Kuwait Times, Sunday, May 14, 2023 | Shawwal 24, 1444
Al-Terkait: Al-Safat Investment, Cap Corp merger promising step with positive effect
Kuwait:
Al-Safat Investment Company’s Chairman of the
Board of Directors Abdullah Hamad Al-Terkait said during the company’s general
assembly meeting Thursday that the merger between Al-Safat Investment Company
and Cap Corp Investment Company is a “promising step that will leave a positive
effect”. “Al-Safat enjoys a stable financial position, and it prepares to enter
a new phase with its merger with Cap Corp,” Al-Terkait said.
The ordinary general assembly of Al-Safat Investment Company approved all the
items on the agenda, including the reports of the board of directors, auditors
and other items, while the approval of the merger between Al-Safat and Cap Corp,
which is on the agenda of the extraordinary assembly, was postponed until the
end of next week.
Al-Terkait said on the sidelines of the assembly, which was held with an
attendance of 56.7 percent of total shareholders, that “the company was able to
deal with the challenges facing the market in general with experience that
reflects its ability to face any developments, and perhaps its success in
structuring its financial conditions and re-entering the market is a good proof
of the success of its strategy followed during the previous period”.
A new stage
Al-Terkait added that Al-Safat is on the verge of a new stage, where it has
developed promising strategies complementary to its goals and investment
mission. ”One of the priorities of the board of directors and the executive
management will be to focus and support everything that maximizes shareholders’
rights, as Al-Safat intends to move forward with a sustainable vision towards a
prudent strategic plan to seize investment opportunities and develop them by
targeting certain local and regional expansions, enabling it to achieve strong
profits and financial results, and then look forward to new horizons that
enhance its presence and durability,” he said.
The merger process
Regarding the future aspirations of Al-Safat, Al-Terkait said it is prosperous
and based on a package of key steps, most important of which is the merger with
Cap Corp, which is expected to be approved by the extraordinary assembly during
the next meeting, as the process will result in higher operational efficiency in
terms of revenue, cost and financial balance, which will create a financial
entity with a positive impact on the company’s value and position in the local
market.
Al-Terkait said the targeted merger process requires raising the capital of
Al-Safat Investment Company by 35.3 percent, equivalent to KD 10 million, which
will lead to an increase in the company’s authorized, issued and paid-up capital
to reach KD 38.3 million divided by 383.27 million shares.
Expected results after completion of merger
Based on this, it is expected that equity will reach approximately KD 37
million, which will contribute to increasing the company’s book value by 19
percent after the completion of the merger, while Al-Terkait confirmed that
Al-Safat is looking to form a larger and stronger investment entity through
which it will be able to increase its market share, which will reflect
positively on its market value and provide greater value to its shareholders.
According to Al-Terkait’s statements, the company is targeting a wider customer
base through this merger to increase fees and commission revenues for clients’
portfolios by 20 percent. He pointed out that the merged entity benefits from a
balanced and diversified income-generating asset portfolio, including
investments in associates that are active in the investment, real estate and
information technology sectors, and this creates a more stable income flow.
Al-Terkait expected the company’s assets to rise to about KD 51 million, which
is equivalent to an increase of 39 percent. This results in an increase in
managed assets to a total of $250 million, with a growth rate equivalent to 48
percent.
“After the merger, Al-Safat Investment Company will enjoy an increase in its
human resources with specialized experienced cadres who are expected to play an
effective role in achieving the company’s goals and strategic direction in the
future,” Al-Terkait said.
Market maker
In a related context, Al-Terkait confirmed that the board of directors agreed to
complete the necessary requirements to enable Al-Safat Investment Company to
obtain a market maker license, noting the executive management’s efforts to
complete the requirements of the Capital Markets Authority and obtain the
necessary approvals to start applying the market maker activity.
Hex office for small projects
Regarding small businesses, Al-Terkait said, “We are in the initial stages of
transforming the Hex Office project from a joint office headquarters of our
company to an incubator that contributes to the development, upbringing and
success of small and medium enterprises in Kuwait, through obtaining official
accreditation from the National Fund for Small and Medium Enterprise
Development. Hex Office contributes to helping entrepreneurs develop their idea
into a successful project by creating a modern innovative technological
environment.
Economic conditions
In terms of economic conditions, Al-Terkait said: “The year 2022 was
characterized by uncertainties that overwhelmed most of the world’s economies,
which led to a decrease in vision, along with fluctuations and resulting
challenges”.
Among these challenges, inflation rates exceeded their levels during previous
decades, which resulted in tightening monetary policy by raising the interest
rate in an attempt to curb inflation, which reached record levels. Accordingly,
the Central Bank of Kuwait increased the discount rate from 1.5 percent in
December 2021 to 3.5 percent in December 2022,” he said. This had a direct
impact on risk ratios, which is reflected in the evaluation of investments. In
addition to these challenges are the war in Ukraine and remaining pandemic
deposits.
Financial statements 2022
The total combined operating and investment revenues of the group amounted to KD
2.8 million, compared to last year’s KD 4.5 million, a decrease of 38 percent.
Al-Terkait explained this decrease is due to the decline in the fair value of
real estate investments from KD 19.6 million in 2021 to KD 17.4 million, which
resulted in KD 1.3 million unrealized book losses. “These declines remain book
based as long as we do not exit these investments, and with the return of
markets rising again, there will be the possibility of compensating for all
these declines,” he said.
“Despite this, operating revenues amounted to KD 3.4 million compared to last
year’s KD 3.2 million, which represents an increase of 6 percent. This is due to
the increase in revenues of Al-Assriya Printing, Publishing and Distribution
Company to its usual levels after experiencing a decline in sales during the
previous years due to the pandemic,” Al-Terkait said.
Despite the economic fluctuations in Lebanon, Al-Terkait reported that Al-Safat
Investment Company managed to get out of 75 percent of one of its residential
properties in Lebanon, which belongs to the Tourism Prosperity Real Estate
Company. By the end of last year, assets under the management of Al-Safat
reached around KD 50 million, a decrease of 25 percent compared to the previous
year as a result of the sale of one of the portfolios worth KD 25 million.
The Ahmadi project
Al-Terkait reviewed the Ahmadi project as one of the company’s achievements in
the real estate sector, which is one of the economic pillars in which Al-Safat
Investment Company invests. “Al-Safat Investment Company was able to develop a
multipurpose complex specialized in craft and industrial activities for medium
and small enterprises located in east Ahmadi, with warehouses, shops and offices
spread over 12,335 square meters. The complex is considered one of the
outstanding complexes in that area, as it provides technological services and
data protection according to international standards,” he said.
Social responsibility
As for social responsibility of Al-Safat Investment Company, Al-Terkait stressed
that Al-Safat considers social responsibility of the company an integral part of
its mission, which is reflected in the activities and events organized
throughout the year, the most important of which was the empowerment of women
and the knights of industry program on youth awareness by introducing them to
what investment is and its importance in the development and emergence of the
state economy and improving the level of per capita income.
Health culture
Al-Safat also pays great attention to the dissemination of health culture, as
the company established a health corner in cooperation with Al Salam
International Hospital to spread the preventive health culture among all
employees and visitors at Al-Safat Tower during November, a month dedicated
globally to men’s health awareness, not to mention the charitable work
represented by a donation campaign contributed by the company’s employees and
all employees in the tower. This campaign was directed to collect the largest
amount of clean used clothes and donate them to the needy in Kuwait and around
the world in cooperation with the Humanitarian Excellence Society.
Acknowledgements
Terkait thanked the shareholders for their constant support, as well as the
employees for continuing to work with full flexibility in light of the
challenging business environment, as well as for their efforts to focus on
achieving the long-term goals of the company in line with its strategies,
seeking to achieve a better future for the company based on solid foundations.
Regulatory authorities
Terkait thanked the various regulatory authorities in Kuwait (Capital Markets
Authority, Ministry of Commerce and Industry, Central Bank of Kuwait and Boursa
Kuwait) for their continuous cooperation and efforts and keenness to develop and
improve the financial market sector of Kuwait.
Shareholders of Al-Safat and Cap Corp
The merger is expected to be in the interest of the shareholders of Al-Safat and
Cap Corp, as it will entail the formation of a leading entity in the investment
and Islamic financial services sector, in light of the focus on efforts related
to the provision of investment products and services provided. It will lead to
the creation of greater added value at the level of the customer base and
shareholders by both companies in the framework of supporting the future
direction locally and regionally, especially in light of the maximum utilization
of operational capabilities and professional human resources to achieve the
goals and visions of the company strategy.