Dubai fund manager Shuaa Capital is fixing its legacy issues, and that works for shareholders
Its 2021 financials were dented by one-off costs related to a past illiquid investment
Apart from its pioneering approach to investing, Shuaa Capital is recognized for its track-record of delivering differentiated products for the public and private markets. The company has a market cap of Dh1.56 billion and recently announced earnings for 2021, with net profit at Dh40 million, down 68 per cent from Dh125 million in 2020. This came as a result of the company's decision to accelerate the restructuring of an illiquid investment portfolio, which set up a one-off charge of about Dh189 million mainly related to valuation impairments.
Shuaa’s net profit on a like-for-like basis would have been Dh229 million in 2021. Similarly, EBITDA declined from Dh350 million in 2020 to Dh233 million, but stood at Dh422 million adjusted for net one-off items. The operating income continued to show progress towards high-quality revenues: at Dh394 million, operating income was up 11 per cent, once adjusted for the one-time effect from a single transaction of Dh183 million in 2020. Net fee and commission income gained 21 per cent Y-O-Y to Dh265 million, while expenses remained under control with operating expenses up 6 per cent at Dh315 million, because of targeted strategic hiring across the business.
New hires
In 2021, Shuaa hired key people across the business, particularly in real estate and client coverage, leading to a 33 per cent increase in core headcount. The asset management activities delivered a strong performance, building on the progress made in 2020. In addition, the appointment of a new CEO for real estate enhances the group's capabilities to deliver quality offering to clients across geographical regions and markets.
The fund manager has been active on the deal-making side, notably seeing through the Arabic music streaming platform Anghami to a Nasdaq New York listing this year. It is looking for new ways to meet demand from existing and new clients and is confident about long-term opportunities that will create value for its shareholders.
Hyper focus
Shuaa aims to focus on two core business lines - asset management and investment banking – even as it pares down assets held in the non-core unit. While the group continues to operate against a backdrop of global geopolitical uncertainty and heightened market volatility, continued progress within the core created from the merger of Shuaa Capital and Abu Dhabi Financial Group in 2019 allows the management to remain confident about its ability to build on its market-leading position and deliver significant value creation.
An attractive aspect of Shuaa is its strong management. This aspect should give shareholders assurance about the firm’s investment decisions. The group has a dividend yield of 4.86 per cent.