KIPCO forecasts beginning of financial good times

"We have built a foundation for the creation of lasting value with regional business reach, investment in engines of growth, diversified revenue streams, and cash flow and profits that are both predictable and sustainable," said Al Ayyar. "This, together with our strong managerial expertise, makes us well-positioned to capitalise on emerging opportunities.

"Our 2003 results show that we are going from strength to strength, with profit at a five-year high and our share price on a roll. But I firmly believe that 2004 will prove to be the beginning of the good times for years to come, with continually improving results that will create lasting value," he said.

The KIPCO Financial Outlook Forum was the first large-scale event of its kind in Kuwait. Organised by KIPCO Asset Management Company (KAMCO), the Forum is aimed at presenting financial details of KIPCO and its directly-held listed subsidiaries and associates in a spirit of transparency, with free and open dialogue between management and investors. Two previous sessions featured presentations by KIPCO's core operating companies, Gulf Insurance Company (GIC), Wataniya Telecom, Burgan Bank and United Gulf Bank (UGB).

Al Ayyar said improving regional economic fundamentals, including geopolitical stability, strong oil prices and growing momentum in large projects, had led to increased operating profits for KIPCO, which allied to its solid financial structure, created the backdrop for an optimistic outlook.

His projections for 2004 included KIPCO's net income increasing by 39 per cent to KD 25 million from KD 18 million in 2003; shareholders' equity up 13 per cent to KD 183 million from KD 162 million; earnings per share up 39 per cent to 25 fils per share from 18 fils per share; and return on equity at 14 per cent, a 27 per cent increase on 2003.

He said forecast increase in profits of KIPCO's core operating companies were Burgan Bank; up 47 per cent to KD 30 million from KD 20.4 million; UGB up 17 per cent to KD 12.7 million from KD 10.9 million; GIC up 9 per cent to KD 6 million from KD 5.5 million; and Wataniya Telecom up 39 per cent to KD 46 million from KD 33.2 million.

Al Ayyar said these projections were reflected in KIPCO's 2004 forecast, with core asset income projected to increase from KD 21.6 million to KD 31 million; other income rising from KD 7.5 to KD 13.6 million; total costs dropping to KD 14.4 million from KD 15.4 million; and net profit increasing to KD 25 from KD 18 million - representing a 20 per cent leap in predictable income stream in 2004, from 60 per cent to 80 per cent.

KIPCO is the most actively traded stock on the KSE. Al Ayyar said that although the share price was on a roll - up 106.3 per cent to 255 fils per share in 2003 compared to the previous year, and outperforming the KSE Index by 8.6 per cent and the KAMCO Weighted Index by 52.9 per cent - it traded at a discount to its intrinsic value if the core value of listed companies at 389 fils per share was taken into consideration.

KIPCO's continued commitment to dividends would be demonstrated by a projected 20 per cent rise in 2004 to 18 fils per share, against 15 fils in 2003, subject to Board approval, he said.

Al Ayyar ended his presentation with a look even further into the future, predicting that in 2006 KIPCO's total assets could rise to KD 382 million; revenue to KD 59 million; shareholders' equity to KD 236 million; and net profit to KD 44 million, with the predictable income stream growing to 89 per cent from 60 per cent in 2003. He projected the three-year total value created for shareholders from 2004-2006 could reach 310 fils, comprising net income plus increase in market value.

KIPCO, with assets of more than US$ 10 billion under management or control, is one of the leading diversified holding companies in the Middle East and North Africa, and a major force in financial services and media & telecommunications, with further interests in real estate and industry. The largest private company in Kuwait, KIPCO employs 10,000 people internationally.