Best managed companies in the Middle East 2010: After Dubai, funds focus on consumer demand
Firms exposed to the Gulf’s more speculative property markets are no longer attractive. Top stock picks in the Middle East revolve around the large and youthful consumer populations of Egypt and Saudi Arabia. Good corporate governance is another key to foreign investment. Dominic O’Neill reports.
DAIRY FARMS IN one of the world’s most arid countries might not be expected to be particularly successful. But Saudi dairy firm Al Marai is a resounding favourite among fund managers.
Al Marai’s cows live in large air-conditioned farms, and yields are high. In the first half of this year, Al Marai’s revenues were up 20% on the same period last year.
Fund managers are particularly attracted to Al Marai because, unlike some firms in the region, it is highly transparent (it has won awards for its investor relations). It also wins a higher score than any other company in the Euromoney poll of best-managed companies in the Middle East.
Hesham Abo Jamee, head of asset management at Saudi Arabia’s Bakheet Investment Group, warns that Al Marai might be over-valued, and prefers to wait a few years to see its returns from its new projects. But for fund managers outside Saudi Arabia, Al Marai fits into a preferred theme: consumer-related businesses in countries with large, young, and increasingly rich populations.
One of the reasons why equity fund managers have gone off firms in Middle Eastern states such as the United Arab Emirates is because, unlike in Saudi Arabia, migrant workers dominate the population there.