Khalid Fouad (page 2 of 2)

Once we find an opportunity we conduct an extensive market research and a full fledged due diligence to prove or refute our initial views. During this time we work closely with management teams of the new company to prepare the company for public life. This exercise might take more than nine months depending on the readiness of the company.

We are very selective in our screening process; the idea is not just to raise capital, but to provide solid investment opportunities to a market craving for paper. For instance, Al-Dar PJSC acquired ALDAR LLC, an existing company with several promising projects.

The same scenario would happen for AIL PJSC which shall acquire Aramex Int'l Ltd and Aabar PJSC which shall acquire Dalma Energy LLC and these target companies are profitable and enjoy large market shares in their respective sectors.

Furthermore, as a merchant and investment banking firm, we hold positions through our private equity arm and the several funds we manage in most of the companies we bring to the market. So, we put our money where our mouth is.

4. What do you think of the DIFX launch this September? Is this positive for the GCC markets overall?

A: The UAE is becoming a regional hub for business and trading. We believe the DIFX will offer a compelling opportunity for regional companies seeking listing at the same norms of international developed markets.

Moreover, DIFX shall allow the development of more sophisticated products designed specifically for the region. As an active member of the practitioners' committee, we work very closely with the DIFX board and management teams. We believe DIFX will present a significant development for the GCC capital markets as a whole.

5. How do you justify a p/e of 37 for the UAE bourse? That means it takes 37 years of annual profits to pay for a company, is any company worth that much? Does this not signal a bubble in market valuations?

A: In general, the P/E ratio doesn't tell us a whole lot by itself. It's usually only useful to compare the P/E ratios of companies in the same industry, or to the market in general, or against the company's own historical P/E.

Although a high P/E ratio could mean that the market might be overvalued, there is no guarantee that it will come back down anytime soon.

In the US we have been witnessing companies trading at P/E ratios well above the market average, but this wasn't an impediment for those companies to record extraordinary price appreciation on the back of solid fundamentals.

The market P/E fluctuates significantly depending on economic conditions at the time. It's difficult to determine whether a particular company's P/E is high or low without taking into account the company's growth rate and the industry it operates in.

Security analysis and valuations require a great deal more than understanding a few ratios. While the P/E is one part of the puzzle, it's definitely not a crystal ball.

6. Why has TNI been so successful in launching IPOs? Are you going to organize your own IPO soon? If not, why not?

A: Our success stems from:

a. Our shareholders which comprises some of the UAE's most prominent business leaders, with expertise that spans across the Middle East. This unique shareholder base has allowed TNI to leverage its wide network of relationships in the UAE and the GCC;

b. Our solid relationships we enjoy with the regulators, strategic business partners and existing clients across the region positions us as the partner of choice;

c. Our flawless execution capability and unsurpassed expertise in regional equity offerings that attracts more clients and thus widens the gap between us and the other players in the market;

d. Our diverse team of professionals which has domestic, regional and international expertise that could offer our clients a fully integrated service. We are still considering various options, but once this is finalized we shall relay it to the market.