Sports play a significant economic role in generating economic activity and jobs. It is estimated that it contributes 2 per cent of Europe’s GDP.
In the UAE, the hectic urban life means many are looking to sports to enhance their fitness… and avoid lifestyle-related ailments. The same is true of children with many parents sending their wards to fitness clubs to prevent incipient obesity.
In a nutshell, there is a huge market for these services in UAE - and Palms Sports offers investors a way to ride this trend. A Dh2.13 billion market cap company, it was listed on ADX last month. International Holding Company (IHC) as the parent company holds 79 per cent.
Palm Sports claims to be the world's largest jiu-jitsu training company with 330 training centres and around 700 employees. It also offers programmes in Muay Thai, mixed-martial arts, and combat sports. The company is also planning to expand into swimming training to be a comprehensive sports training provider.
It is debt-free and has distributed dividends of Dh280 million in the last five years, including Dh100 million in 2020. The dividends for 2021 are likely to be on the lower side due to the pandemic's impact, but the ones from the past point to the management's shareholder-friendly practices.
A dividend of Dh100 million will translate into a yield of 4.69 per cent at current share price. Revenue is likely to rise sharply in the second-half of this year, and total assets have already risen from Dh290 million to Dh344 million. The biggest attraction is that it is net debt-free.
The business plan is supported by strong brand awareness and strategic partnership with broadcasting channels. It also launched the Al Nakheel Academy. In cooperation with Abu Dhabi Ministry of Education, the Academy prepares Emirati youth and athletes for participation in local, regional and international events.
Palms Sports is also helming the Jiu-Jitsu School Programme, which covers 155 Schools in the seven Emirates and ensures revenue continuity.
The expected normalization of life post-vaccines makes Palms Sports a good proxy for the economy.
- Vijay Valecha is Chief Investment Officer at Century Financial.