SHUAA Capital reports first quarter operating income of Dhs176.6m and net profit of Dhs67.1m

The results reflect SHUAA's robust business model and solid market positioning across its businesses.

First quarter operating income reached Dhs176.6m, up 64.0% on the last quarter (Q4 2007/08: Dhs107.7m) and up 21.9% from the same period a year earlier (Q1 2007/08: Dhs144.9m).

First quarter net profit attributable to SHUAA shareholders stood at Dhs67.1m, up 13.9% on the last quarter (Q4 2007/08: Dhs58.9m) and down 10.0% from the same period last year (Q1 2007/08: Dhs74.5m).

Mr. Iyad Duwaji, Chief Executive Officer of SHUAA Capital said, "I am pleased with our overall performance given difficult market conditions regionally and globally. We remain confident that fiscal 2008 will be another successful year for SHUAA Capital. Although the performance during the first quarter partially reflected the poor performance and unusual volatility in capital markets, our annuity fee business generated the second strongest quarter in the company's history."

In comparison to the first quarter last year, SHUAA Capital's annuity fee business recorded significant growth of 73.1% to Dhs119.5m (Q1 2007/08: Dhs69m). SHUAA Asset Management contributed a substantial portion of this result.

Reaching their highest level ever, assets under management of SHUAA Asset Management increased by 121.8% year on year to Dhs6.7bn (Q1 2007/08: Dhs3.0bn), and grew 37.0% over the last quarter (Q4 2007/08: Dhs4.9bn).

While SHUAA continues to invest in the future growth of the company, net profits were primarily offset by difficult market conditions affecting the principal investment division and by the substantial increase in personnel expenses, which were driven by a sharp rise in number of staff, as well as performance related benefits. SHUAA grew its headcount by 93.8% to 498 at the end of June 2008 from 257 last year.

Mr. Kerim Mitri, Deputy CEO of SHUAA Capital added: "Our diversified and balanced business model helped us maintain solid operating income growth and deliver a sizeable net profit. SHUAA's capital position is strong and we have deployed resources to invest in high-margin, high-profit businesses while we control our growth efficiently across regional markets. We also remain confident that the GCC will continue to serve as a safe haven for smart investors - both foreign and domestic."

SHUAA Capital's total client's funds under management increased by 110.6% to Dhs 15.6 bn (30 June 2007: Dhs 7.4 bn) year on year. This reflects the continued demand from regional and, increasingly, international investors for its products and services, primarily asset management, brokerage services, and private equity investments.

Corporate highlights

In May 2008, Moody's Investor Service assigned a long-term issuer rating of Baa2 to SHUAA Capital with a stable outlook. The short-term issuer rating on SHUAA is Prime-3. The rating reflected SHUAA's solid track record as one of the few leading, regional investment banking and securities firms in the GCC, its robust capitalization, its solid brand recognition and reputation, its strong financial performance despite very volatile markets, ample liquidity and satisfactory operating diversification.

In June 2008, Euromoney awarded SHUAA Capital 'Best Equity House in the Middle East' and 'Best Equity House in the UAE' being the first institution to receive both awards in the same year. SHUAA also received the Euromoney Award for "Best Equity House in the UAE" in 2004 and 2007.

In June 2008, SHUAA Capital Saudi Arabia and Rotana Hotel Management Corporation signed a master agreement to develop hotel properties in Saudi Arabia through the $533m SHUAA Saudi Hospitality Fund I. The SHUAA Saudi Hospitality Fund I is a Shari'a compliant closed-end fund which aims to develop and own seventeen hotel properties, furnished apartments, and resorts across the Kingdom of Saudi Arabia comprising 5,000 rooms.

At the Extraordinary and Ordinary General Assembly held on 17 June 2008, shareholders approved the distribution of a cash dividend of 45% of the nominal value of shares, corresponding to Dhs0.45 per share with settlement on 29 June 2008. Shareholders also agreed to amend the company's articles of association allowing GCC nationals to be treated as UAE nationals in relation to owning, dealing with and disposing of shares of the Company (which became effective on 15 July 2008). The delisting of SHUAA's shares from the Kuwait Stock Exchange was also approved during the meeting.

Principal investments

The Principal Investments Division is the proprietary, multi-strategy, investment arm of SHUAA. The Division's objective is to augment SHUAA's shareholder value by actively investing in a diversified portfolio across selected markets and across asset classes, with a bias towards emerging Asian and regional markets.

Operating income during the first quarter was Dhs3.2m (2007: Dhs57.6m) and represented 1.9% of group operating income. The division recorded a net loss of Dhs5.4m (Q1 2007/08: net profit Dhs33.5m). The first quarter results for the Principal Investments division were weaker than anticipated and significantly down compared to the same period last year, mainly due to the continued volatility in global capital markets.

Investment banking

The Investment Banking Group provides corporate finance advisory as well as equity and debt capital markets, structured investments and other services. Operating income increased to Dhs24.8m, slightly lower than last year (Q1 2007/08: Dhs29.9m) while net profit was Dhs16.8m (Q1 2007/08: Dhs23.2m). The division represented 14.0% of group operating income.

Investment Banking was able to secure 6 new mandates and continues to have a strong pipeline for 2008/09. SHUAA has mandates to execute 2 mergers & acquisitions, 1 debt transaction, 3 initial public offerings and expects to generate more investment banking mandates by year end.

SHUAA Asset Management

The division experienced a massive increase in operating income in the first quarter driven primarily by growth in assets under management and its ability to perform well through all market cycles. Operating income increased by Dhs54.3m to Dhs62.8m (Q1 2007/08: Dhs8.5m) representing a sixfold increase over last year and net profit soared more than threefold to Dhs49.1m (Q1 2007/08: Dhs1.4m). SHUAA Asset Management stood for 35.5% of group operating income.

Assets under Management have reached their highest level ever, increasing by 121.8% year on year to Dhs6.7bn (Q1 2007/08: Dhs3bn), and growing 37.0% over the last quarter (Q4 2007/08: Dhs4.9bn).

SHUAA Asset Management's core proprietary products are the single strategy Gateway Funds first introduced in the year 2000. The flagship product, the Arab Gateway Fund, which has Dhs2.67bn in assets under management and is predominantly invested in GCC markets, has returned 8.73% so far this year, outperforming its benchmark, the MSCI Arabian Markets Index, by 12.3%.

Today, we have seven funds in the Gateway range with the latest addition being the Saudi Gateway Fund, launched in June 2007, which has Dhs 813 m in assets under management at the end of June 2008.

Brokerage

SHUAA Securities is the prime brokerage and portfolio advisory services division of SHUAA Capital with total clients' assets under management over Dhs9 bn. SHUAA Securities offers clients access to 14 exchanges in 12 GCC and MENA markets through one single platform. We provide services to over 600 high net worth individuals and institutions across 13 regional capital markets, and have executed Dhs22.15bn ($6.04bn) in transactions as of 30 June 2008.

Brokerage was able to increase its top and bottom line growth in spite of a challenging market environment. SHUAA Securities' operating income increased by 32.6% to Dhs29.3m (Q1 2007/08: Dhs 22.1 m) and net profit rose 9.4% to Dhs10.5m (Q1 2007/08: Dhs9.6m). This represented 16.6% of group operating income.

SHUAA Partners

SHUAA Partners manages three private equity funds, as well as the Principal Investments Division's three heritage investments. Operating income increased by 17.6% to Dhs6.0m (Q1 2007/08: Dhs5.1m) and net profit decreased by 17.4% to Dhs1.9m (Q1 2007/08: Dhs2.3m) as the division reported no exit from any of its portfolio companies during the period.

In July 2008, SHUAA Partners announced the first closing of its $200m SHUAA Hospitality Fund I and made its first investment. The fund signed $40m joint venture agreement with Orascom Hotel Holding, the single largest hotel owner in Egypt, and Rotana Hotel Management Corporation, the leading hotel chain in the MENA region, to develop five hotels under the brand Centro by Rotana and will capitalize on the growing need for affordable, budget business hotels in Cairo and other strategic locations in Egypt.

The $200m SHUAA Hospitality Fund I will also invest in the $533m SHUAA Saudi Hospitality Fund I that was launched by SHUAA Capital Saudi Arabia earlier this year.

Finance

Gulf Finance Corporation ('GFC') is quickly growing its market share in asset backed finance. The Company remains focused on auto and construction equipment finance but is gradually expanding its consumer finance offering, particularly in the area of small and medium-sized commercial businesses. GFC is a wholly owned subsidiary of SHUAA.

During the first quarter, GFC reported a 56.2% rise in operating income to Dhs18.9m (Q1 2007/08: Dhs12.1m) and a net profit increase of 52.0% to Dhs11.4m (Q1 2007/08: Dhs7.5m). Assets grew by 42.9% to Dhs796.5m (Q1 2007/08: Dhs557.4m). GFC contributed 10.7% of group operating income.