Download DFM Trading Value by Sector

Dubai Financial Market
International Investor Conference
London 2008
1
Table of Contents
• Introduction
• DFM: Market Highlights
• DFM: Company Highlights
2
Recent oil boom has helped GCC economies achieve compelling
GDP growth rates, creating a pool of liquidity in excess of USD 3 T
GCC Nominal GDP
(USD Billion)
Regional Strengths
900
797
800
• Strong growth potential supported by
high oil prices
• Large regional GDP size with
relatively high per capita income
718
700
608
• Access to a pool of liquidity of US$ 3
trillion
600
490
500
• High financing requirements to
support investment needs
405
400
300
• The region is under-going structural
transformation
200
100
0
2003
2004
2005
2006
2007
3
Differently from other GCC countries, Dubai has a well-diversified
economy that experienced 21% annual growth from 2001 to 2006
Dubai Nominal GDP
(USD Billion)
Dubai 2006 GDP Breakdown
(%)
Oil&Gas Sector as a % of GDP
50
46
Qatar
45
Other, 10%
Trade, 21%
40
Oil & Gas, 5%
CAGR
20.6%
35
Government,
5%
30
Abu
Dhabi
43%
Saudi
Arabia
41%
Oman
41%
Financial
Services, 7%
25
20
61%
18
Manufacturing,
15%
15
Real Estate,
11%
Bahrain
21%
10
5
Transportation,
13%
0
2001
2006
Construction,
13%
Dubai
5%
0%
20%
40%
60%
80%
4
Financial services is expected to be a major contributor to the
Dubai future growth story
Globally fast growing industries
with strong Dubai position
Financial
services
Tourism
Trade
Oil and gas
Globally faster
growing sectors
Professional
services
Communication
Transportation
and storage
Manufacturing
Future global
growth 2005– 2015
(%pa)
Average global
GDP growth
Construction
Electricity/
Water
Globally slower
growing sectors
Agriculture
Government
services
Very weak
Average
Strong
Dubai’s strength by international standards
$ 3B
Source:
Dubai 2015 Plan
Dubai
sectorial
GDP 2005
Sectors qualified to be
part of future
growth path
5
Dubai aims to become a regional hub of capital market activity and
play an active role in regional and international consolidation…
Dubai Capital Market Strategy
Vision
Portfolio
Strategy
Business
Strategy
•
•
•
•
Leading emerging markets exchange
Regional hub of capital market activity
Active player in regional and international consolidation
Connector of liquidity pool
• Pursue attractive regional harmonization and integration opportunities
and line-up based on strategic fit
• Expand footprint in terms of geography and capabilities
• Prioritize cash equity market development
• Focus on attracting Institutional investors and become member of
major global and/or emerging market indices
• Enhance awareness and increase access for regional retail investors
and, in long term, pursue regional and local institutional investors
6
… which has been a trend over the past years moving from mature
markets towards emerging economies
Consolidation in mature markets
Madrid SE
Valencia SE
Barcelona SE
Bilbao SE
Iceland SE
Copenhagen SE
Vilnius SE
Stockholm SE
Helsinki HEX
Boston SE
NASDAQ
Strike
Brut
Island
Instinet
BVLP
LIFFE
Brussels SE
Amsterdam SE
Bourse de Paris
NYSE
PCX
Arc
Redibook
GlobeNet
Borsa Italiana
London SE
Deutsche Börse
SWX Group
Growth in emerging markets (CAGR 06-08E)
Bolsas y Mercados Españoles
NASDAQ-OMX
Euronext
NYSE Euronext
UAE
8.6%
Kuwait
7.3%
India
8.6%
Kazakhstan
9.6%
Turkey
5.8%
Pakistan
6.4%
Saudi Arabia
4.6%
Egypt
7.0%
Libya
5.5%
Jordan
5.9%
Turkmenistan
8.0%
London Stock Exchange
2000
2001
2002
2003
2004
Source: Celent Report, The Economist Intelligence Unit
2005
2006
2007
7
Dubai Financial Market (DFM) is already one of the biggest
exchanges in terms of market capitalization
Market Capitalization By Exchange
(in USD Billion)
(March 31, 2008)
35
30.7
30
25.3
25
20
18.4
16.4
15
11.1
10.1
10
7.8
6.7
5.9
3.8
5
0
Deutsche
Borse
CME
Hong Kong
SE
NYSEEuronext
DFM
BOVESPA
NASDAQOMX
LSE
SGX
TSX
8
Table of Contents
• Introduction
• DFM: Market Highlights
• DFM: Company Highlights
9
DFM Index has outperformed other GCC indices
DFM General Index Performance
8000
8000
7000
7000
6000
6000
5000
5000
4000
4000
GCC Indices Performance Comparison
(Base 1000)
DFM
MSM
3000
3000
2000
2000
1000
1000
0
Dec-03
KSE
ADSM
TSE
DSM
BSE
0
Dec-04
Dec-05
Dec-06
Dec-07
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
10
DFM was the best performer in GCC even in terms of total trading
volume, due to the substantial growth in 2007…
Trading Value
(USD Billion)
Trading Volume
(2007, Billion Shares)
60
53.9
50
120
40
34.1
105
30
100
22.6
20
14.9
11.7
10
0
80
70
Trading
Volume
(B Shares)
Q1 2007
Q2 2007
Q3 2007
Q4 2007
Q1 2008
8.6
23.2
20.6
52.9
26.3
58
60
Average Daily Trade
(USD Million)
52
1000
40
870
800
560
600
20
365
400
240
189
3.4
2.7
200
0.8
0
0
DFM
KSE
TSM
ADSM
DSM
MSM
BSE
Q1 2007
Daily Trading
Volume
(M Shares)
138
Q2 2007
358
Q3 2007
312
Q4 2007
Q1 2008
896
432
11
… which is testament that DFM is a highly liquid exchange
DFM Traded Value and Listings Market Cap
(USD billion)
136
110112
95
103
Comments
85
• DFM is a highly liquid exchange
as is supported by its high
turnover velocity figures
36
0.1 5.8
0.3
2000
7.9
0.7
2001
9.5
1.0
2002
14
2003
14
2004
Traded Value
2005
2006
2007
Market Cap
• Turnover velocity in 2007 was
impacted by
DFM Turnover Velocity*
(%)
112%
120%
• Turnover velocity ratio was at
its highest in 2006 during the
market correction

Reducing the number of
trading days per week
from 6 to 5 days

Low trading volume
earlier in the year
98%
100%
80%
76%
60%
38%
40%
20%
2%
3%
7%
7%
0%
2000
2001
2002
2003
2004
2005
2006
2007
* Turnover velocity is defined as the ratio of Annual Traded Value to Market Cap
12
Real Estate and Financial Services are the key sectors in terms of
trading value – Institutions are increasing their trading activities
Trading Activity By Sector
(%, Q1 2008)
Trading Activities By Category
(%)
100%
Utilities, 2%
Other, 0%
Telecom, 2%
90%
Insurance, 3%
15.8%
13.9%
14.6%
22.4%
28.2%
80%
70%
Transport, 14%
Real Estate,
37%
60%
50%
40%
84.2%
86.1%
85.4%
77.6%
71.8%
30%
20%
Banking, 18%
10%
0%
2004
F-Services,
24%
2005
Retail
2006
2007
Q1 2008
Institutions
13
The share of Non-UAE and Non-GCC investors has strongly
increased over the past years
Trading Activities By Nationality
(%)
Trading Activities By Nationality
(%)
100%
12%
11%
90%
22%
31%
30%
80%
40%
36%
36%
35%
31%
70%
30%
5%
60%
25%
88%
89%
3%
20%
78%
69%
70%
30%
18%
12%
22%
50%
40%
30%
17%
64%
15%
10%
11%
20%
10%
10%
5%
14%
6%
5%
2007
Q1 2008
2%
4%
9%
9%
4%
0%
12%
0%
2003
2004
2005
UAE
2006
Non-UAE
2007
Q1 2008
2004
2005
GCC
2006
Other Arabs
Others
14
The number of Non-UAE investors has increased to 190k in Q1
2008, representing 30% of the total
Number of Investors By Nationality
(‘000)
700
Comments
630
627
600
• Number of investors has
strongly increased from 126k
in 2003 to 627k in 2007 (50%
2003-2007 CAGR)
533
500
441
441
400
UAE
382
297
300
• The share of Non-UAE
investors has reached 190k
by Q1 2008, 30% of total
investors
–
200
197
155
40
126
100
125
42
Others
95
GCC
Other Arabs
33
139
24
71
94
30%
GCC investors
represents 50% of
Non-UAE ones
40
36
47
52
53
2005
2006
2007
Q1 2008
0
2003
2004
Non-UAE
15
Foreign ownership is increasing, mainly due to greater involvement
of international institutions(1)
Foreign Ownership Development By Nationality(2)
($ Billion)
16.0
100%
15.1
Others
14.0
12.0
Other Arabs
13.0
10.7
8.5
1.5
8.0
6.0
6.7
0.0
41%
1.9
40%
2005
4.8%
10.4%
30%
1.4
1.6
1.6
10%
2006
2007
Q1 2008
0%
9.9%
13.1%
35%
37%
2007
Q1 2008
67%
4.4
59%
2004
% of Total
Market Cap
63%
75%
20%
2.5
65%
60%
50%
3.7
1.8
2004
33%
6.9
5.1
0.2
1.2
0.4
25%
70%
7.0
4.0
2.0
90%
80%
GCC
10.0
Foreign Ownership By Category
(%)
2005
2006
12.6%
Retail
Institutions
Note (1): As can be observed from the combination of both graphs, the “Other” foreign investors are mostly international institutions
Note (2): The term “GCC” under “Foreign” implies non-UAE GCC investors
16
Total DFM listings stood at 56 at the end of 2007 and the exchange
is still facing a large untapped market
No of Companies in UAE by Ownership and Size(1)
Number of Listings on DFM
Total No of Listings: 56
Potential Size of IPO Pipeline ~ 2,000
1,497
15
38
145
12
11
2
9
163
3
528
5
10
1
9
9
6
623
4
1
1
2000 2001 2002
257
15
30
1
2003 2004
2005 2006 2007
Private
80
80
218
52 23
48
Government
16
12
115
120
Foreign
Public
No of employees
UAE
Foreign
< 100
101 - 500
< 1,001 – 5,000
5,000+ (potential anchor issuers)
Note (1): Estimated by number of employees
501 -1,000
17
The following list is illustrative of some of the major IPOs in the
pipeline
Potential future issuance
Source: Market interviews, literature search
Sector
Ownership
Airline
Semi-governmental
Real estate
Semi-governmental
Natural resources
Semi-governmental
Properties, financial services,
industrial goods
Semi-governmental
Construction
Private
Consumer, industrial goods,
building and construction
Private
18
Table of Contents
• Introduction
• DFM: Market Highlights
• DFM: Company Highlights
19
The Dubai Financial Market started its operations in 2000 and has
established significant growth over a short period of time
DFM Timeline
Start-up Business
Key Facts and Figures
2000-2001
• DFM (Dubai
Financial Market)
began operations
in March 2000
• Ten companies
listed on DFM
during first year
of operations
• DFM licensed by
ESCA in October
2000
• First bond listing
in July 2001
2002-2003
• In 2003 the
number of
investors
exceeded 100,000
Establish Footprint
2004
• DFM foreign
investment traded
value recorded a
YOY growth level
of above 70%
• DIFC (Dubai
International
Financial Center)
opened in
September 2004
2005
• DFM listings
market cap
exceeded USD
100 Billion
• DFM number of
employees
exceeded 100
• DIFX (Dubai
International
Financial
Exchange) was
opened in
September 2005
Growth
2006
• 20% of DFM’s
shares were
offered for sale
to the public
through an IPO
in November
2006
2007
• DFM listing in
March 2007
• Borse Dubai, the
holding company
for DFM and
DIFX, was
created on 6
August, 2007,
located in DIFC
20
DFM is regulated by the Securities and Commodities Authority…
UAE Capital Market Structure
Securities & Commodities Authority
Dubai Financial Market
Dubai Gold and
Commodities Exchange
Abu Dhabi Securities
Exchange
21
… and is 80% owned by Borse Dubai, the Exchange holding
company
DFM Shareholder Structure
Comments
Public
• Borse Dubai in turn has 3
shareholders, mainly
Borse Dubai
80%
19.99%
20%
20%
DFM
NASDAQ-OMX
66.7%
33.3%
LSE
 ICD (International
Corporation of Dubai):
60%
 DIFCI (Dubai International
Financial Center
Investments): 20%
 DFG (Dubai Financial
Group): 20%
NASDAQ-DIFX
22
UAE nationals and retail customers are the main shareholders of
the 20% public stake in DFM
20% Public Ownership Breakdown by Category
(%, Q1 2008)
DFM Ownership
(%, Q1 2008)
Institutions
34%
Borse
Dubai,
80%
Retail
66%
Public,
20%
20% Public Ownership Breakdown by Nationality
(%, Q1 2008)
Others
28%
GCC
2%
Arabs
4%
UAE
66%
Non-UAE=34%
23
DFM is focusing on 4 key pillars to achieve its targets
DFM Key Pillars
1
Offer
All Products
Equity
• Issuers/Listings
– UAE
– Large and mid-cap
– Government-owned
Other Products
• Diversification of
products and services
2
Specific
Segments
• Investors
– Foreign institutional
– Local retail
3
Focus on Trade
and Post-Trade
• Hybrid trading
mechanism
• Adherence to G30
guidelines and best
practices
• Develop CSD value
added products
4
•
•
Strong
Governance
Best practice SRO
capabilities
Robust risk controls,
especially in CSD
operations
– Bonds/ Sukuks
– Derivatives
– ETFs
– Data Services
– Technology
24
Over the past years DFM has developed strong operational
capabilities
DFM Operational Capabilities
Trading
system
Clearing,
settlement
and depository
Risk
management
• Continuous, order-driven, fully automated trading system
• Tight coupling with depository system, enabling validation of sell orders
against depository inventory prior to trading
• Transparent, automated and cost-effective information dissemination
• Upgrading to a high performance OMX X-Stream system
•
•
•
•
T+2 rolling settlement with multilateral netting
Same-day turnarounds (back-to-back transactions)
Corporate actions (cash dividends, stock splits, bonus issues, etc.)
Undertaking an operational review to ensure compliance with G30
recommendations
•
•
•
•
Trades once executed are final and irrevocable
Trading limits for market participants commensurate with posted collateral
Immediate suspension of trading for defaulting brokers
Established business continuity and contingency plans
25
Compelling advantages are offered to international investors
Description
Accessibility
Existing international
investment
Taxation
Repatriation of capital
Exchange Rate
Foreign ownership
Regulation
Dubai vision
•
DFM is open to all international investors
•
Significant existing investment presence by regional, international
firms on DFM
•
No capital gains tax
•
No restrictions on repatriation of capital
•
Exchange rate pegged to US Dollar
•
Foreign ownership allowed for most actively traded companies
•
One of the strongest regulatory frameworks in the Middle East and
North Africa; with continued progress
•
Dubai government commitment to growing capital markets as part of
strategic growth plans
26
In particular, regulatory developments should further attract
international investors
DFM Regulatory Developments
2007 - 2008 ( completed )
Federal Regulatory
Developments
• Companies Law
- Reduction of minimum floatation
from 55% to 30% for family
business.
2008 (expected)
• Companies Law
- New rules being added
• Capital Markets Regulations
- Allowing GCC citizens to be
treated as UAE national.
ESCA Regulatory
Developments
• Corporate Governance Guidelines
- All listed companies should
implement the guidelines by April
2010.
• Capital Adequacy
• Custodians – drafted
• Margin Trading – Brokers training phase
• ETF - drafted
27
Table of Contents
• Introduction
• DFM: Market Highlights
• DFM: Company Highlights
 Financials
28
DFM is a highly profitable exchange where total profits constitute
around 90% of total revenues
DFM Revenue and Profits
(USD millions)
400
350
Operating Profit
Does not include
IPO profits of
USD 126 Million
350.6
Expenses
307.0
300
200
338.6
262.3
150
215.3
94.9
100
45.5
50
5.4
84.9
7.1
-1.6
40.2
5.4
12
16.5
2003
2004
2005
2006
2007
Q1 2008
Profit
Margin
(%)
-30%
88%
97%
93%
85%
89%
EBITDA
Margin
(%)
22%
90%
97%
94%
93%
96%
0
• High profit margin is reflective
of the scalability business of
the exchange
• 2006 revenue dip reflects a
reduction in commission
charges by 30%
231.8
250
Comments
44.6
10
• 2003-2004 revenue figures
reflect the startup phase of
the exchange
• In 2007 IPO revenue of $126
million was realized rendering
profits greater than revenues
-50
29
DFM revenues are driven primarily by trading, clearing, and
increasingly by investment revenue
Revenue Breakdown
(%)
Other
CSD Revenue
Membership
100%
90%
8%
22%
Investment
Revenue
36%
Clearing Fees
36%
38%
Trading Fees
2006
2007
Q1 2008
232
306
95
27%
80%
70%
41%
60%
34%
50%
Comments
• Trading and clearing
constitute around 70%-80%
of total revenue
• More revenue coming from
investments
40%
30%
20%
46%
10%
0%
Total
Revenue
(USD M)
30
DFM share price increased by more than 500% since the IPO, and
the company had a dividend payout ratio of 80% in 2007
DFM Share Price
(AED)
Comments
7
6
• DFM’s market cap is $12.7
billion, 2007 P/E is 33x & 2008
is 24x
5
4
3
2
1
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Listing date
EPS(1)
(USD)
• DFM is one of the most liquid
stocks on the exchange
0.044
• 2006 EPS reflects a reduction
in a commission charges
0.033
0.027
0.011
2005
2006
• Share price increased
substantially at the end of
2007 as the stock market
recovered from the 2006
correction
2007
Note (1): EPS for 2007 excludes the one-off IPO proceeds
Note (2): Excludes the one-off IPO proceeds
Exchange rate: AED 3.67/$
• 2007 dividend payout ratio
amounted to 80%(2)
Q1 2008
31
DFM Balance Sheet
$m
Cash & bank balances
Islamic investment deposits
Total current assets
2006
79.8
242.2
497.0
2007
42.2
588.0
779.6
Q1 2008
132.8
468.6
759.2
Intangible assets
Goodwill
Total non-current assets
0.0
0.0
143.6
783.4
784.5
2,006.0
778.2
784.4
2,050.2
Total assets
640.6
2,785.6
2,809.4
49.0
49.3
91.8
168.7
268.3
345.2
Total shareholders equity
591.3
2,616.9
2,464.2
Total liabilities & shareholders equity
640.6
2,785.6
2,809.4
Total current liabilities
Total liabilities
Exchange rate: AED 3.67/$
32
DFM will move to a new fascinating building in Dubai Business Bay
DFM: Design of the New Building
• Dubai Government granted DFM a Land plot in the Business Bay in November 2007
• The land measuring 390,000 square feet was booked at $ 76mn (that time market value)
• The plot oversees the Business Bay’s waterfront from three angles
33
CONTACTS
Dubai Financial Market
Dubai - UAE
• Phone +971 4 305 5555
• Fax +971 4 305 5566
• P.O.Box 9700 Dubai, UAE
• Email [email protected]
• Web site: www.dfm.ae
• Voice portal +971 4 312 8000
Contact Person :
Mrs. Fahima Al Bastaki
[email protected]
Mrs. Areej Al Saeed
[email protected]
34