REG - Gulf Investment Fund - Quarterly Report 30 September 2023

Gulf Investment FundAnnouncement

16/10/2023 15:00

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RNS Number : 2716Q  Gulf Investment Fund PLC  16 October 2023

16 October 2023

Legal Entity Identifier: 2138009DIENFWKC3PW84

 

30 September 2023

Gulf Investment Fund plc (GIF) Quarterly Report for 3 months to 30 September
2023

§ Net Asset Value (NAV) down 1.0 per cent (S&P GCC Index down 1.5 per
cent).

§ Outlook for the GCC remains good with socio-economic reforms, tourism
initiatives and mega infrastructure projects.

Performance

GIF outperformed its benchmark (S&P GCC Composite Index) in the quarter by
0.6 per cent. The fund was helped by a slight underweight in Saudi Arabia
(which was down 3.5 per cent) and Kuwait (down 2.0 per cent) and being
overweight in Dubai (up 9.8%) and Qatar (up 1.8 per cent). In the nine months
to the end of September the GIF NAV is ahead 19.4 per cent, outperforming the
benchmark by 15.7 per cent.

In terms of stocks, positive performance came from holdings in Gulf
International Services (up 61.1% in the quarter), Emaar properties (up 25.4%),
Qatar Insurance Company (up 23.0%), Emirates National Bank of Dubai (up 19.9%)
and Maharah Human Resources (up 17.8%).

Holdings that contributed negatively were Middle East Healthcare (down 22.1%),
Banque Saudi Fransi (down 12.5%) and Saudi National Bank (down 10.9%).

On 30 September 2023, the GIF share price was trading at a 0.5 per cent
discount to NAV (five-year average discount 6.5 per cent).

Portfolio changes

During the quarter GIF increased exposure to financials, industrials, and
energy sectors, as valuations look undemanding coupled with attractive growth
profiles.

The financial sector weighting increased to 38.5 per cent of NAV from 35.0 per
cent in 3Q 2023, as Dubai Islamic Bank joined the portfolio. Dubai Islamic
Bank has a well-diversified financing book with loan growth expected in 2023.

Exposure to the industrial sector increased from 27.9 per cent to 29.6 per
cent as newly listed Lumi Rental Company and soon-to-listed Ades Holding
Company were added to the portfolio. Lumi surged 30 per cent at its trading
debut having been 94 times subscribed. With a vehicle fleet of c.22,000, it is
well placed to capture car leasing demand and tourism growth in Saudi Arabia.
Meanwhile, ADES is one of the largest drillers in the MENA region which is
expected to benefit from a ramp up in rig deployment as well higher charter
rates for rigs.

GIF also added a holding in Saudi Airlines Catering. This is the single
largest airline catering company in Saudi Arabia and is a beneficiary of
catering demand for operations tied to the Giga projects.

The fund's weighting in real estate rose from 4.8 per cent of NAV to 5.0 per
cent of NAV, as we added Barwa Real Estate into the portfolio. The fund
reduced exposure to materials, utilities and consumer discretionary to capture
better opportunities elsewhere.

Relative to the benchmark, the fund remains overweight Qatar (28.5 per cent vs
an index weighting of 10.0 per cent) but is underweight Saudi Arabia (51.7 per
cent vs benchmark weight of 59.1 per cent), UAE (13.2 per cent vs benchmark
weight of 19.2 per cent) and Kuwait (4.8 per cent vs benchmark weight of 9.9
per cent). Qatar still trades at a discount to its GCC peers, with an
undemanding 11 times earnings.

GIF ended the quarter with 28 holdings: 16 in Saudi Arabia, 8 in Qatar, 3 in
the UAE, and 1 in Kuwait; maintaining its concentrated portfolio approach. The
cash position stood at 1.7 per cent.

Outlook

Global financial markets are facing stronger headwinds on increased interest
rates, geopolitical tensions and rising bond yields. GCC remains a relative
bright spot on where these headwinds are less and are offset by domestic
resilience and sustained public and private spending.

The outlook for the GCC remains good with mega infrastructure projects,
tourism initiatives and socio-economic reforms coming through. The IMF
projects GCC GDP growth to be 2.9 per cent and 3.3 per cent in 2023 and 2024.
More importantly, non-oil GDP growth is expected to be 4.2 per cent and 3.9
per cent in 2023 and 2024 respectively.

Tourism-related industries are a major driver of non-energy growth. Visitors
to Dubai increased by 20.1 per cent year on year in the first half of 2023,
with a record 8.6 million visitors, surpassing pre-pandemic level of 8.4
million visitors. In Saudi Arabia, tourism revenue surged 225 per cent to
US$9.9 billion in Q1 2023 compared to Q1 2022. The country hosted 7.8 million
tourists in Q1 2023, which marked a 64 per cent increase versus pre pandemic
in Q1 2019. The Saudi government hopes to attract 100 million visitors by
2030.

In its September report, OPEC retains its oil demand forecast which sees
year-on-year growth of 2.44 million bpd and 2.25 million bpd respectively for
2023 and 2024.

The IMF projects GCC inflation at around 2.9 per cent and 2.3 per cent in 2023
and 2024. The lower inflation in the GCC economies gives the necessary
bandwidth to the GCC governments to continue and/or increase their fiscal
spending.

 

 GIF Country Allocation as of 30 Sept 2023      Top 5 Holdings
                                                Company              Country       Sector       % NAV
                                                Saudi National Bank  Saudi Arabia  Financials   7.9%
                                                Qatar Navigation     Qatar         Industrials  7.4%
                                                Qatar Gas Transport  Qatar         Energy       5.5%
                                                Qatar Insurance Co.  Qatar         Financials   5.2%
                                                Emirates NBD         UAE           Financials   5.1%
 Source: QIC; as of 30 Sept 2023.

 

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