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EXHIBITING EXEMPLARY LEADERSHIP
OER presents its annual Oman’s Top
20 leading listed companies for the year 2011
The year 2011 was an eventful year of enormous proportions. The
volatility during the year continued unabated due to several
factors including natural disasters, political upheaval and
financial turmoil. For the first time in history, we saw a
credit downgrade for the US as well as the deficit ceiling
fiasco, which brought the US to almost a financial standstill.
The earthquake and tsunami in Japan, took a devastating human
and economic toll. The debt crisis in Europe created fears of
sovereign defaults, resulting in major financing strains on
banks with fears of a breakup of the euro zone. With this
background, almost $6.3tn was wiped out from global stock
markets in 2011 with the global stock market capitalisation
dropping 12.1 per cent to $45.7trn according to Bloomberg data,
primarily in the European and the emerging markets. Oil prices
shot up to $114 a barrel before plunging to $76 and rising again
to $100 in reaction to the Arab spring in the Middle East and
North Africa. Gold broke through $1,890 an ounce, and the price
of Treasuries soared, with the yields on 10-year notes falling
nearly 40 per cent in the third quarter, to 1.9 per cent from
3.16 percent, despite the downgrade in America’s debt.
As stated by HE Darwish bin Ismail Al Balushi, Minister
Responsible for Financial Affairs, in his budget speech, the
national economy continued, in the year 2011, its good
performance in spite of the severity of the international
financial and economic crisis that affected most of the advanced
economies. This strong performance is attributed to the increase
in the rates of the oil production, the remarkable improvement
in its prices and the expansionary fiscal and monetary policies
adopted by the government.
The price of Oman crude oil continued to increase substantially
during the year 2011. Oman crude realised an average price of
$102.95 per barrel, compared with an average price of $76.64 for
2010 and the budgeted price of $58 per barrel for 2011. This has
resulted in Oman’s budget balance turning into a huge surplus of
RO964.8mn in 2011.
For the year 2011, the MSM Index declined by 15.69 per cent,
compared to an increase of 6.06 per cent in the previous year.
The financial sector was the largest loser at 23.25 per cent for
the year 2011. The industrial sector was next which depreciated
by 18.45 per cent for the year. The services sector closed the
year with a total loss of 5.12 per cent. A total of 2.4 billion
shares got traded during the year amounting to an aggregate
turnover of RO992mn, which was down by 25 per cent compared to
2010. The MSM 30 Index hit a low of 5,419 points during the year
while the high of the year was 7,027 points closing the year at
5,695.12. With a return of 15.69 per cent for the year, the MSM
has been the fourth best performing market in the GCC region
behind Qatar, which advanced by 1.1 per cent and Saudi Arabia,
which declined by 3.1 per cent for the year. Abu Dhabi ended
third with a decline of 11.7 per cent, Kuwait 16.4 per cent,
Dubai 17 per cent, and Bahrain ended the year down by 22.2 per
cent.
The substantial increase in oil prices during the year was
supported by increased oil production and increased non-oil
exports which resulted in a real GDP growth rate for 2011 of 7
per cent. Oil production increased in 2011 again by about 3 per
cent to 890,000 barrels per day. The government’s continued
emphasis on diversifying the economy away from dependence on oil
gained further momentum during 2011. Non-oil exports grew by
about 20 per cent. ‘MEED Projects’ estimates that there are
currently projects worth over RO5bn planned for Oman in a broad
range of sectors that include transport, petrochemicals and
utilities. The government launched several major projects for
construction of roads. Other major projects will be awarded in
the course of the year 2012.
Performance of world financial markets was mixed. The S&P 500
was flat in 2011 while the FTSE 100 only dropped by 5.5 per
cent. Eurofirst 300 gauge of blue-chip European companies lost
by 11 per cent, led by the French and Italian exchanges. The
MSCI Emerging Markets index has shed 20 per cent of its value
despite strong growth in China and other emerging markets.
Japan’s Nikkei index lost by 17.3 per cent this year, Hong
Kong’s Hang Seng index by 20 per cent and the Shanghai Composite
by 22 per cent.
During the year 2011, the revenues of Oman’s 20 largest
companies showed an increase of RO365mn. Total revenues for the
OER Top 20 companies increased by 10.79 per cent to RO3,751mn.
Corporate performance for the year 2011, overall, however
decreased. The profits for the year 2011 decreased by 5 per cent
to RO447mn from RO471mn last year. The total market cap of the
OER Top 20 companies on December 31, 2011 was RO4,684mn, with a
decrease of 16 per cent compared to 2010. On March 31, 2011, the
market cap of the Top 20 has gone down by a further 7 per cent
to RO4,339 mn. The OER Top 2o companies represent 69.75 per cent
of the total market cap of the MSM-RO6,221mn at the end of 2011.
The average P/E ratio of the OER Top 20 based on the profits of
the year 2010 and the share price on 31 March 2011 is 9.7 times
earnings.
Who is out and who is in
We have two new comers on the list this year. SMN Power, a
newcomer in the market by virtue of an IPO in 2011 comes in at
number 16 and Oman Refreshment at number 20.
These companies have made it to the OER Top 20 this year at the
expense of Dhofar Power, which was delisted in 2011, and Salalah
Port.
The ranking of Oman’s 20 largest companies in order of revenue
produces a list, which includes the six companies from the
financial sector, seven from the services sector and seven from
the industrial sector.
Largest Revenue
Omantel continues to be the largest public company in Oman
with a growth in revenue of 8.64 per cent compared to 2010. Bank
Muscat has moved up one notch to number two with a growth in
revenue of 4.41 per cent. Shell has also moved up from four to
three with a growth of 10.88 per cent. Galfar Engineering has
fallen two places from being number two last year to number four
this year with a drop of revenue by 17.31 per cent. Renaissance
remains in the number five slot with an impressive growth in
revenue of 14.4 per cent.
The chairman of Omantel HE Sultan bin Hamdoon Al Harthi in his
report to the shareholders explains that the total revenue
increased by 8.6 per cent. The increase is contributed by all
business segments--fixed, mobile and wholesale-- as well as
revenues from submarine capacity sales. He further explains that
the total operating expenses increased by 11.1 per cent. Major
reasons for the increase were costs related to capacity sale
from EIG / Falcon cable systems, increase in depreciation and
employee costs. Al Harthi states that the group has achieved a
net profit after tax of RO112.9mn compared to the net profit of
RO110.3mn in 2010, with an increase of 2.3 per cent. HE Al
Harthi adds that the total subscriber base has recorded a growth
of 6 per cent. The total number of subscribers has increased to
3.53mn compared to 3.33mn last year.
HE Al Harthi states the telecom sector in Oman is likely to
experience intense competition in Year 2012. The company has
already withstood the competition successfully and with
integrated operating structure, it is well positioned to face
evolving competition. HE Al Harthi is hopeful that Omantel would
continue this performance in spite of increasing competitive
pressure.
Most profitable
Three of the top five most profitable companies in Oman are
the same as last year with two newcomers on the list being
National Bank of Oman and Ominvest at the expense of BankDhofar
and Renaissance Services. BankMuscat has overtaken Omantel as
the most profitable company in 2011. Omantel has dropped one
place to the number two position. Oman Qatari Telecom retains
its third position as last year. The two newcomers on the list,
NBO and Ominvest, take the fourth and fifth positions.
BankMuscat is the most profitable company in Oman as well as the
second largest company in Oman based on turnover for the year
2011. BankMuscat which was number two last year and has improved
this position from last year, has recorded a growth in profit
for the year of about 15.7 per cent.
Chairman Khalid bin Mustahail Al Mashani states in his yearend
report to the shareholders that the results achieved have been
encouraging despite the challenging global economic and
financial situation. The key business lines of the bank recorded
healthy performance on expected lines. He explains that the bank
achieved a net profit of RO117.5mn as against a net profit of
RO101.6mn in 2010, an increase of 15.6 per cent over the year
2010.
Mashani adds that during 2011, the return on average assets was
at 1.8 per cent compared to 1.7 per cent in 2010. The return on
average equity was 15.4 per cent in 2011 compared to 14.6 per
cent in 2010 and the basic earnings per share was RO0.076 as
against RO0.075 in 2010.
Mashani goes on to say that the board has proposed a dividend of
40 per cent, 25 per cent in the form of cash and 15 per cent in
the form of stock.
Mashani observes that the overall economic outlook for 2012
remains positive with the government announcing a 12 per cent
increase in spending. Indications are that infrastructure
projects will continue to give a fillip to the economy in 2012.
Profit growth
SMN Power Holding has shown the highest growth in profits by
an enormous 222.35 per cent and comes in straight at the number
one spot. All the five top companies showing the highest growth
of profit – SMN Power, Oman Refreshment, Al Jazeera Steel, Bank
Sohar and Al Maha Petroleum – are new in the list. OHI, Galfar,
BankMuscat, BankDhofar and NBO which were in this list last year
have all dropped off.
The chairman of SMN Power Holding Mahinder Nath in his report to
the shareholders for the year ended on December 31, 2011 has
explained that the company and its affiliates cater to around 35
per cent of the total power capacity and 20 per cent of the
water capacity of Oman. He adds that in 2011 the company reached
an important milestone by successfully listing 35 per cent of
its issued share capital on the Muscat Securities Market. He
explains that the technical performances of the plants over 2011
were in line with expectations. Nath adds that the technical
performance of the plants is reflected in the financial
statements with net earnings per share increasing to RO0.192
compared to RO0.060 in 2010 in line with forecast.
Highest capitalised
Three of the top five companies that have the highest amount
of equity employed are banks. Four of the five companies in this
category remain the same as last year and in exactly the same
positions. The newcomer in the list at number five is Oman
Qatari Telecom who has replaced Renaissance Services.
The chairman of NBO, Omar Al Fardan, in his report to the
shareholders states that the bank achieved a net profit of
RO34.2mn for the year compared to RO27.2mn for 2010, an increase
of 26 per cent. Al Fardan remarks that the net spreads went to
3.18 per cent in 2011. The cost to income ratio improved from 51
per cent to 47 per cent on a year on year basis due to higher
levels of income. The bank continues to reduce non-performing
loans, with the non-performing loan ratio standing at 2.9 per
cent at the end of December 2011 as compared to 3.5 per cent in
2010. Al Fardan adds that the board has recommended a cash
dividend of RO0.0175 per share as well as a stock dividend of
0.0025 per share this year based on the dividend policy approved
by the board of directors.
Al Fardan states that the bank looks at 2012 with optimism as
continued government spending is expected to maintain the growth
momentum. Participation in major domestic transactions and cross
border activity in conjunction with its strategic alliance
partner, Commercial Bank of Qatar, continues to be the key to
driving efficiencies by sharing best practices. He also adds
that the bank plans to offer Islamic banking in 2012 as part of
their franchise following the recent approval by the Central
Bank of Oman for introducing Islamic banking in Oman.
Market capitalisation
This year again, two of the top five companies that have the
highest market capitalisation on the MSM are not banks. Omantel
and Bank Muscat have once again swapped places this year with
the former emerging as the number one company on the MSM in
terms of market cap. Bank Dhofar, Oman Qatari Telecom and NBO
retain their same positions as last year.
The chairman of Bank Dhofar, Abdul Hafidh Salim Rajab Al Aujaili
in his annual report to the shareholders states that the bank’s
winning streak continued in 2011 as it was awarded ‘Best Bank in
Oman’ twice in a row by the OER-GBCM Best Banks in Oman Survey
and therefore it seeks to concentrate on development from all
aspects.
Al Aujaili explains that the profit before tax for the year 2011
achieved by the bank, after the legal case loss charge off and
other recoveries, was RO15.9mn in the year 2011, and the same,
excluding the effect of legal case loss of RO26.1mn, would have
been RO42mn as compared to RO37.9mn achieved in the previous
year 2010 recording a growth of 10.8 per cent. The net profit
after tax is RO14mn for the year 2011 as compared to RO33.3mn
achieved during 2010, showing a decline of 58 per cent. In the
light of these results, the board of directors has proposed a
cash dividend of 7 per cent and a bonus share issue of 20.2 per
cent.
Al Aujaili explains that a lawsuit was filed by Oman
International Bank against Ali Redha Al Lawati and his companies
(Ali Redha Trading and Muttrah Holding) and Bank Dhofar as per
the Enforcement Court’s order which instructed BankDhofar to
transfer an amount of RO26.1mn to the Court’s account. The case
relates back to a dispute between Oman International Bank and
Ali Redha Group, who purported to have owned and pledged
1,925,000 shares of BankDhofar in favour of Oman International
Bank, and the same is disputed by BankDhofar.
Al Aujaili states that in its continuous efforts to improve the
performance of the bank, the board of directors has appointed a
consultancy firm, Boston Consulting group, to formulate a
five-year strategic plan for the bank and supervise its
implementation.
Returns on equity
Interestingly, none of the top five companies showing the
best return on equity employed come from the banking sector.
Three of the companies in the top five are newcomers to the
list. Shell remains at the number one spot as last year. Oman
Refreshment, a newcomer to the list, comes straight in at the
number two spot. Oman Qatari Telecom slips to the number three
positions. Newcomers Oman Oil and Al Maha Petroleum take the
number four and five positions. Ominvest, Omantel and OHI are
knocked out of this list.
Amjad Mohamed Al Busaidi, Chairman of Oman Qatari
Telecommunications Company (Nawras) in his annual report to the
shareholders for the year ended 2011 states that in the first
full year as a public company, revenue increased by 4.2 per cent
to RO196.9mn yielding a net profit of RO47.5mn. Earnings per
share equated to RO0.073. Al Busaidi explains that taking the
year’s achievements into account, Nawras has maintained compound
annual growth rate of 54 per cent in revenue since its
formation. This enables the board to recommend to the
shareholders a dividend of RO0.38 per share representing a yield
of 5.8 per cent.
Al Busaidi adds that their investment in technology and physical
assets has been completed by corresponding emphasis on
developing human capital. Nawras has always been a ‘people
company’ and this outstanding feature becomes more evident by
the year, he adds.
Earnings per share growth
Four of the top five earnings per share growth companies are
newcomers in this list. SMN Power jumps straight into number one
spot. Oman Refreshment comes in at the number two position, Al
Jazeera Steel at number three, Bank Sohar at number four and NBO,
which was number four last year, at number five. OHI, Galfar,
BankDhofar, and Salalah Port who were on this list in 2010 have
all disappeared.
Buti Obaid al Mulla, chairman of Oman Refreshment, in his report
to the shareholders states that while the food and beverages
market in Oman continues to grow with the growth of local
population and influx of expatriate manpower required for the
growing economy, the operational environment poses some
challenges such as the changing consumption habits, stiff
competition in juice, water and snacks product segments in a
highly price sensitive local market. Also, the operating margins
are subject to tremendous pressure due to rising cost of input
materials and employment. The commodity prices in the
international markets are on continuous rise on account of a
series of natural calamities resulting in food shortages in many
parts of the world. Al Mulla explains that the company has
achieved a net profit after tax of RO7.04mn on a total turnover
of RO56.04mn for the year 2011 compared to a net profit after
tax of RO3.35mn on a turnover of RO45.11mn in 2010. The overall
revenue has increased by 24 per cent as the company’s efforts to
improve sales realisation have succeeded during the year which,
together with the efficiencies resulting out of various cost
control and costs optimisation measures, despite the challenges
of rising costs of employment and high staff turnover due to the
recent changes in the employment market, have contributed to
overall growth in the top line as well as bottom line. Al Mulla
adds that in view of good performance of the company during
2011, the board is pleased to recommend a cash dividend of 70
per cent (70 Baizas for each paid up share) of the issued share
capital for the year 2011.
Al Mulla is optimistic about the future prospects with the
product expansion and diversification plans and renewed impetus
on achieving higher production efficiencies. However, the
volatile global market of commodities and the rising prices of
key input raw materials, packing materials and volatile
employment market may impact profitability of the company in the
near future.
Share price growth
Three of the five companies in this list are new comers.
Oman Refreshment comes in straight into the number one position
with a massive share price growth of 71.88 per cent. Oman Oil
Marketing retains its second position same as 2010. Newcomer Al
Maha Petroleum comes in at number three. Shell moves up one
place to number four and newcomer Omantel comes in at the number
five position. Renaissance, Al Hassan engineering and BankMuscat
who were on the list last year have all dropped out.
Salim Abdullah Al Rawas, chairman of Oman Oil Marketing in his
report to the shareholders states that in 2011, the company
committed itself to pursuing an aggressive growth target, with
the ultimate intention of leading the domestic market in all its
business sectors. The company recorded its highest total sales
in history of approximately RO278.2mn, with an increase of 29
per cent compared to RO216.2mn in 2010. The pre-tax profit
increased by 18 per cent to RO9.2mn from RO7.8mn. After
providing for corporate tax, the company’s net profit amounted
to RO8.1mn, the highest ever net profit in the company’s
history, a 17 per cent increase from that of 2012. Earnings per
share stood at 126 baizas. Al Rawas adds that the board of
directors is recommending a final dividend of approximately 62
baisas per share which represents 62 per cent of nominal value
per share. Al Rawas explains that the company has continued to
increase its presence nationwide with a network of 132 stations
offering the company’s full array of petroleum products. The
retail business continues to be the back bone of the company.
Al Rawas is positive on the outlook for the coming year with the
demand for petroleum products expected to grow in line with
Oman’s projected economic growth of approximately 7 per cent in
2012. He explains that the company is gearing itself for intense
competition particularly in retail and commercial businesses.
Current market share is to be defended while new ones are to be
created and the margins to be managed.
Dividend yield
One new company has entered the ranking of the best five
dividend yield companies. Areej Vegetable Oils continues to
remain in the number one spot as 2010; Omantel moves up to the
second position from number three in 2010; Raysut Cement drops
to number three from being second; Al Maha retains its number
four positions and OHI, a new comer, comes in the number five
slot. Shell has dropped out of this list.
Nasser bin Muhammed bin Nasser Al Hadhramy, chairman of Areej
Vegetable Oils, in his report to the shareholders for the year
ended on December 31, 2011 states that the company has posted a
record sales turnover of RO96mn in 2011. The year also witnessed
changes in its operating environment. Price regulation has been
introduced in Oman through the newly formed Public Authority for
Consumer Protection. The social unrest witnessed in the first
quarter and subsequent events led to an increase in labour
costs. International vegetable oils prices continued to be very
volatile in 2011. The company has managed the environmental
factors and the price fluctuations in international vegetable
oil market very well to improve sales and to earn a net profit
after tax of RO1,501,664.
Based on the good results achieved, the board has recommended a
dividend of 0.250 baiza per share for the year. Al Hadhramy
explains that the company carries out its responsibilities as a
good corporate citizen. The company meets all the standards of
the Ministry of Regional Municipalities, Environment and Water
Resources for disposal of solid, liquid and gaseous effluents,
and continuously works towards further improvements. The company
holds the ISO 9001 certificate for quality management, the ISO
14001 certificate for environment management and the ISO 22000
certificate for food safety management.
METHODOLOGY
The rankings for the OER Top 20 and the introductory
write-up were done by Mukhtar Hasan who is a Fellow of the
Institute of Chartered Accountants in England and Wales and
holds a Corporate Finance qualification issued jointly by this
institute together with the Securities Investment Institute and
the Chartered Accountants Institute of Canada. He graduated as a
Bachelor of Commerce in 1970 and qualified as a Chartered
Accountant in 1974. He is also a member of the Corporate Finance
Faculty of the Institute of Chartered Accountants in England &
Wales.
Hasan has local and international experience in banking,
finance, senior management, private equity, corporate finance
and investments. He is the managing partner of Al Barij
International, which is a corporate finance firm specialising in
corporate turnarounds. He has served on the board of several
companies including Omani public companies United Power,
Renaissance Services, Renaissance Hospitality, National
Hospitality, Muscat Finance and Oman Textiles. He also served as
the chairman of the American British Academy, an IB World School
in Muscat for a number of years. He is currently chairman of
Muscat Thread Mills, managing director of Gulf Mushroom Products
Company and vice chairman of Oman Dental College as well as
several other local and foreign private companies.
He may be contacted by email at
mukhtar@albarij.com
KPMG is a global network of professional firms providing Audit,
Tax and Advisory services. KPMG reported Financial Year 2011
revenues of $22.7bn, employs 145,000 people in member firms
around the world and operates in 152 countries. In the lower
Gulf, comprising Oman and UAE, KPMG employs more than 700
professionals and operates from five offices in Muscat, Dubai,
Abu Dhabi, Sharjah and Jebel Ali. KPMG Oman currently has a
staff compliment of approximately 100 in audit, tax and
financial advisory services, including four partners, five
directors and 19 managers. KPMG Oman has been successfully
training accountants and auditors in the Sultanate for many
years.
DEFINITIONS AND EXPLANATIONS
Revenues: All companies on the list are derived from the
published accounts submitted to the Muscat Securities Market (MSM).
Therefore, closed joint stock companies and private companies
and establishments are excluded from this list. These companies
are, in the first instance, ranked by revenues. All the other
rankings shown on the table do not consider any other companies
that do not make the list on the basis of revenue. In the case
of banks and investment sector, the gross interest income as
well as other operating income together is considered as their
revenue for this purpose. In the case of insurance companies,
the gross premium written as well as investment income together
is considered as their revenue for this purpose. All figures are
for the year ended December 31, 2011 or the end of financial
year of the company in year 2011, unless otherwise stated.
Profits: Profits are shown after taxes and all charges including
extra-ordinary charges. Figures in brackets indicate a loss. All
losses and negative growth are also ranked where possible.
Assets: Assets shown are as per the balance sheet at the
end of the year. It is the total of fixed as well as the current
assets.
Shareholders’ Equity: Shareholders Equity is the paid up
capital of the company, retained earnings, and statutory and all
other reserves as well as share premium.
Market Cap: Market Capitalisation figure has been arrived
at by multiplying the total number of outstanding shares of the
company by the price per share as of close of business on March
31, 2012 or as the last trading of stock of the company.
Earnings per share: The earnings per share are as
declared by the company in its published financial statements.
Dividend Yield: The dividend yield figure is calculated
on the basis of dividend declared in the financial statements
for 2011 against the share price at close of business on
December 31, 2011 or as per the end of financial year of the
company.
Price Earnings ratio: This ratio has been calculated by
dividing the price per share by the earnings per share as at
December 31, 2011.
NOTES:
The following institutions have declared bonus shares dividend
for the year 2011, which has not been taken into account in the
calculation of dividend yield.
BankMuscat 15.00 per cent
National Bank of Oman 02.50 per cent
BankDhofar 20.20 per cent
OMINVEST 10.00 per cent
The financial statements of OHI are as at March 31, 2011, which
is their financial year-end.
The following companies are having share price/par value of
share @ RO1/- each;
Al-Maha Petroleum Company
Areej Vegetable Oil & Derivative Company
SMN Power Holding |
