected to be listed on the Abu Dhabi stock exchange in the next few weeks.

The bank’s asset management division, which made a profit of AED6.7m ($1.8m) in fees and interest income in 2009, is also ripe for development, he said. Of the estimated AED50bn ($13.6bn) in managed funds in the Middle East and North Africa (MENA) region he estimated that Shuaa only manages 0.5 percent of the market, indicated it has a lot of “room for growth.”

In this regard, he added that Shuaa was in the early stages of talks about a number of possible joint ventures to boost its asset management division.

Earlier this month, Shuaa Capital's Saudi Arabian unit said its hospitality fund had bought land in Jeddah for a hotel development worth more than $130m, the first ever land acquisition by a hospitality fund in the kingdom.

On Tuesday, Al Ansari said the Kingdom was going to become a focus for Shuaa in 2010 and that he expected the Saudi market to become as important to the firm's balance sheet as the UAE.

Finally, with regards to last week’s Dubai World restructuring plan announced last week, Al Ansari said he believed the impact had been very positive.

“We would like to commend the Dubai Government for taking progressive and decisive steps to end speculation on debt defaults and removing much of the uncertainty hanging over the investment community. The news has been overwhelmingly welcomed by the market because the restructuring plan is generally seen as a positive effort by the Dubai Government to treat creditors fairly. The improved market confidence will be an important driver for Shuaa's business especially in the UAE as investors return to the markets,” he said.

On Tuesday, Shuaa’s share price was already beginning to see some of this positive sentiment and rose 8.9 percent to AED1.47 ($0.40).

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