Punters who dare play this stock for whatever reason deserve what they got, get and will get with the stock. Shuaa makes big moves sporadically on the stock market, so either one is a long-term stockholder or is a lover of pain when they buy SHUAA shares and take a good whipsawing. Do not get tempted by big spikes in stock price to get into a stock.
In a stock market where the majority of stock brokers are financially weak and unable to continue operating, why would anyone believe SHUAA can make enormous money as a broker over the next few years?
SHUAA lacked and lacks the quality to behave as an asset manager in the best of market times, let alone during bad economic and financial times. The new CEO is no one special and a person of no impressive track record in doing anything. He is someone Dubai Government can trust, however. He is there to clear up the mess Dubai Government got themselves into the past few years with Shuaa Capital. The market values the company at 1 billion dirhams now. Definitely not cheap
I cannot think of another company on the market that literally has nothing of value and worth on its balance sheet. Their client database would be worth 50 million dollars at 2007 levels to a real asset manager. Their UAE stock market operations are worth another 50 million dollars, again at 2007 levels. The UAE central bank forcing lower interest rates will not make stimulate the stock market or investments, by the way. The conditions from 2000 to 2008 were very different to today's. The banks do not want to lend and they will find ways to not lend until they rid themselves of toxic assets like credit card balances and car loans and mortgages. The banks do not trust you now no matter who you are so forget about financials coming back to life anytime soon in the real economy.
I cannot think of another company on the market that literally has nothing of value and worth on its ...
After reading this, I am not going to buy SHUAA for a long time. Further, I am yet to understand how does the equity value of the shareholders remain same when 515 million new shares are being issued. Anyhow.
Fayesloan - Which stocks would you shortlist as good medium term and long-term buys in DFM/ADX ? Your opinion would be really helpful for lotsa guys around here (including Myself Ofcourse). Also, whats your take on the markets at the moment ?
(medium term - 18 months around, long term - over 5 years)
I cannot think of another company on the market that literally has nothing of value and worth on its ...
Interesting that you think all of an investment bank's operations revolve around brokerage (which by the way SHUAA Securities is consistently 1st of 2nd in the UAE in). In addition, all that stuff about bank lending and credit card balances and subprime are also completely irrelevant when talking about SHUAA, which doesn't lend, had no subprime and has a consumer finance subsidiary that's always been profitable. Your analysis completely ignores potential revenues from investment banking (M&A, IPOs etc., which the company has significant market share in and was only down in 2008), asset management (management fees and performance fees when the market goes up, private equity (the same fee streams), and treasury. In addition, when the markets go up, there will be writeups in the prop portfolio (see Q2 results).
Fayesloan - Which stocks would you shortlist as good medium term and long-term buys in DFM/ADX ? Your ...
Total equity remained the same because the convertible was originally booked as part of shareholder's equity in 2007 when it was issued. Dilution occured when the shares were issued recently, but the book value thus didn't change.
SHUAA, for all anyone knows may hit 3, 4, 5, 6, or 10 dirhams a share.
I've seen stranger things happen, with companies that have nothing of value, no assets, see their stock price surge. Markets do that.
Now, in response to Genesis.
No, my post was not an analysis of SHUAA Capital.
Yes, I do know that SHUAA's brokerage arm is consistently a top 5 business in the UAE stock market. I won't get into whether the brokerage business model is viable enough to support the stock price of SHUAA, and brokers are only another 40% crash in stock values away from damaging permanently public sentiment towards shares... and seeing dramatically lower revenue. Brokers have been in crisis here since early 2007.
Yes, I do know what an investment bank is, and is supposed to do.
Yes, I do know SHUAA's business is not conventional banking. If your reread my post carefully you would realise that I am pointing out that leverage, which is an "investment" bank's lifeblood, is quite expensive and very hard to find these days. The days of 2002-2007 for credit are over.
Genesis, you will not find a investment bank-style report and analysis of SHUAA Capital from me here anytime soon. I would have to put a price tag on such a thing anyway.
George Makhoul of Morgan Stanley (of course you know that MS is an investment bank?) has left his post.
I wonder why? My advice to Genesis is to go and speak to him.
Maybe Morgan Stanley, the quintessential investment bank, is not as hopeful as you sound about prospective revenue and "fees" from M&A and IPO activity in this region. Private Equity (PE)? Go and have another look at the massacre in the banking sector. Let the banks deal with their toxic assets before lending to the PE sector. Again, the lifeblood (credit) of the PE industry has been drained.
Having said all that, it would not surprise me if Makhoul is on his way to SHUAA, because they have a management problem and it a problem of quality.
I recommend that people on this forum read the Bloomberg website articles about Lehman Brothers on the first anniversary of its spectacular collapse. Why do I recommend it? So that people understand the "investment banking" business model and how it affects the wider financial system, and people's "savings".
Most people think the financial crisis began because conventional banks lent irresponsibly to uncreditworthy people. If it were just that then a few banks would have gone under and that would have been it. Who packaged mortgages into tradable securities?
Yes, I do know that SHUAA's brokerage arm is consistently a top 5 business in the UAE stock market. I ...
So your analysis is basically regurgitating a bunch of stuff in every paper about the days of easy credit being over etc. If you actually followed the debt markets you'd know that spreads on corporates and governments have tightened considerably, leveraged finance teams are busy again and debt underwiting and issuance in the region is at an all-time high. You keep mentioned lending while not addressing the fact that SHUAA isn't in the business of lending at all, having never had the balance sheet to support it. I don't see how Makhoul resigning has anything to do with the death of investment banking, especially considering the bank has moved a heavy hitter like Behbebani to the region recently, but I appreciate the condescension about MS being an investment bank. I know a bit about the industry myself given I work in it, but thanks. Some of us have actually worked with MS. Leverage may be the lifeblood for JPMorgan, Barcap etc., but it never has been for SHUAA, which relies on its fee income and prop book for revenues. In any case, most of the big banks (GS, MS, JPM, BarCap) made huge revenues through fixed income (which is debt) internationally this quarter, which basically negates your argument about leverage no longer being a source of income.
Again, not sure why you're bringing up mortgage-backed derivatives when they weren't really an issue in Dubai. And I wasn't talking about 'lending' (there it is again) to the PE sector, but SHUAA's own PE business, which has 2 funds that are actively investing.
The stuff about a management problem etc. is perfectly valid, but most of your argument apart from that is fairly irrelevant to the bank at hand. Not all investment banks have the same business mix.
Genesis
I appreciate your post though I cannot take it seriously for some of the statements you make.
Not sure why I bring up MBS, "because they weren't really an issue in Dubai"?
It doesn't surprise me that you would say that kind of thing because I know the industry quite intimately and am aware of the kind of false unwarranted optimism I sense in your post that is being cultured lately by investment bankers.
You say investment banks have had a fantastic quarter, but an industry doesn't die suddenly in less than a couple of years. And a couple of good quarters after a crisis does not a promising and profitable industry make.
You talk about following the debt markets and improvement in certain spreads. Thanks for the tip but I didn't need anyone to get me invested in HYG and JNK since April, in hope of a big bounce and nothing more. Funny, because I just sold 50% of my investment in "debt" an hour ago.
Investment banking surely is not "dead", as you accuse me of asserting.
It's just that pricing investment banks globally, let alone SHUAA, indicates a return to the golden era of leverage, the good old days.
Genesis, tomorrow visit your Bloomberg terminal and take a long hard look at the situation in ABCP.
Do you see any indication of a return to the golden age of credit?
The tightening of spreads on companies and sovereigns, on CDS's, whatever is just noise when you look at the fundamental scenario unfolding over 15 to 20 years.
But investment banking will always exist, Genesis, though from now on the investment bankers may not be held in the same esteem they were the past couple of decades.
There is no structured argument I was trying to make in my earlier comments for you to take such umbrage at. I'm sorry that I could not offer you a Goldman Sachs-style PDF to chew on.
Now I will tell you this:
In the late nineties, the banking sector here was paralysed temporarily by the first stock market bubble in the UAE and by the Patel fraud in an environment of relatively healthy credit markets (nothing like now.)
These two things look like child's play compared to what has happened the past couple of years for local banks.
Moreover private and public invesment in stuff like Bear and Lehman and Madoff funds and debt by local money will be a lesson not to be forgotten for at least 5-6 years. I can't help you if as an investment banker, you still have no real idea of the gravity of the problem, of the money lost by local money.
I have no self serving nterest in bashing or belittling the prospects of investment banks globally and locally, but it looks like you do in talking it up. I am just a private crude oil trader with some side investments. Nothing dies abruptly. So there will always be IPO's and M&A to feed on, yes.
I have intimate knowledge of invesments by institutions in this region in mortgage derivative securities and exotic, delicious stuff like SIV's and CDS's, so... I am just here to burst people's bubbles.
I hope, for the sake of everyone invested in markets (but not for investment bankers), that the recovery in credit and corporate prospects being priced in across most asset markets will really materialise.
The thing is though, I don't believe in investing in Ponzi Schemes.
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