Mushaa Real Estate Company KSCC - Global Investment House KSCC Private Placement of 290,000,000 shares

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Mushaa Real Estate Company KSCC
        (A Kuwaiti Shareholding Closed Company)

    Private Placement of 290,000,000 shares
        Selling price KD0.105 per Share

                        2008

                  Lead Manager
   Global Investment House KSCC
Contents

Introduction                             3
Terms of the Offer & Lead Manager        5-6
Economy and Sectors– Highlights         8-10
The Company                             12-18
Baz Real Estate Modern Systems          20-21
Financial Summary & Projections         23-28
Key Investment Factors                  30-31
Key Risk Factors                         33
Disclaimer                               34

                                    2
Introduction
ƒ GCC economies have witnessed strong growth in recent past owing to
     ―   Rising oil prices and consequent high Governmental earnings
     ―   Strong corporate & stock market performance
     ―   Large infrastructural projects
     ―   Investment repatriation adding to liquidity
     ―   Structural reforms – privatization, financial sector, real estate laws
     ―   Relative political stability
ƒ Real estate sector together with hospitality or lodging segment are of the most
  benefited sectors from this unprecedented economic growth
ƒ Demand for hotel rooms is strongly correlated to GDP.
ƒ The hospitality industry, largely represented by hotels, in the GCC has registered
  tremendous performance and growth in recent years
ƒ There is a great opportunity for a considerable demand for timeshare, a sector which
  is under-represented in this region.
ƒ To capitalize on this lucrative investment opportunity, Mushaa Real Estate Company
  KSCC (‘Mushaa’ or ‘the Company’) has planned to set up a chain of Islamic
  timeshare properties with a comprehensive presence in the region.
ƒ Mushaa intends to increase its capital to KD30mn through the issuance of 290mn
  shares of par value fils100
                                               3
Terms Of The Offer & Lead Manager
Terms Of The Offer

Company Name:                                            Mushaa Real Estate Company KSCC*

Number of new shares for sale:                           290,000,000 shares

Share Sale Price:                                        KD0.105 (fils 105) per share**

Minimum Subscription:                                    200,000 shares

Maximum Subscription:                                    30,000,000 shares (10% shareholding interest)

*   Name of the Company has been proposed to be changed to Mushaa Real Estate Company from its current name
    Al-Shorouk United Real Estate Company

** Sale Price includes fils100 per share face value plus fils5 per share non-refundable marketing & allotment fee

                                                            5
Lead Manager

Global Investment House KSCC
P. O. Box 28807, Safat 13149, Kuwait
Tel: (965) 240 0551
Fax: (965) 240 0661
Email: global@global.com.kw
Web: www.globalinv.net

The Lead Manager reserves the right to allocate participation in the shares of “Mushaa Real Estate Company KSCC” among
Investors. Investors will receive shares as the Lead Manager may determine, in its sole discretion. If the offering is oversubscribed,
the Lead Manager will allocate the shares after the closing. The Lead Manager also reserves the right to reject subscription
applications as a whole or in part, in its sole discretion or to allocate shares higher than the maximum subscription indicated in
this document. The Lead Manager, in its sole discretion, may issue and allocate additional shares and acquire additional interests in
“Mushaa Real Estate Company KSCC”. The Lead Manager, in its individual sole discretion, may acquire shares under this
offering.

                                                              6
Economy and Sectors - Highlights
Economic Boom
ƒ GCC is the world’s 14th largest economy and accounting for more than half of the
  combined GDP of the all Middle Eastern countries with a combined GDP expected
  to reach US$798bn in 2007 .
ƒ Driven by sustained high oil prices and increased oil production, most economies in
  the GCC have experienced an average annual GDP growth over 7% for past five
  and is expected to grow in the range of 5.5% -7% in the short to medium term.
                                   Nominal GDP & Growth Rates
                 900                                                           30%
                 800
                                                                               25%
                 700
                 600                                                           20%

                                                                                     Growth
        US$ bn

                 500
                                                                               15%
                 400
                 300                                                           10%
                 200
                                                                               5%
                 100
                  0                                                            0%
                       2003          2004       2005        2006      2007 E

                              Nominal GDP (US$ bn)       Nominal GDP growth

                                                     8
Economic Boom
ƒ The per capita income of the GCC states was $12,000 in 2002, which almost
  doubled to $22,000 in 2007. Per capita income ranges from less than US$10,000 in
  Bahrain to US$70,000 in Qatar.
                  GDP per Capita & Population Growth – GCC
           40                                                            26,000

           35                                                            22,000

           30                                                            18,000

           25                                                            14,000

           20                                                            10,000
                 2003        2004         2005         2006     2007 E
                        Population (mn)          Per capita GDP (US$)

ƒ GCC economies are investing to develop non-oil sectors to reduce the reliance of oil
  revenues and build broad-based economies.
ƒ Capital markets, tourism, real estate, intra-GCC trade are sectors where reforms and
  development have been targeted.
                                                  9
Hospitality and Tourism – Dynamic Economic Sectors
ƒ The tourism sector has proven paramount effects on regional economies and has
  positively driven income levels and employment in the region
ƒ The Middle East region is expected to achieve the fastest overall tourism growth in
  the world. The estimated annual growth rate for travel in the Middle East is
  expected to be 6.7% until 2020, compared to 4.1% worldwide
ƒ Hospitality industry, largely represented by hotels, in the GCC has registered
  tremendous growth and performance in recent years outperforming some of the
  world’s more established markets
ƒ Given the amount of new supply entering the market, revenue per available room
  (revPAR) in the Middle East grow 17.0% exceeding both Asia Pacific and Europe
ƒ The Islamic hospitality market is growing at a fast pace in the Middle East as well
  as in many popular international destinations favored by Middle Eastern travelers
ƒ There is a new trend of religious timeshare in GCC
ƒ The Middle East market can support US$540 million in timeshare sales allocated
  mainly for Dubai, Sharm El Sheikh and Makkah (Source: RCI research)
                                       10
Mushaa Real Estate Company
Incorporation
ƒ Mushaa Real Estate Company (“Mushaa” or the “Company”), a closed
  Kuwaiti shareholding company established in July 2006 under the name Al
  Shorouk United Real Estate Company
ƒ The General Assembly of Al Shorouk United Real Estate Company will be
  summoned to approve the following:
    – Change the name of the Company from Al Shorouk United Real Estate
      Company to Mushaa Real Estate Company KSCC
    – Increase the Company’s authorized and paid-up capital from KD1million to
      KD30million by issuing 290,000,000 new shares of par value KD0.100 per
      share to reach a total of 300,000,000 shares
    – The Company shall conduct its business and operations in accordance with the
      rules of Islamic Shari’a

                                     12
Business Activity
ƒ Mushaa Real Estate Company plans to be the first company specialized in
  the Islamic timeshare in the Middle East
ƒ The Company shall conduct its business in conformity to the principles of
  the Islamic Shari’a
ƒ The principle activities of the company are real estate investment,
  development and trading
ƒ The Company will market, trade and sell its real estate projects using Hisas
  Al-Mushaa with initially focus on the GCC market and then expand to
  regional markets in future
ƒ The Company has entered into a strategic partnership with Baz Real Estate
  Modern Systems “BAZ Systems”, the company which developed the
  concept of Hisas Al-Mushaa, to manage the proposed properties
ƒ Mushaa intends to set up five to seven properties across the GCC in the first
  five years
                                   13
What are Hisas Al-Mushaa
ƒ Capitalizing on the fast pace growing sector of Islamic hospitality together with the
  booming real estate markets and supported by the potential for Islamic timeshare
  industry in the region, BAZ Systems has developed, based on Islamic Rules, the new
  concept of Hisas Al-Mushaa
ƒ Hisas Al-Mushaa is an Islamic timeshare scheme inspired by Islamic rules and
  teachings allowing ownership of a real estate for a specified period of time every year
  for a term of 20-50 years.
ƒ Advantages of Hisas Al-Mushaa
     – Cost effective compared with owning a permanent residency or staying at hotels.
     – The owner can carry forward the occupation period of time specified or previous surplus
       periods to the next year and only for one year.
     – An owner may also interchange his specified unit or occupation period with another unit
       or occupation period within Hisas Al-Mushaa the owner have already possessed.
     – Although Hisas Al-Mushaa is measured by weeks as periods of occupation, yet
       reservations are so much flexible that an owner may select the beginning and end of
       occupation week.
     – An owner may accommodate any persons based on confirmed reservations upon
       concluding reservation coupon in the name of the guest.

                                          14
Strategic Partnership with BAZ Systems
ƒ Mushaa will have an adequate experienced management team to manage
     – Development or acquisition of properties
     – Partnership with BAZ Systems
ƒ The Company has entered into an agreement with Baz Real Estate Modern Systems where
  BAZ Systems shall assume all the following duties and responsibilities for a term of five (5)
  years renewable for another 5 years.
     –   Assist in the formulation of the Company’s 5-year business plan
     –   Assist in the strategic corporate planning
     –   Acquisition, development and/or sale of real estate properties
     –   Assist in assigning the hotel operators for the Company’s properties
     –   Handle trading of Hisas Al Mushaa
ƒ As per the agreement, BAZ Systems shall work exclusively for Mushaa Real Estate for a term
  of 10 years; 5-year term renewable for another 5 years
ƒ For its management services, the Company will pay BAZ Systems an annual fee of 0.2% of the
  paid-up capital of the Company.
ƒ BAZ Systems will purchase up to 5% of the total outstanding shares of the company through
  this offering, reflecting the long-term commitment to the Company
ƒ The partnership with BAZ Systems is expected to mitigate most of operational risks as BAZ
  Systems will manage every single aspect relating to the Company’s properties.

                                                  15
Development Plan
ƒ The Company intends to set up 5 to 7 properties in the GCC according to the
  following plan:
               Ready               Development                              Opening
    Year     Properties      Start      Completion          Opening       (Cumulative)
    Year 1        1                                              1              1
    Year 2        1            1                                 1              2
    Year 3        1            1                                 1              3
    Year 4                                       1               1              4
    Year 5                                       1               1              5

ƒ Mushaa intends to acquire and development of 5 properties in the first five years.
     – Acquire 1 ready property each year in the first three years
     – Start development of additional 2 properties in year 2, and 3 respectively
ƒ In the event that sound projects and joint venture partners are available, the number
  of properties may go up from 5 to 7 in the first five years

                                            16
Development Coverage
ƒ Based on detailed planning along with senior management at BAZ Systems, the
  following coverage has been planned for Company’s properties in the first five years
                Phase I: First 5 years                  Phase II: Next 5 years

                         - UAE
                  1 - Dubai,

              1 - Makkah, Saudi Arabia
                                                              Other
             1 - Madenah, Saudi Arabia                Cities and Countries
                                                               In
              1 - Jeddah, Saudi Arabia             GCC, Middle East and Europe

                     1 - Kuwait

                1 - Manama, Bahrain

                 1 - Salalah, Oman
ƒ In phase II the company intends to expand to other cities and countries in GCC,
  Middle East and Europe
                                         17
Exit Options for Investors

ƒ Listing on Stock Exchange
    – The Company intends to list its shares on Kuwait Stock Exchange (KSE),
      subject to meeting KSE’s listing requirements
ƒ Option to invest through a Special Purpose Vehicle (SPV)
    – Investors can also invest in the Company via a limited liability company, which
      upon allotment, allows investors to trade subject to availability of buyers
    – Global provides a trading platform for the investors investing through the SPV

                                      18
BAZ Real Estate Modern Systems
Overview

ƒ BAZ Systems started to work on modern tourism concepts since 1988
  through BAZ for Tourism and Shipping.
ƒ In 2002, BAZ for Tourism and Shipping started its product development
  by introducing Sokouk program, in cooperation with Munshaat Real Estate
  Projects Company, applied to Zamzam Tower in Makkah.
ƒ BAZ Systems activities include real estate trading, management and
  marketing, and providing solutions such as Hisas Al-Mushaa.
ƒ BAZ Systems has branches in KSA, UAE, Bahrain and Turkey and is
  planning on expanding into Qatar very soon.
ƒ BAZ Systems promoted the timeshare concept to suite the culture and
  traditions of the region and the Islamic Shari’a by enhancing the concept of
  Hisas Al-Mushaa.

                                   20
Experience

ƒ BAZ Systems has introduced several projects in the region using Hisas Al-
  Mushaa concept and is in the process of introducing similar projects as
  follows:
    – BAZ Systems has successfully marketed Sokouk Al-Intifa’a of renowned
      Zamzam Tower in Makkah in partnership with Munshaat Real Estate.
    – The 164-room luxury Brooj Suites in Dubai, recently offered by BAZ Systems
      on Hisas Al-Mushaa investment basis, is the first of several such Shari’a hotels
      being launched by Abu Dhabi Islamic Bank and managed by Millennium &
      Copthorne.
    – In coordination with Gulf Management Services, BAZ Systems, is marketing
      Hisas Al-Mushaa in Tower C, of the Villamar project at Bahrain Financial
      Harbor
    – BAZ Systems is also studding to invest in 2 towers in a prime locations in
      Dubai and Jeddah
    – BAZ Systems is currently handling the marketing and selling of Hisas Al-
      Mushaa of Manazel Al-Ain Hotel in Makkah

                                      21
Financial Summary
Key Financial Assumptions & Analysis
ƒ Estimated Project Capital Expenditure and Property Schedule

KD million                                       Year 1    Year 2   Year 3     Year 4   Year 5
Project Cost - Estimated Outflow                    20       25       35         31       14
Project Cost - Estimated Outflow (Cumulative)       20       45       80        111      125
Ready Properties Acquired                             1        1        1
                                    Start                      1        1
Development of Properties
                                    Completion                                    1        1
Property Opening                                      1        1        1         1        1
Property Opening (Cumulative)                         1        2        3         4        5

ƒ Estimated cost per property is KD20-35 million
ƒ cost estimates are subject to change based on location and size of the properties
  developed over a period of time.
ƒ Properties will be established through
     – Acquisition of a ready property or conversion of an existing property
     – Development of new property

                                            23
Key Financial Assumptions
ƒ 40% of Hisas Al-Mushaa total annual sales will be in cash, the remaining 60% will
  be offered to clients at 3 years payment terms
ƒ Accounts Payable equivalent to 20% of cost of sales
ƒ Debt/Equity ratio is assumed at 1:1, applied to each property
ƒ Cost of Islamic funding has been considered at 9% per annum
ƒ For every property, Hisas Al-Mushaa is assumed to be sold over 4 years.
ƒ Operating expenses assumed to represent 33% of annual sales (on average).
ƒ Annual appreciation in the fair value of Investment Property is assumed at 3% per
  annum
ƒ Dividend payouts are estimated to start from the second year as follows:
     –      32% of Net Profit in 2nd year
     –      47% in 3rd year
     –      55% in 4th year
     –      60% in 5th year

                                            24
Projected Income Statement
KD'000                                Year 1    Year 2   Year 3   Year 4   Year 5
Revenues                                  3,248   17,458   21,807   25,801   29,901
Operating Expenses                        (750)        (6,150)   (8,895)   (11,438)   (15,176)
Operating Profit                         2,498         11,308    12,912    14,363     14,724
G&A Expenses                              (700)        (3,542)   (4,411)    (5,210)    (6,030)
EBITDA                                   1,799         7,767     8,500      9,153      8,694
Changes in Fair Value of Investment
                                           -             450      1,274     1,942      2,000
Property
Provisions for doubtful debts             (150)          (943)    (781)      (629)      (803)
Net Operating Profit                     1,799         8,217     9,774     11,095     10,694
Investment Income                        3,400           780        -          -          -
Murabaha Expenses                         (219)        (2,006)   (2,877)    (3,844)    (2,182)
Net Profit before KFAS, NLST &
                                         4,980         6,990     6,897      7,251      8,512
Directors' Remuneration
Contribution to KFAS                       (45)           (63)      (62)       (65)       (77)
National Labor Support Tax                (134)          (189)     (187)     (196)      (231)
Directors' Remuneration                    (50)           (50)      (50)       (50)       (50)
Zakat                                     (119)          (167)    (165)      (173)      (204)
Net Profit                               4,632         6,521     6,434      6,766      7,951

                                                  25
Projected Balance Sheet
KD'000                           Year 1       Year 2        Year 3     Year 4      Year 5
Bank Balances & Cash                 4,432          2,667      1,983       1,307     10,697
Receivables                          1,350          9,837     16,870     22,532      29,757
Investments available for sale      20,000         13,000        -           -          -
Project under Construction                -         3,333      8,000       4,667        -
Hisas Al-Mashaa Assets              19,000         22,750     21,650     20,400      20,425
Investment Property                       -        15,450     43,724     66,665      68,665
Total Assets                       44,782          67,037     92,227     115,571    129,545
Murabaha                            10,000         19,509     28,096     30,375      14,296
Payables                              150           1,230      1,779       2,288       3,035
Deferred Revenue                          -         7,200     19,860     37,380      63,495
Total Liabilities                   10,150         27,939     49,735     70,043      80,827
Share Capital                       30,000         30,000     30,000     30,000      30,000
Reserves                              987           2,372      3,740       5,177       6,864
Retained Earnings                    3,645          6,726      8,753     10,351      11,855
Total Equity                       34,632          39,098     42,492     45,528      48,718
Total Liabilities & Equity         44,782          67,037     92,227     115,571    129,545

                                              26
Key Financial Indicators

                                  Year 1            Year 2        Year 3        Year 4        Year 5
EBIT Margin                            77%               65%           59%           56%           49%
Net Profit Margin (%)                  70%               36%           30%           26%           27%
Return on Average Assets (%)           10%               12%               8%            7%            6%
Return on Average Equity (%)           13%               18%           16%           15%           17%
Shares Outstanding (in million)    300,000           300,000       300,000       300,000       300,000
Earnings Per Share (fils)                      15            22            21            23            27
Proposed Dividend (fils)                   -                 7             10            12            16
Dividend Payout Ratio %                    0%            32%           47%           55%           60%
Book Value Per Share (fils)            115               130           142           152           162
Leverage (Debt/Equity)                 29%               50%           66%           67%           29%

                                           27
Estimated Investor Returns (IRR)

ƒ Estimated IRR to the investors is 27% based on:
     – Capital infusion of KD30 million as equity
     – 5 years dividend cash flows
     – Terminal value computed at a P/BV multiple of 1.3x
ƒ IRR – Scenario Analysis
     – IRR sensitivity to increases in sales prices and price to book value multiple.
 Range of IRR                             Change in Hisas Al-Mushaa selling prices
                                       Conservative                         Best
                                           -10%       -5%      Base case     5%
 Terminal value = 1.2 X Book Value         22.9%      23.9%      24.9%      25.9%       Conservative
 Terminal value = 1.3 X Book Value         25.0%      26.1%      27.0%      28.0%
 Terminal value = 1.4 X Book Value         27.0%      28.1%      29.0%      30.0%
 Terminal value = 1.5 X Book Value         29.0%      30.0%      30.9%      31.9%          Best

                                             28
Key Investment Factors
Key Investment Factors
ƒ The estimated Internal Rate of Return (IRR) to an investor is 27%
ƒ Mushaa intends to be the first company specialized in the Islamic timeshare in the
  Middle East
ƒ Alliance with BAZ Systems:
    – Partnership with BAZ Systems is expected to mitigate large part of development and
      operations related risks
    – BAZ Systems will manage all the aspects of Company’s properties
    – BAZ Systems will market Hisas Al-Mushaa through its network of branches in the
      Middle East
    – BAZ Systems has enhanced the concept of Hisas Al-Mushaa as per Islamic laws and has
      proven experience in marketing and selling this instrument
ƒ Besides development of new properties, the Company will acquire ready
  properties to accelerate its planned coverage of the GCC markets
ƒ There are adequate exit options – there is an option to invest through an SPV and
  the company also intends to list in KSE, subject to meeting the listing
  requirements
ƒ GCC is one of the fastest growing regions in the world
                                         30
Key Investment Factors
ƒ Buoyant GCC real estate market gives much incentive to investors who are
  seeking to take part in this growing sector
ƒ Hospitality industry is highly correlated to the GDP and the industry has
  significantly benefited from buoyant economies
ƒ GCC hospitality industry, largely constituting hotels, has had a spectacular
  performance in the last five years, outperforming some of the well-established
  markets in the world
ƒ The estimated annual growth rate for travel in the region is expected to be 6.7%
  until 2020, compared to 4.1% worldwide
ƒ Timeshare is a highly profitable industry for developers.
ƒ Timeshare developments have higher year-round occupancies and tend to be more
  inelastic in economic downturns than most hotels
ƒ Timeshare is still in its early stage of the product cycle in the region, consequently
  there are huge opportunities for this industry in the region’s markets.
ƒ Hisas Al-Mushaa as an Islamic timeshare option could accelerate the penetration
  of this sector in the region.
                                        31
Key Risk Factors & Disclaimer
Key Risk Factors

ƒ Cost and time overruns
ƒ Unavailability of suitable ready properties and or land for new properties could delay
  Company's plans and consequently impact investor returns
ƒ Increasing competition in the sector
ƒ Downturn in tourist arrivals in region
ƒ Higher than estimated financing cost
ƒ Political instability
ƒ Force Majeure

                                        33
Disclaimer
This Document is a confidential document intended only for those to whom it is addressed. Those targeted by this document have been specifically
selected as sophisticated investors having the experience and expertise necessary to assess the nature of the investment and understand and quantify the
risks addressed in this Document. The reproduction or redistribution of this Document is strictly prohibited without the prior written consent of Global
Investment House KSCC.
The contents of this Document should not be treated as investment, tax or legal advice by any prospective investor. All prospective investors must make
their own investigation and evaluation of the opportunity to invest in “Mushaa Real Estate Company KSCC”, a company established in Kuwait to do the
objectives addressed in the articles of association which are available upon request, and should seek to consult with their own advisors concerning the
evaluation of the risks of the investment and its suitability for their individual circumstances.
A summary of certain information relevant to an investment in “Mushaa Real Estate Company KSCC” is provided in the Document. This Document is
not intended to be the sole document upon which investors should rely in reaching their investment decision. Global Investment House KSCC may from
time to time provide investors and their advisors the opportunity to receive additional information concerning investment in “Mushaa Real Estate
Company KSCC”. It should be noted that no person has been authorized to give any information concerning investment in “Mushaa Real Estate
Company KSCC”, nor has any person been authorized to give any information or to make any representation other than those contained in the
Document, and if made or given such information or representations may not be relied upon as having been authorized by Global Investment House
KSCC.
The directors of Global Investment House KSCC confirm that it is their opinion that this Document contains all material information that a potential
investor would reasonably require to be able to make an informed decision as to whether or not to invest in “Mushaa Real Estate Company KSCC”. To
their knowledge such information is true and accurate and is not misleading in any material respect. The opinions, forecasts, assumptions or intentions
expressed in this Document are honestly held and made and are not misleading in any material respect. Investors in this issue must note that Global
Investment House KSCC has not carried out any independent due diligence on “Mushaa Real Estate Company KSCC”.
The Document has not been independently verified or reviewed as to its accuracy or completeness or in relation to the methods of sale or raising capital
described in the Document, by any professional, financial, legal advisor or by any government authority identified herein. Such bodies and authorities
assume no responsibility for the contents of the Document or the performance of any obligations of Global Investment House KSCC.

This document does not constitute and shall not be construed as being an offer or solicitation, nor shall it be used for those purposes by any person in any
jurisdiction (i) in which such an offer or solicitation is not authorized, or (ii) in which the person making such an offer or solicitation is not qualified to do
so, or (iii) to any person to whom it is unlawful or unauthorized to make such an offer or solicitation.

Investors should be aware that any projections concerning potential rates of return and future performance of the investments described herein represent
estimates prepared on the basis of assumptions which are considered fair by the Managers under the present market conditions. However, investors in this
issue must note that Global Investment House KSCC has not carried out any independent due diligence on “Mushaa Real Estate Company KSCC”. It
should be understood that actual results may vary considerably from the projections. Consequently, the inclusion of the projected information herein
should not be regarded as representation by Global Investment House KSCC, or any other person that the projected results will be achieved.
An investment of this type is subject to inherent risk, the value of investment in “Mushaa Real Estate Company KSCC” could go down and may be
difficult to sell or liquidate.

                                                                          34
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