Epicure Qatar Equity Opportunities plc
Qatar: The Jewel in the Middle Eastern Crown
Compelling investment case for the world's fastest growing economy
London, 16 February 2011, Sandeep Nanda, investment adviser to Epicure Qatar Equity Opportunities plc, the only London-listed fund investing principally in Qatar, believes that a combination of macro-economic and domestic factors make a powerful investment case for Qatar. At a presentation to London-based media in Harrods today he highlighted how Qatar has the world's third largest reserves of gas, has enjoyed average annual real GDP growth of 15.5% over the last five years and is forecast by the International Monetary Fund (IMF) to be the fastest growing country in the world in 2011, with growth of 18.6%. By comparison China is expected to grow at 9.6%, India at 8.4% and Brazil at 4.1% over the same period.
Qatar's economy is diversifying. The non-oil and gas sector is predicted to account for 48% of GDP in 2010, up from 41% in 2006. Major infrastructure projects include a $7bn seaport, a new $10bn airport and $20bn to be spent on road improvements. Furthermore, a new city, Lusail, is being developed to house 250,000 people.
Qatar has been chosen to host the 2022 FIFA World Cup. This is expected to provide a further boost to infrastructure spending of the order of $65-100bn over the next decade. It is estimated that total spending on outstanding projects currently stands at $209bn, with around 40% of this slated for infrastructure investment.
Sandeep Nanda commented:
"We believe that Qatar offers the most attractive investment opportunity among the Gulf Cooperation Council countries (GCC) in view of its strong growth prospects and economic fundamentals. The Qatari economy is diversifying and liberalising. The Qatar Exchange is growing fast and becoming increasingly attractive to investors, with a robust regulatory environment coming about through the development of a unified regulator and improving legal framework. The number of companies quoted on the Qatar Exchange is increasing and the exchange itself has introduced the NYSE Euronext universal trading platform which should improve capacity and liquidity."
Qatar's combination of budget surpluses, increasing export volumes and price floors and ceilings in its long term gas sale contracts should ensure that Qatar's government expenditure in the domestic economy will be largely unaffected by all but the most dramatic and sustained fall in oil prices.
The banking sector makes up 52% of the Qatar Exchange Index. Other major sectors include insurance, industrial and services. During the global financial crisis the Qatari government took proactive measures to protect the banking sector and local economy by removing over $7bn in real estate and equities from the banks' balance sheets.
Qatar's robust GDP growth over the last five years has translated into strong earnings growth across all sectors, equating to a combined annualized earnings growth rate over the last five years of 34%. Qatari companies have an established dividend pay-out record, with the market currently yielding 4.4%.
Sandeep Nanda added:
"MSCI is considering reclassifying Qatar from being a frontier market to an emerging market, which we would expect to cause valuations to rise."
Equity valuations for Qatari stocks are undemanding. The Qatar Exchange trades on a price earnings ratio of 10.6 times, which is not demanding compared to Saudi Arabia on 13.9 times, Kuwait on 16.8 times and emerging markets on 15.3 times.
About Epicure Qatar Equity Opportunities plc
Epicure Qatar Equity Opportunities plc is an AIM listed (EQEO LN equity), closed ended, long only fund, investing primarily in quoted Qatari equities. The fund currently has net assets of $244m. It represents an attractive, actively managed means for international investors to access the Qatar equity market.
Epicure Qatar Equity Opportunities plc has out-performed the Qatar Exchange Index by 3.5% since becoming fully invested in Q1 2008 and has announced its intention to move from the AIM market to a full listing on the London Stock Exchange in Q2 2011. The Board is also considering changing the name of the company to "Qatar Investment Fund plc" to more clearly reflect the purpose of the company.
The investment adviser to the fund is Doha-based Qatar Insurance Company (QIC), established in 1964, which manages $1.3bn of investment funds in total. The team comprises Sandeep Nanda, Executive Vice President of Investments, who is responsible for portfolio performance. He is supported by Jubin M Jose, research analyst and eight investment professionals.
Epicure Qatar Equity Opportunities plc's top investments include:
Qatar National Bank, the largest bank in the country with strong ties to the public sector. The Qatar National Bank also has an international presence in key financial centres around the world such as London, Paris and Geneva and has been building a network of branches throughout the Middle East North Africa (MENA) region.
Industries Qatar, a holding company with interests in petrochemicals, fertilizers, steel and fuel additives. It is one of the lowest cost producers in the industry with operating and net margins of over 50%. It procures its natural gas at a price range of $1.75-2.25m per Btu compared to current global natural gas prices in the range of $5.0-5.5m Btu.
Commercial Bank of Qatar, the largest private sector bank in Qatar which has been one of the fastest growing banks in the Middle East from 2004 to 2008. CBQ enjoys a strong balance sheet with an equity to assets ratio of 21% and a Tier 1 capital ratio of 17.2%.
David von Simson, Chairman of Epicure Qatar Equity Opportunities plc, summed up:
"Epicure Qatar Equity Opportunities gives international investors a unique opportunity to achieve exposure to a fast growing, financially strong economy with a track record of wealth creation. The macro-economic outlook for Qatar is very positive. The structure of this market, its depth, liquidity and regulatory environment are all improving. The valuations and corporate earnings outlook remain compelling.
"We have the stock-picking skills and are well positioned to benefit from these positive trends. The move to a main listing on the London Stock Exchange will bring the fund to the attention of more investors and should increase liquidity".
For further information:
David von Simson
Epicure Qatar Equity Opportunities plc Tel: 0207 440 3500
Panmure Gordon Tel: 020 7459 3600
Maitland Tel: 020 7379 5151