GFH CEO expects US real estate deals in 2016; aspires for Tadawul listing

Bahrain-based GFH Financial Group, previously known as Gulf Finance House, recently announced that it aims to widen its investments in retail and consumer-driven businesses. Chief executive officer Hisham Alrayes tells Argaam more about the company’s overall strategy, as well as the group’s objective behind the recent acquisition of a leading sweets and bread producer in Saudi Arabia for $50 million. He also shared his views on the Saudi consumer sector, his outlook for the Gulf region, and GFH’s targets for 2016-2017.

Q: Can you elaborate on the company's investment strategy behind its recent acquisition of the Saudi-based sweets and bread producer?

A: “Over the last few years, GFH has been primarily focusing on new investments in defensive sectors, which offered high yield and value growth. With this strategic focus, our investments included sectors such as education, consumer goods, and other commercial assets. The recent transaction that took place by GFH in the GCC region’s largest and most important market, Saudi Arabia, was in food and consumer businesses, which will enjoy natural market growth and increase in demand due to favourable demographics. What makes this transaction more appealing is the company’s current market share in Saudi Arabia and specifically in Makkah.”

Q: Are you still considering listing on the Saudi Stock Exchange (Tadawul)?

A: “All regional companies aspire to be listed on Tadawul as it’s the region’s largest stock market. There is a long queue for listing on Tadawul… and we will consider listing when the timing is right and precedent is in place.”

Q: What are your projections for the FY-2015 results?

A: “As a result of lower oil prices, the overall GCC market scenario remains challenging and it is affecting the general liquidity in the market. Nevertheless, GFH had a generally positive year so far. We target to close the year with better performance than last year, and keep our commitments to our shareholder and investors. This year, GFH witnessed strong contributions from our various businesses, particularly commercial banking, private equity and real estate. We are again seeing our real estate business contributing significantly to GFH’s overall income— this is an interesting trend as increasing sales from a number of real estate projects will result in increased liquidity for the bank.”

Q: What countries and sectors are you targeting in terms of investment in 2016?

“We target to achieve 10 percent return on equities for our shareholders by 2017; 2016 will be an important year towards achieving this target. We expect our commercial banking to continue its positive performance. On the other hand, GFH capital, the private equity arm of GFH will continue to undertake new acquisitions. We anticipate potential transactions in the UAE healthcare sector and in US real estate assets.”

Q: What's your outlook on GCC’s banking sector, and Bahrain's economy in particular?

“Undoubtedly, the banking sector is set to witness mixed performance. Equities are expected to be stressed, but will offer opportunities for acquisitions as a result of attractive valuations. The debt market is expected to see greater activity as both the public and private sectors are increasingly going to tap the markets to finance projects and bridge liquidity gaps arising out of the lower oil price scenario.”

“Bahrain has a large concentration of wholesale and commercial banks, and the reconfirmation of its credit rating gives confidence to local banks on the sovereign risks. Bahrain continues to be part of the GCC banking system and cannot be seen in isolation. Currently, the market is going through some challenging times, but such circumstances also offer opportunities for attractive acquisitions when valuations are lower.”

Write to Joumana Saad at joumana.saad@argaamplus.com