Tabreed

Here is a basic utility company with strong cash flow and excellent growth prospects that is just about to start paying dividends and expand into Qatar and Saudi Arabia.

Established for an initial public offering in 1998, Tabreed supplies cool air for air conditioning from industrial chilling plants, saving money for landlords on traditional air conditioning, and secures long term contracts with blue chip clients.

'In fact, 80% of our present business is with the UAE military and that is hardly likely to go away,' says Managing Director Dany Safi.

'We now have 12 plants either in operation or under construction, and five or six in the pipeline. Our typical contracts are for 20 years and over that lifecycle Tabreed saves 10-20% on the cost of traditional air conditioning. We have also just established Tabreed Qatar and Tabreed Saudi Arabia.

'Our board is discussing the payment of our first dividend this year as we are now in a profitable position. Indeed, a long term dividend stream is very much part of our business plan which aims to achieve a 15% return on investment over 20 years.'

But Tabreed was a share that suffered greatly in the UAE stock market crash of 1998. Its Dhs5 partly-paid shares were chased up to Dhs65 before crashing back to earth, and presently the Dhs10 full-paid stock trades at around par value.

Not surprisingly the board and executives think this is a monstrous undervaluation of their company. For this price to book ratio of one implies that there has been zero value added to Tabreed in almost five years as a public company.

'We are starting to generate huge cash flows,' noted Mr. Safi who is prevented from saying more by the proximity of Tabreed's financial results for 2002. He will say nothing more except that turnover is ahead of target.

Tabreed's shares are widely distributed, with the UAE Offsets Group, which helped set the company up, owning no more than 2%. There is also a small overhang of stock left over from the second installment on share payments late last year.

Moreover, early this year Tabreed decided to open its shareholdings to foreign ownership, and up to 49% of shares can be held by foreign individuals or institutions.

'We have talked to quite a few interested parties since then, but obviously it is early days,' says Mr. Safi, 'We would welcome some long term international investors. Time will tell if they chose to invest.'

Perhaps Warren Buffet and his followers might like to visit www.tabreed.com for further information on this unique UAE investment opportunity.