Goldilocks Investment Fund “The Midas Touch” – Khaleeji Commercial Bank

As Legendary Investor Fred C. Dobbs Can Tell You Not Only Have to Have 

the Golden Touch, But You've Got to Know How Hold On to Value

Continuing our fairy tale theme, another instalment on Goldilocks Investment Fund.

In doing a bit of research on GFH, I just happened to discover that Goldilocks owned some 9.98% of the shares of Khaleeji Commercial Bank Bahrain.

From a quick look at previous years KHCB financials, their ownership first emerged in the FYE 2017 report and has been consistent since then.

What changed was that as of FYE 2016 Shuaa Capital owned 14.01% of KHCB.

In the FYE 2017 report it “disappeared” from the list of major shareholders – 5% and above.

According to the Bahrain Stock Exchange, on 26 September 2017, Shuaa sold 100 million shares to Goldilocks at BHD 0.096 per share on the Special Order Market.

According to Bahrain Stock Exchange data, the closing price on that day in the regular market was BHD 0.1113 so Goldilocks bought at a 15% discount.

Goldilocks already owned some 3,950,000 shares as of that date and apparently acquired another 829,110 shares prior to FY 2017 end.

Shuaa retained 40,779,824 shares or 3.88 % of its holding then.

It’s not clear if it still does.

What was Goldilocks’ return on its investment?

KHCB paid no cash dividends since Goldilocks’ acquisition.

So the return is change in the market value of stock.

KHCB closed at BHD 0.052 on 2 May 2020.

ROI is negative 46% (based only on the cost of the 100 million shares purchased from Shuaa).

That’s before consideration of the likely negative impact on Goldilocks and other KHCB's existing shareholders of KHCB’s need to raise BHD 37.1 million in new Tier 1 equity. 

See that discussion here. 

But save some of your pity for KHCB which is sitting on a similar size block of Treasury Shares at an average cost of BHD 0.1138 and facing a much lower ROI – negative 54%.

You’ll recall and if you don’t AA will remind you that Shuaa bought AlImtiaz's 14% stake in KHCB in December 2006 for BHD 0.065 per share. Approximately one month after ADFG bought a little over 48% of Shuaa.

Shuaa’s ROI on its investment in the 100 million in KHCB shares it sold Goldilocks was roughly a positive 48%.

Side note:  Ending of film pictured above presents an unrealistic scenario when atomic weight is considered, though it has a nice cinematic effect.