Omar Al Jaroudi
CEO of Shuaa Capital Saudi Arabia
One foreign company to recognise the potential of Saudi Arabia's huge financial market is Shuaa Capital Dubai, which did not hesitate to establish its new Saudi branch even in the middle of the global financial storm. “We actually arrived just before the crisis hit, at a bad moment, but we have been doing well anyway,” explains Mr. Omar Al-Jaroudi, CEO of Shuaa Capital Saudi Arabia.
AN EYE ON KSA OPPORTUNITIES
Proof of Shuaa´s confidence in the resilient Saudi economy is the company's recent opening of a second office in Jeddah. “Because of the crisis, many investors and fund managers took a step back to reconsider their policies and decisions. There was a general return to the principles of sound investing in a strong economy carried by real fundamentals. We carried out a survey among investors and fund managers which showed high confidence in the Saudi economy: KSA has a huge and growing population, large reserves of minerals and huge financial resources, which are now being invested wisely. All this at a moment when neighboring countries are struggling to prove their liquidity.”
In fact, Al-Jaroudi thinks the future of the country looks more promising than ever. “I know many people who started their careers here, then spread out all over the world and they are now coming back. Things are changing very fast here”. Indeed, of Shuaa's 45 full-time employees - fully dedicated to the huge local market - over 60% of them are Saudis, including Al-Jaroudi himself.
The entry of Shuaa to the Saudi Market
Shuaa Capital Dubai, a publicly listed company, was founded in 1979 by the Chambers of Commerce of several GCC countries and started as a private equity house. Later, it expanded its activities to become a full-fledged investment bank, providing the entire range of services including brokerage, asset management and investment banking.
In April 2007, the kingdom's Capital Management Authority licensed Shuaa to carry out the same activities in KSA. Shuaa Capital Saudi Arabia is a closed joint stock company, with a paid-up capital of SR 150 million. Shuaa Capital Dubai holds 60% of the shares, with the remaining 40% divided equally among four prominent Saudi business groups: Al Faisaliah Holding Group, Sara Trade Holding, Al Mutlaq Group, and Ibrahim Abunayyan & Bros.
The company has carved out a niche for itself among affluent high net worth customers. “On the retail level, the market is controlled by local banks; they have good distribution, better financial capabilities and established accounts. I would prefer not to see them as our competitors but as a fait accompli in the market. We serve another niche, very far from theirs. Our clients are interested in quality advice, a personalised service and our good research capabilities.”
Shuaa's astute sense of marketing has enticed some large accounts to come their way. “When we arrived here and looked at the market, we noticed that there were several economical sectors which had not grown yet despite the growth in population and demand, and contrary to the regional growth of the same sectors. We identified five underdeveloped fields: tourism, hospitality, logistics, health care and education and we have concentrated on those fields.”
Shuaa Saudi Hospitality Fund
To capitalise on the huge gap in demand and supply in hotels, the company developed its flagship product: the Shuaa Saudi Hospitality Fund. “I think that in this country we have been too busy with the public economy. There was not enough incentive to invest in the hospitality business, the sector was disorganized and doing business was difficult. All this has improved in recent years with the activities of the SCTA.”
According to Al-Jaroudi, it will take at least five more years to close the existing gap in hospitality, not to mention future demand and growth. “It is true that five new hotels are being built per year in the KSA, but at 250 to 300 rooms per hotel, that is still insufficient.”
In the meantime, however, Shuaa Capital is on the case, partnering with Rotana Hotels of Abu Dhabi. When finished in 2014, the project will comprise six properties in Jeddah, Riyadh and Eastern Province, where Shuaa's hospitality fund will build complexes with different components. The first project in Jeddah will consist of a 5-star hotel and 5-star furnished apartments plus a retail component. “In all, we are investing $133.3 million,” Al Jaroudi says.
In another location in Jeddah, Shuaa will build on the new Rotana formula, the 3+ stars 'Centrum' business hotel, with other components to be added. In all, Al-Jaroudi estimates the project will create some 3,500 long-term job opportunities.
Searching for niches
The company has successfully brought another neglected niche to the market: mergers, acquisitions and private placement. “Nobody is doing that here; we have little or no competition. It is still an uncommon phenomenon in KSA, but becoming less so. There is a huge potential here and we are already helping companies with private placements when they need to raise money for acquisitions.”
In the future, Al-Jaroudi also sees important developments taking place in the logistics sector. 'There are exactly 2 logistics companies in this huge country, whereas Kuwait has 17 of them and Dubai alone 22. Companies in KSA are wasting time, resources and efforts organizing their own logistics, which detracts from their core business and is not sustainable in the long run.”
Shuaa Capital has acquired a solid reputation for its dependable market research and analysis and its personalized advice to international investors and companies seeking information and access to the market. “But we work the other way round too. Because we are an international organization ourselves, we advise Saudi investors in their ventures abroad as well.”
Our latest investment report on Kuwait was recently published in one of the leading Spanish dailies, ABC. FindMe in Kuwait explores the economic perspectives of Kuwait and the country´s future plans to compete with its fast developing neighbours. Once the leading country of the Gulf, Kuwait has remained silent for the past decade. And although many would like to see faster changes, Kuwait is moving, at its pace, to them. Inexorably. Learn about who is who in Kuwait and read what the leaders say about their own future in our upcoming release: FindMe in Kuwait Mobile app.
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