Mushaa Real Estate Company KSCC - Global Investment House KSCC Private Placement of 290,000,000 shares
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
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 KSCCContents
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
2Introduction
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
Real estate sector together with hospitality or lodging segment are of the most
benefited sectors from this unprecedented economic growth
Demand for hotel rooms is strongly correlated to GDP.
The hospitality industry, largely represented by hotels, in the GCC has registered
tremendous performance and growth in recent years
There is a great opportunity for a considerable demand for timeshare, a sector which
is under-represented in this region.
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.
Mushaa intends to increase its capital to KD30mn through the issuance of 290mn
shares of par value fils100
3Terms 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
5Lead 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.
6Economy and Sectors - Highlights
Economic Boom
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$798bn in 2007 .
Driven by sustained high oil prices and increased oil production, most economies in
the GCC have experienced an average annual GDP growth over 7% for past five
and is expected to grow in the range of 5.5% -7% in the short to medium term.
Nominal GDP & Growth Rates
900 30%
800
25%
700
600 20%
Growth
US$ bn
500
15%
400
300 10%
200
5%
100
0 0%
2003 2004 2005 2006 2007 E
Nominal GDP (US$ bn) Nominal GDP growth
8Economic Boom
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$70,000 in Qatar.
GDP per Capita & Population Growth – GCC
40 26,000
35 22,000
30 18,000
25 14,000
20 10,000
2003 2004 2005 2006 2007 E
Population (mn) Per capita GDP (US$)
GCC economies are investing to develop non-oil sectors to reduce the reliance of oil
revenues and build broad-based economies.
Capital markets, tourism, real estate, intra-GCC trade are sectors where reforms and
development have been targeted.
9Hospitality and Tourism – Dynamic Economic Sectors
The tourism sector has proven paramount effects on regional economies and has
positively driven income levels and employment in the region
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
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
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
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
There is a new trend of religious timeshare in GCC
The Middle East market can support US$540 million in timeshare sales allocated
mainly for Dubai, Sharm El Sheikh and Makkah (Source: RCI research)
10Mushaa Real Estate Company
Incorporation
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
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
12Business Activity
Mushaa Real Estate Company plans to be the first company specialized in
the Islamic timeshare in the Middle East
The Company shall conduct its business in conformity to the principles of
the Islamic Shari’a
The principle activities of the company are real estate investment,
development and trading
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
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
Mushaa intends to set up five to seven properties across the GCC in the first
five years
13What are Hisas Al-Mushaa
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
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.
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.
14Strategic Partnership with BAZ Systems
Mushaa will have an adequate experienced management team to manage
– Development or acquisition of properties
– Partnership with BAZ Systems
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
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
For its management services, the Company will pay BAZ Systems an annual fee of 0.2% of the
paid-up capital of the Company.
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
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.
15Development Plan
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
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
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
16Development Coverage
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
In phase II the company intends to expand to other cities and countries in GCC,
Middle East and Europe
17Exit Options for Investors
Listing on Stock Exchange
– The Company intends to list its shares on Kuwait Stock Exchange (KSE),
subject to meeting KSE’s listing requirements
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
18BAZ Real Estate Modern Systems
Overview
BAZ Systems started to work on modern tourism concepts since 1988
through BAZ for Tourism and Shipping.
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.
BAZ Systems activities include real estate trading, management and
marketing, and providing solutions such as Hisas Al-Mushaa.
BAZ Systems has branches in KSA, UAE, Bahrain and Turkey and is
planning on expanding into Qatar very soon.
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.
20Experience
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
21Financial Summary
Key Financial Assumptions & Analysis
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
Estimated cost per property is KD20-35 million
cost estimates are subject to change based on location and size of the properties
developed over a period of time.
Properties will be established through
– Acquisition of a ready property or conversion of an existing property
– Development of new property
23Key Financial Assumptions
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
Accounts Payable equivalent to 20% of cost of sales
Debt/Equity ratio is assumed at 1:1, applied to each property
Cost of Islamic funding has been considered at 9% per annum
For every property, Hisas Al-Mushaa is assumed to be sold over 4 years.
Operating expenses assumed to represent 33% of annual sales (on average).
Annual appreciation in the fair value of Investment Property is assumed at 3% per
annum
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
24Projected 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
25Projected 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
26Key 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%
27Estimated Investor Returns (IRR)
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
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
28Key Investment Factors
Key Investment Factors
The estimated Internal Rate of Return (IRR) to an investor is 27%
Mushaa intends to be the first company specialized in the Islamic timeshare in the
Middle East
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
Besides development of new properties, the Company will acquire ready
properties to accelerate its planned coverage of the GCC markets
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
GCC is one of the fastest growing regions in the world
30Key Investment Factors
Buoyant GCC real estate market gives much incentive to investors who are
seeking to take part in this growing sector
Hospitality industry is highly correlated to the GDP and the industry has
significantly benefited from buoyant economies
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
The estimated annual growth rate for travel in the region is expected to be 6.7%
until 2020, compared to 4.1% worldwide
Timeshare is a highly profitable industry for developers.
Timeshare developments have higher year-round occupancies and tend to be more
inelastic in economic downturns than most hotels
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.
Hisas Al-Mushaa as an Islamic timeshare option could accelerate the penetration
of this sector in the region.
31Key Risk Factors & Disclaimer
Key Risk Factors
Cost and time overruns
Unavailability of suitable ready properties and or land for new properties could delay
Company's plans and consequently impact investor returns
Increasing competition in the sector
Downturn in tourist arrivals in region
Higher than estimated financing cost
Political instability
Force Majeure
33Disclaimer
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.
34You can also read
