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Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 11th April 2019).

Please click here to download a table of listed companies and their associated ticker codes.

The RSISX index ended the week at IQD581 (+0.5%) / $626 (+0.5%) (weekly change) (-11.9% and -11.9% YTD change, respectively). The number of week traded shares was 6.2 bn and the weekly trading volume was IQD5.0 bn ($4.1 mn).

ISX Company Announcements

  • Al-Bilad Islamic Bank for Investment & Finance (BLAD) will hold a GA on Apr. 21, 2019 to change the bank’s name to Al-Ataa Islamic Bank for Investment & Finance.
  • ISX will suspend trading of Region Trade Bank for Investment and Finance (BRTB) starting Apr. 17, 2019 due to the GA that will be held on Apr. 22, 2019 to discuss increasing the bank’s board members and electing 4 original and 4 alternative board members.
  • ISX suspended trading of Asiacell (TASC) starting Apr. 10, 2019 due to the AGM* that will be held on Apr. 15, 2019 to discuss and approve 2018 annual financial results.

By Hamidreza Azizi for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

Iran, Iraq forge ahead with collaboration amid US pressure

Iraqi Prime Minister Adel Abdul Mahdi visited Tehran April 6-7, his first official visit to the neighboring country since assuming office in October 2018. Accompanied by a large delegation of high-ranking Iraqi officials and representatives of the private sector, Abdul Mahdi came to Tehran at the formal invitation of Iranian President Hassan Rouhani.

Apart from meeting with Rouhani, the Iraqi leader also met with Supreme Leader Ayatollah Ali Khamenei and attended a joint meeting of the Iranian and Iraqi business sectors at the Iran Chamber of Commerce.

The visit came less than a month after Rouhani’s visit to Iraq — the first by the Iranian president since taking office in 2013 — in which the two sides reached a number of important agreements, mostly on economic issues.

Click here to read the full story.

By John Lee.

The National Investment Commission (NIC) has announced a new investment opportunity in Iraq:

(Source: National Investment Commission)

(Picture: Business opportunity word cloud, from ibreakstock/Shutterstock)

By John Lee.

The National Investment Commission (NIC) has announced a new investment opportunity in Iraq:

(Source: National Investment Commission)

(Picture: Business opportunity word cloud, from ibreakstock/Shutterstock)

Saudi Minister of Commerce and Investment, Dr. Majid Bin Abdullah Al-Qasabi, said that Iraq has offered Saudi companies and investors 186 investment opportunities.

Speaking at a joint press conference with Iraqi Deputy Prime Minister, Thamir Al-Ghadhban, Al-Qasabi said the two countries have decided to set up a joint Saudi-Iraqi business council to exchange investment opportunities.

He pointed out that the business council will be signed during Iraqi Prime Minister Adel Abdul Mahdi’s upcoming visit to Riyadh.

The two countries have also decided to establish a free trade zone.

For his part, Al-Ghadhban said “the Saudi-Iraqi Coordination Council has discussed a number of issues while the committees have completed preparing some files that will be signed in Riyadh.”

(Source: Middle East Monitor)

Sponsored by the Embassy of the Republic of Iraq in Rome, and in coordination with the Federation of Italian Industries, the Iraqi Conference on Investment and Reconstruction was held at the end of March to discuss investment opportunities and the contribution of Italian companies in the reconstruction of Iraq.

Representatives of more than 200 Italian companies witnessed the participation of the National Investment Commission (NIC), Undersecretary of the Ministry of Commerce, Directors-general, officials of oil and transport ministries, Baghdad investment, and representatives of the Federation of Chambers of Commerce from the Iraqi side and from the Italian side by Italian Undersecretary of State for Development and Economy, the Italian Ambassador in Baghdad.

The conference also witnessed the holding of meetings between the representatives of the Iraqi authorities and Italian companies to discuss investment opportunities in the fields of energy, oil, agriculture and infrastructure.

(Source: Ministry of Foreign Affairs)

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The market, as measured by the Rabee Securities RSISUSD Index, declined by -1.7% in March, bringing the YTD decline to -13.9. Turnover, while up +23% from February’s dismal levels, was still mostly in-line with the historic lows of the last few months. Foreign selling, the cause of the last few weeks’ declines, continued along the recent low levels dragging prices lower given the overall low market liquidity.

The market’s obliviousness to the increasing signs of the return of liquidity to the economy (discussed here over the last few months) has extended into an obliviousness to solid earnings growth for one of the market’s top banks- an earnings growth that has all the characterises of a classic banking recovery after a severe economic contraction.

It was argued here in November, following the earnings recovery of mobile operator AsiaCell, that “The next few quarters should see a similar recovery for the battered banking sector, with probably the first indicator to recover being the quality of loans. A return of liquidity and an economic pick-up should be followed by a recovery in the quality of bad loans and the reversal of NPL’s (non-preforming loans) with past provisions becoming earnings, thus providing the first boost to earnings recovery. This should be followed by growth in loans and deposits …”.

Mansour Bank’s (BMNS) 2018 results provide a textbook example of the above argument in action. BMNS reported revenue and income growth of +28.1% and +42.6% respectively for 2018 over 2017. Both revenues and net income were helped by a reversal of some of the past provisions for NPL’s (non-preforming loans) as some clients, helped by the economic pick-up, began to pay back loans that were classified as non-performing. However, even without this reversal of provisions, both revenues and earnings would have been up +13.1% and +15.5% respectively on the back of strong underlying metrics.

The first of these underlying metrics was deposit growth of +25.8% in 2018 over 2017, driven by the growth in private sector deposits. This lends support to the argument, made here in January,  that the growth in the monetary base M0 is an early indicator of a recovery in private sector deposit growth.  The second and most promising metric is an acceleration of loan growth to +6.1% in 2018 over 2017, after an almost flat trend. BMNS’s management singled its confidence in its future outlook by declaring a 9.7% dividend yield- up 40% in absolute terms over last year’s dividend payment.

BMNS’s financial performance during the years of conflict up to 2017 was reviewed here in October after it was caught in the selloff that engulfed the banks during the second half of 2018. The improvement in 2018 suggest the end of the tough times for the bank, and potentially for other strong banks in general.

BMNS’ financial performance during the years of conflict, the stability of 2017 and the start of the recovery in 2018 can be seen through the two charts below that look at loans/non-performing loans (NPL’s), and deposits and their association with government budget surpluses/deficits given the central role that government spending plays in the economy. BMNS’ loan and NPL data were supplied by the research team at Rabee Securities which is gratefully acknowledged, while other data were taken from the Ministry of Finance, the Central Bank of Iraq, the Iraq Stock Exchange and company reports. Data from 2010-2014 are based on Iraqi accounting standards, while data from 2015-2018 are based on IFRS, and all calculations use the official USD/IQD exchange rate.

BMNS’ loan book growth peaked in 2015 at the same time that NPL’s peaked. Unlike many other banks in the sector, its loan book was almost flat during 2015-2017, and started to pick up in 2018. NPL’s as a percentage of loans declined by over 60% from the peak (chart below).

Mansour Bank: Loans & NPL’s 2011-2018

(Source: Ministry of Finance, Central Bank of Iraq, Iraq Stock Exchange, Rabee Securities, Asia Frontier Capital)

Unlike, almost all other banks in the sector, BMNS experienced deposit growth throughout the crisis, which accelerated during the relative stability in 2017, and continued into 2018. A flat loan book and sharply increasing deposits resulted in a very low loan/deposit ratio allowing BMNS the opportunity to grow its loan book. Moreover, most of these loans are collateralized by property, as most of banks’ loans are in Iraq, and where the norm is for collateral value at 2x the loan. It should be noted, that most of these deposits are in the form of current accounts, followed by on-demand deposits underscoring the nascent nature of the Iraqi banking system and the opportunity for future growth as the society adopts banking culture.

Mansour Bank: Deposits and Loan/Deposit ratio 2011-2018

(Source: Ministry of Finance, Central Bank of Iraq, Iraq Stock Exchange, Rabee Securities, Asia Frontier Capital)

While not all of the other banks enjoy the same financial strength of BMNS, yet the macro forces that contributed to BMNS’s recovery are the same for the sector as a whole and should therefore create the conditions for a recovery in the sector. These macro forces are boosted by the December data from the Ministry of Finance which show that the government recorded a budget surplus of about USD 22.9 bln for 2018, or a two-year surplus of USD 24.4 bln by end of 2018.

The government’s 2019 non-oil investment programme is about USD 12.5 bln, which would be equivalent to about a 7.5% stimulus to the estimated non-oil GDP for 2019. While it is highly unlikely that this would be immediately spent, yet the spending should start with a trickle but grow as investment spending gets underway- and should therefore provide a further boost to the expected banking sector recovery.

The market has made a mockery of expectations, made here over the last few months, that its divergence from its past close relationship with oil revenues (a proxy for the forces driving the economy) should come to an end. Nevertheless, the strong fundamentals of the market’s leading stocks such as Pepsi bottler Baghdad Soft Drinks (IBSD), mobile operator AsiaCell (TASC), and Mansour Bank (BMNS) coupled with resuming growth in oil revenues only add to the unsustainability of this divergence (see chart below).

(Source: Iraq’s Ministry of Oil, Rabee Securities, Asia Frontier Capital)

(Note: Oil revenues as of Mar)

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS), and an Adjunct Assistant Professor at AUIS. He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

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Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 4th April 2019).

Please click here to download a table of listed companies and their associated ticker codes.

The RSISX index ended the week at IQD578 (+3.0%) / $622 (+3.1%) (weekly change) (-12.4% and -12.4% YTD change, respectively). The number of week traded shares was 5.5 bn and the weekly trading volume was IQD3.7 bn ($3.0 mn).

ISX Company Announcements

  • Al-Bilad Islamic Bank for Investment & Finance (BLAD) will hold a GA on Apr. 21, 2019 to change the bank’s name to Al-Ataa Islamic Bank for Investment & Finance.
  • ISX will suspend trading of Asiacell (TASC) starting Apr. 10, 2019 due to the AGM* that will be held on Apr. 15, 2019 to discuss and approve 2018 annual financial results.
  • Iraq Noor Islamic Bank for Investment (BINI) resumed trading on Apr. 4, 2019 after discussing and approving 2018 annual financial results and deciding to distribute 2.4% cash dividend (IQD0.024 dividend per share, 2.4% dividend yield).
  • ISX suspended trading of Iraqi Date Processing and Marketing (IIDP) starting Apr. 4, 2019 due to not disclosing 2018 annual financial results.
  • ISX requested Investment Bank of Iraq (BIBI) on Apr. 3, 2019 to disclose its AGM minutes that was held on Mar. 30, 2019.
  • ISX requested Middle East Producing & Marketing – Fish (AMEF) on Apr. 3, 2019 to disclose its AGM minutes that was held on Mar. 26, 2019.
  • Investment Bank of Iraq (BIBI) resumed trading on Mar. 31, 2019 after electing 7 new original board members and 7 alternative members.

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Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 28th February 2019).

Please click here to download a table of listed companies and their associated ticker codes.

The RSISX index ended the week at IQD561 (-4.7%) / $604 (-4.7%) (weekly change) (-14.9% and -15.0% YTD change, respectively). The number of week traded shares was 8.9 bn and the weekly trading volume was IQD3.7 bn ($3.1 mn).

ISX Company Announcements

  • Trans Iraq Bank for Investment (BTRI) resumed trading on Mar. 27, 2019 after discussing and approving 2017 annual financial results and deciding to distribute 3.03% cash dividend (IQD0.0303 dividend per share, 4.3% dividend yield).
  • ISX suspended trading of Investment Bank of Iraq (BIBI) starting Mar. 26, 2019 due to the GA that will be held on Mar. 30, 2019 to elect 7 new original board members and 7 alternative members. The bank will resume trading on Mar. 31, 2019.
  • ISX suspended trading of Iraq Noor Islamic Bank for Investment (BINI) starting Mar. 25, 2019 due to the AGM* that will be held on Mar. 28, 2019 to discuss and approve 2018 annual financial results.
  • ISX requested Modern Animal and Agricultural Productions (AMAP) on Mar. 25, 2019 to disclose its AGM minutes that was held on Feb. 28, 2019.
  • Cross Transactions: 5.3 bn shares of Iraqi Middle East Investment Bank (BIME) on Mar. 24, 2019, which represents 2.1% of BIME capital. 100 mn shares of Iraqi Agricultural Products and Marketing Meat (AIPM) on Mar. 26, 2019, which represents 2.0% of AIPM capital.

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) were trading up more than three percent on Thursday morning after the company proposed issuing $50-million in dividends this year.

The company, which produces oil at the Shaikan field (pictured) in Iraqi Kurdistan, issued the following statement as part of its 2018 Full Year Results:

Financial

  • Record revenue of $250.6 million (FY 2017: $172.4 million)
  • EBITDA of $149.3 million (FY 2017: $104.3 million)
  • Profit after tax of $79.9 million (FY 2017: $14.1 million)
  • Net capital investment in Shaikan of $35.7 million (FY 2017: $8.1 million)
  • Cash balance of $295.6 million at year end (2017: $160.5 million)
  • The Company anticipates being fully funded for all phases of the Shaikan expansion
    programme under its current set of assumptions
  • $100 million bond refinancing in July 2018

Dividend

  • The Board confirms a dividend policy to shareholders, which will comprise an annual dividend on the ordinary shares of the Company of no less than $25 million per financial year
  • The Company is therefore pleased to announce its intention to pay an ordinary dividend on the ordinary shares of $25 million in 2019 and, given its current financial strength, the Board is also proposing to complement the ordinary dividend in 2019 with a $25 million supplemental dividend to shareholders on the ordinary shares
  • The total dividend of $50 million will be subject to approval at the next AGM in June 2019.  One third of the total dividend will be paid following approval at the Company’s AGM, with the balance payable following release of the Company’s half-year results

Operational

  • Full year gross average production of 31,563 bopd (2017: 35,298), at the upper end of guidance
  • GKP and its partner MOL reached agreement with the MNR in June 2018 to recommence investment into Shaikan, towards an initial production target of 55,000 bopd by Q1 2020
  • Common vision for a phased development that will grow gross Shaikan production to 110,000 bopd
  • The development vision described by the revised Field Development Plan (“FDP”) was submitted in October 2018. This revision has not been accepted by the MNR, specifically due to a request for additional assurances on the timing and commitment to eliminate gas flaring. As the parties aim to progress this matter and reach an agreement, investment on the ground continues as per the initial phases of this plan
  • On target to achieve plant de-bottlenecking by year-end and tie-in of the pipeline from PF-1 to the export system mid-year
  • GKP internal review indicates an upgrade in Proven (1P) reserves and no material changes to Probable reserves (2P). A revised Competent Person’s Report to be released following FDP approval
  • Robust HSSE performance with one LTI in 2018, the first in three years

Corporate

  • Signature of Crude Oil Sales Agreement in January 2018 normalised payments in line with oil prices and production.  Renewed in February 2019 through to 2020 providing certainty over payments for the foreseeable future
  • Further strengthening of the Board in 2018 with Jaap Huijskes appointed as Non-Executive Chairman, Martin Angle as Senior Independent Non-Executive Director and Kimberley Wood as Non-Executive Director

Outlook

  • On track for material uplift in production to 55,000 bopd in Q1 2020
  • In 2019, gross Capex associated with 55,000 bopd phase of between $130 million and $150 million, in addition to $20 million to $45 million associated with the subsequent development phase
  • Dividend distribution from 2019 onwards
  • Gross production guidance for 2019 unchanged at 32,000 – 38,000 bopd

Jón Ferrier, Gulf Keystone’s Chief Executive Officer, said:

Throughout 2018, our focus was on laying the foundations for the delivery of the Company’s phased growth plans, which envisages a step change in production profile.  The Company is on track to achieve its near-term production target of 55,000 bopd in Q1 2020, and with our partner MOL continues to work towards delivering the staged investment programme. The remarkable Shaikan reservoir presents a straightforward, low-cost onshore development opportunity with unrivalled near-term upside.

The new dividend policy represents another major milestone for the Company. It crystallises returns to shareholders while we preserve the ability to fully fund the Shaikan development and maintain a strong balance sheet; our platform for growth.

More details here.

(Sources: GKP, Yahoo!)