Dubai: The ADX-listed Eshraq Investments is going in for a reset - over the next five years, the fund manager plans to build up its private equity exposure. And at the same time, transition from its legacy assets.
In the recent past, Eshraq has done much to get started on the process, selling some of its real estate interests, including plots in Dubai. These moves have been net positive for the bottom-line, according to analysts, but more clearly can be done.
"Eshraq intends to have control of its destiny by focusing on directly held private equity investments, complemented by cash generation from minority equity positions, fixed income assets and real estate to balance the portfolio and support consistency in earnings," the company said in a statement.
The Board of Directors has mandated the management to 'commence execution of the strategy with immediate effect'.
The Eshraq stock is trading at Dh0.29, well off its 52-week high of Dh0.59. In the first quarter 2024, its net loss had widened to Dh306 million from Dh34.09 million a year ago. Investors will be watching closely whether the new strategy will have an immediate rub-off on the stock's performance.
Private equity push
Eshraq’s geographical focus will remain unchanged even under the new strategy, with investments to be focused on the UAE and wider GCC. The plan is to invest in 'one- to two high growth businesses annually, seeking attractive cash flows as assets mature and become ready to exit'.
Fahad Al Qassim, Chairman said: “On the successful execution of our strategy, we expect our investment proposition will be characterized by a well-diversified portfolio in growing sectors across the GCC, enabled by a strong balance sheet that offers significant headroom to invest in new and existing assets, driven by a highly experienced Board following the recent appointment of new members in 2023. And a management team ideally suited to sourcing and executing high quality investment opportunities.”
We expect our investment proposition will be characterized by a well-diversified portfolio in growing sectors across the GCC.
The Dubai fund manager Shuaa has been one of the major shareholders in Eshraq. The DFM-listed Shuaa itself is going through a turnaround strategy, most recently through plans to issue mandatory convertible bonds.
'Overdue'
"Today is a first step in a long-term strategic shift, something which both our board and management believe is overdue," said Mohamed Al Hashimi, CEO.
"We are actively evaluating the best options for transitioning our legacy assets, including certain properties in our real estate portfolio and the future holdings and management of the Goldilocks Fund. We plan to make further announcements on both in the near future."
What the legacy asset transition will mean
The future of each real estate asset is to be 'evaluated on a case-by-case basis'. This will in turn lead to better value creation through stable long-term revenue and cash generation from the portfolio.
"This includes a plot-specific feasibility study to inform the go-forward strategy for each asset, under the guiding principle of maximizing value," said a statement.
The evaluation will consider four potential strategic options, to either:
- Develop plots for subsequent lease;
- Develop plots for subsequent sale
- Develop strategic plots, and sell, swap or exit others;
- Sell, swap, or exit plots.
Plans for new hiring
The private equity focus switch will also mean new hirings for key positions.
The plan is to create a 'highly qualified' investment committee and improving internal systems, including market intelligence and stakeholder relationship management platforms.
"Eshraq is already making very good progress in the hiring of several talented and experienced professionals who will play a vital role in helping steer the business towards a direct investment model with robust governance in place," the statement said.
