National Bank of Oman and the "Mysterious" Treasure Fleet International

Not To Scale

Larger Than Life

You may have seen articles that Treasure Fleet International of Singapore had offered to buy a stake (amount undisclosed) in National Bank of Oman.  Gulf News.  Reuters.

Here’s the report from the Times of Oman.  Emphasis courtesy of AA.

“Muscat: National Bank of Oman (NBO) on Thursday said that it had received a letter from Treasure Fleet International Pte Ltd proposing to acquire a stake in the bank.

“The proposal from Treasure Fleet International Pte. Ltd. will be reviewed and discussed by the board of directors. Further disclosure concerning this matter will be made if there are developments to report,” said a bank disclosure statement posted on MSM website.

NBO also said that no legally binding commitments have been made and this matter is still subject to review and approval by NBO’s board of directors, the shareholders of NBO and the local regulatory authorities. Treasure Fleet International is a Singapore-based firm, according to its website, which is under development.

That last bit caught AA’s eye.  Off on a buying spree, but doesn’t have a working website.

But the press doesn't seem to have a clue about TFI.  Or was unable to find a clue.  Or didn't bother to.

AA did a cursory search via the internet and learned:

1. As per the Government of Singapore’s “bizfile”, the company was formed and registered in Singapore 24 August 2016 with Ng Lee Ken (NLK) filing the paperwork.   The same source notes that on 29 August NLK also filed a change of shareholders. Check the EROM section.  Side note:  This is fairly common.   A local registered agent opens a company using its personnel as shareholders of record and then subsequently amends the shareholders’ list to reflect new shareholders (presumably the actual owners or their other nominees).
2. As per Singapore’s Business Times, TFI was formed with between S$500,00 to S$5,000,000 (roughly US$345,000 to US$3,448,000) in capital.
3. As per AA's research, TFI shares its Singapore office and telephone number 65 6286 3622 with the following other companies:  Andromedic/MEA; Elite Power; and VKMCS (Victory Knights Management Consulting Service).
4. The Oman Connection Updated: Elite Power has an office in Oman.    VKMCS is no stranger to Oman having relationships with Bank of Muscat, Al Ramooz Group of Companies, Voltamp Oman,  and the Royal Oman Navy and joint partnerships with TFI and Andromedic.  VKMCS also appears to be related to Seven Seas Victory Knights Company LLC Oman.  A common principal individual appears to be a Mr. Nicholas Koh. 

So what we’ve got here is a 4 month old company with no more than US$3.4 million in capital apparently making an offer to buy a stake in NBO significant enough for NBO to file a report with the Muscat Securities Market.

Curious. 

At first blush TFI seems to be rather small tonnage for a sea voyage of this sort. But with the network of affiliated companies, who knows?

There is additional information for sale at “bizfile”, though it seems one needs a SingPass to pay. SingPass is restricted to Singaporeans and those with residence.   Neither of which AA qualifies for. 

So an appeal to any of SAM’s Singaporean readers out there or other folks more clever than AA to buy the documents and post a comment with details of shareholders of record.  Perhaps the Oman connection goes deeper.

For that purpose, TFI’s UEN (corporate registration) is 201623102G. 

Its registered address is:

62 UBI ROAD 1

#09-03

OXLEY BIZHUB 2

SINGAPORE 408734 Good hunting!

Blue City Blues

A poignantly haunting tune of betrayed love though word has it the beloved was little more than a remarkable fiction of the imagination.

Other than a deserted construction site and a rather neat website (with no construction pictures), isn't all the value in the Tranche A bonds?

National Bank of Oman 2008 Preliminary Earnings Announcement - 42.5% Lower Than 2008

You've probably seen the press headlines that NBO's 2009 earnings were 42.5% lower than 2008.  But probably not much more than the headline.

While the announcement on the Muscat Exchange is  naturally brief (this is an announcement of preliminary results after all), we can look at earlier quarterly reports  on NBO's website to get sufficient information to make an informed guess about the full year's results. 

At 30 September 2009, NBO's net income was OR 26.1 million which was down some 43.8% from the comparable nine month period in 2008.  For the full year (FYE) net profit was down 42.5%.

What drove this decline?  Without the 4Q09 numbers, we don't know for certain, but with the 3Q09 financials we can infer the difference. 

First, Operating Profit (profit before provisions and taxes) was down some 4.9% at 3Q09.  At FYE 2009 it was down 13.3%.  That implies some deterioration in 4Q09 but not sufficient to cause the 42.5% drop in net income.

Second, the major culprit in depressing 3Q09 net income were expenses related to loan losses.  Provisions were OR10.4 million a whisker higher than 2008. So the culprits are in recoveries on previous provisions, charegoffs as well as other items.

Here are the details- again for the first nine months of the year:

1. Net recoveries of OR4.7 million versus OR12.9 million - a difference of OR8.2 million.
2. OR3.1 million in impairment losses on available for sale investments versus zero the year before.
3. OR4 million in credit loss expense for bank loans versus zero the year before. 

The total is OR15.3 million in additional expenses in 2009.

We can expect a similar pattern to hold in 4Q09 with net income in that period an additional OR6 million (which appears to be the average run rate per quarter for the year).

Two more observations.

First, if we look at comprehensive income (which includes changes in fair value that did not pass through the income statement), NBO's (comprehensive) income for the first nine months was OR22.5 million versus OR30.2 million for 2008.  On this basis the decline is only 25.5%.

Some additional information on the additional credit loss expense.  The bank loans comprise OR1.9 to a bank in Kazakhstan (my guess is Alliance but it may be BTA).  And OR6.6 million in exposure to Awal Bank and The International Banking Corporation.  NBO took a 50% provision on the Saudi Group exposure and 37.5% on the Kazakh bank. 

Update:  While I haven't been following Kazakhstan, I suspect 37.5% may be a bit light for a provision.  As to Awal and TIBC, this provision is probably light as well.  The Governor of the Central Bank of the UAE is on record as requiring his banks to provision 100%.  According to the press reports, he is quoted as saying this level is on par with local and international regulators' views. Earlier post here.

Omani New Income Tax - Effective 1 January 2010

Rupert Bumfrey has a post on this topic.

Here are some commentaries by accounting firms.  BDO Jawad Habib (soon to change its name to just BDO).  And Deloitte.

The major change is a reduction in the rates paid by foreign owned companies, though there are some other modifications, outlined in detail in the BDO Jawad Habib piece.

Middle East (UAE and GCC) Finance and Investment News

Another blog added to the links of Interesting Blogs and Other Links.

Link here.

GCC Real Estate Projects - A Survey

With all the discussion about the fall out from real estate  in Dubai and the declines in real estate elsewhere in the GCC, I thought it would be useful to provide a bit of macro context. 

Luckily, Global Investment House has recently issued a report on the GCC real estate sector. You'll have to register to get the full text.  Click here to do so.

Based on information from MEED Projects, they've compiled a comparable table across the six members of the GCC.

Amounts in Billions of US Dollars

Country	Nov 2009	Nov 2008	% Change	Held Projects	% Held
Bahrain	$ 68.3	$ 57.7	+18.3%	$ 9.1	11.8%
Kuwait	$ 271.5	$ 298.7	- 9.1%	$ 41.0	13.1%
Oman	$ 104.6	$ 106.4	- 1.7%	$ 6.7	6.0%
Qatar	$ 204.8	$ 216.9	- 5.6%	$ 7.9	3.7%
Saudi Arabia	$ 609.4	$ 606.5	+ 0.5%	$ 39.2	6.0%
UAE	$ 915.9	$1,228.2	-25.4%	$368.2	28.7%
TOTAL	$2,174.5	$2,514.5	-13.5%	$472.1	17.8%

At 42.1% the Emirates' share of real estate projects seems outsized relative to their population as a percentage of the GCC total or to their economy as a percentage of GDP total. When the held projects are factored in, their share goes to 48.5%.

That level of activity could be the sign of several things:

1. Severe underdevelopment relative to the rest of the GCC.  I think we can rule that out.
2. A speculative boom.  From the nature of the projects, this is the leading candidate.
3. The development of needed infrastructure.  For anyone who has endured the traffic jams in Dubai or elsewhere in the GCC,  the Dubai Metro seems a worthwhile project.  But this does not seem to me to the major driver of the activity.
   

I suppose an argument related to #3 above is that they are developing the next London or Manhattan.   To paraphrase  "Field of Dreams":  If you build it, they will come.  

Not sure I buy that there is a need for a major financial center between Hong Kong and London.   Nor that there is any "natural" location for any such additional center.  Capital is highly mobile these days.  There are few to no impediments to cross border flows.  And the state of today's communications has eroded whatever earlier benefit there was from having a physical presence in a specific location.  If the new center must have a "seaside" location, Shanghai or Mumbai could serve as well as Dubai.

It's more likely that a regional center will arise in the GCC, but I doubt that at present it would need to be as large or as elaborate as London or Manhattan. 

The critical work that needs to be done is building another form of infrastructure:

1. The creation of a set of appropriate laws and regulations
2. The development of a cadre of trained judges and lawyers to implement them
3. Enhancements and actual implementation of accounting standards and regulations
4. Establishment of a sovereign bond curve as a benchmark for pricing other issues in the debt markets
5. Greater institutional participation in local stock markets 
6. More liquidity in both debt and equity markets - not only in terms of demand but also on the supply side. 
   
7. On the debt side many of the issues are not traded, particularly the Islamic structures.  Or to be more precise not traded in local markets.
   
8. The free float on many equity issues is rather shallow.   Relatively small transactions can move the price disproportionately. 
   
9. And in certain markets there are sadly issues with brokers and market makers - who seem more focused on making a market for themselves than for their customers.  Though to be fair this is not just a GCC phenomenon.  
10. Finally, there is the "silo" nature of the GCC.  At this point, countries by and large stick to their own national business.  There isn't a lot of cross border investment. 
    

Governments in the area are not oblivious to these issues as evidenced by the initiatives launched QFC, DIFC, the Saudi CMA and in Bahrain. 

There is also another issue and that is the nature of the market.  Is the market intended to be one that  primarily mobilizes capital for local use?  Or one that provides funding to other geographic regions?  

For the first alternative, Saudi Arabia would seem the natural site given its population and major share in GCC GDP.  One could I suppose argue that as happened with commercial lending in the 1980's, a nimble neighbor with a more congenial regulatory regime and living conditions could play this role.  There are two major differences between then and now.  First, GCC nationals have the primary role in financial firms - at all levels.  There is less need for Western experts to be parachuted in.  And thus less need for concern about their life style preferences.  Second, the Kingdom is not sitting on the sidelines watching others develop an offshore center to serve the Kingdom.  New regulations - particularly those from the Capital Markets Authority are designed not only to foster the development of the market  but also to "encourage" foreign firms to open offices in the Kingdom. 

Is there a role for a regional Hong Kong?  Perhaps.  And several contenders as well.

UAE and Bahrain Rulers Join Forces to Combat Sand Shortage

26 November marks the last official day of Saudi sand exports to Bahrain.

As of tomorrow, there will be an official sand drought in Bahrain.

As noted in an earlier report, the Nass Company has already begun importing sand from Oman.

I was trying to think of a funny spin to put on this.  But it is a serious problem and steps are being taking to resolve it.

AA will, however, keep his eye on Saudi exploration to discover new sand reserves.

Earlier posts can be found through the use of the label "sand".

Transparency International Publishes 2009 Corruption Perceptions Index - How Did the GCC Do?

By now you've probably seen other reports on the rankings of the GCC countries in TI's 2009 CPI.  Before we turn to the numbers, a few words.

First, how does TI itself describe the CPI?

Here are their exact words:  "The Corruption Perceptions Index (CPI) measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is a "survey of surveys", based on 13 different expert and business surveys."

A few points to emphasize:

1. The second word in the name says it all.  It is a Corruption Perceptions Index.  It is the perception of the level of corruption not necessarily the reality. 
2. It is public sector corruption only.
   
3. It is based on surveys (there are a universe of 13 different surveys).  Not all surveys use the same methodology.  Not all cover the same set of countries.  Usually, countries are ranked using 5 or 6. 
   

Despite these factors, the results are set forth with apparent Cartesian precision.   New Zealand is the least corrupt with Sweden two places below.  Not three.  Not one.   Similarly, at the other end of the scale, Somalia is more corrupt than Afghanistan.  Really?  How do they get to this fine a level of distinction?  Are the same set of respondents doing business in both Somalia and Afghanistan?

I commented on this phenomenon before and so I will turn to the rankings.

GCC states CPI ranking (best to worst):  World rankings follow the country name.

1. Qatar             22
2. UAE              30
3. Oman             39
4. Bahrain          46
5. Saudi Arabia  63
   
6. Kuwait           66
   

MECRA Regional Credit Bureau: Bahain, Oman, UAE and Pakistan

A significant development in improving the institutional architecture for banking in the region.

This will give banks a clearer picture of the exposure of their existing and potential customers.