Abu Dhabi: Waha Capital, the Abu Dhabi-listed investment company, is planning to invest at least $100 million (Dh367 million) in its core business, with the firm eyeing acquisition deals potentially this year to capitalise on attractive valuations in the market.
According to Salem Al Noaimi, chief executive officer and managing director of Waha Capital, 2016 can be a “transformational year” for the business given that the company already has the fire power and is ready to invest.
The CEO said the company is in talks with various potential partners about acquisitions, but there were no concrete deals yet. Future acquisitions will be in sectors such as energy, infrastructure, financial services, health care, and education.
“We have allocated an amount for principal investments, but that amount is not a limit. I don’t want to get too focused on figures because the reality is that $100 million could go on one deal — if we find a suitable deal — or it could go four or five smaller transactions.
When that $100 million is deployed, or if there is an opportunity to deploy further amounts, we would look at that. I would say, over the next couple of years, we will invest well above that for sure,” Al Noaimi said.
With such deals, Waha’s target will be acquiring a stake of 10-40 per cent, and will be using its existing liquidity to fund those deals rather than tapping the market.
Volatility and oil prices
In an interview with Gulf News, he said that with sentiment (rather than fundamentals) now acting as the main driver of markets in the UAE, there are lots of companies that are undervalued. This makes it a good time for investment firms like Waha to reach deals on such companies.
Al Noaimi pointed that while 2015 was “challenging”, 2016 has proven to be even tougher.
“If you look at the UAE markets, the negative sentiment has been there. There’s been capital pulled out of the region, so that obviously impacts us. I’m always looking at the long term. You cannot avoid this — you cannot pull into your shell and say this isn’t happening because it is happening.
The markets are very volatile and you have to be extremely cautious in how you do things, but this is a time of opportunity … so this is the time to build for the future of Waha,” Al Noaimi said.
Financial markets in the UAE and overall GCC region have seen much volatility starting from the third quarter of 2014 until now, resulting in lower liquidity and weaker investment appetite.
This was primarily on the back of lower oil prices, which plunged from highs around $115 per barrel in mid-2014 to lows below $29 earlier this year.
“Our approach to oil [prices] in 2016 and even in 2015 is that this is the time to invest in the energy space. Valuations are so depressed. Fundamentally, a lot of companies are still there … so, energy is part of our growth areas.
It’s a very lucrative space to invest in … We’ve been looking at it, we’ve come close to many deals, we are looking at many deals right now, but we will always try to be diversified in our investments,” the CEO said.
As matters stand, Waha Capital’s investments in the energy sector include a 21 per cent stake in National Petroleum Services, and a 49 per cent stake in Stanford Marine Group.
Another sector Waha is aiming to invest in is education, which Al Noaimi described as very lucrative.
“We will continue to look at [education] but we have not yet found the right platform to invest in at the right valuation — we found many platforms and had many discussions, but we have not been able to close the deal that we thought was suitable for our shareholders,” he said.
Along with core investment areas, Waha Capital launched an asset management arm with five funds — two of which are up and running (with $100 million allocated to each).
The remaining three are expected to be established within the next 12 months; a strategic equity fund focusing on the Middle East and North Africa; a mezzanine fund; and a private equity fund. The company allocated $50 million to each of the three funds.
Last month, Waha reported Dh578.2 million in net profit for 2015, marking a significant plunge from the Dh1.7 billion reported in 2014. The company said, however, that 2014 saw one-off gains primarily from the dilution of its stake in AerCap Holdings, with the adjusted net profit for the year standing at Dh498.1 million.
Earnings in 2015 were driven by key investments specifically in aircraft leasing where Waha has a 15.6 per cent stake in New York-listed AerCap Holdings. Al Noaimi said Waha may acquire a greater stake if AerCap’s share prices dip dramatically.