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Elaine Mulcahy
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Victoria Robson
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Hannah Jatwani
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hannah.jatwani@dealreporter.com
Tom McKay
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Special Situations
Company Country Sector Deal Status Situation Tracked Description
From
Dubai International United Financial Confirmed Significant 17-Dec-10 DIC creditors expect to negotiate an improved
Capital LLC Arab Services Business coupon on delayed payements, this news
Emirates Events service reported
Emirates United Telecommuni Potential Significant 13-Dec-10
Telecommunicatio Arab cations: M&A Etisalat would look at Zain stake acquisition
ns Corporation Emirates Carriers again, this news service reported
Dubai Group United Financial Confirmed Significant 29-Nov-10 Dubai Group discussions with its creditors
Arab Services Business include the extent to which intercompany debts
Emirates Events are counted in the total debt to be restructured.
Recent reports said that the company is
restructuring USD 10bn of liabilities, up from a
previously reported USD 7bn. Bank debt totals
USD 6bn
AREF Investment Kuwait Financial Confirmed Significant 08-Nov-10
Aref Investment Group hires adviser on debt
Group Services Business
restructuring, according to reports
Events
Bahrain Islamic Bahrain Financial Confirmed Equity Capital
Bahrain Islamic Bank postpones its rights issue,
Bank Services Markets
according to a stock market statement
Damas United Consumer: Confirmed Significant 28-Oct-10
Damas International is in the final stages of
International Arab Other Business
negotiating a cascade agreement with the
Limited Emirates Events
Abdullah Brothers, according to a company
statement
Mobile Saudi Telecommuni Potential Significant 27-Oct-10
Telecommunicatio Arabia cations: M&A The consortium of Batelco and Kingdom
ns Saudi Arabia Carriers Takeover Holding Company is still waiting for Zain Saudi
Company Targets Arabia board approval before it can begin due
diligence on its proposed 25% stake acquisition
in the Saudi telco, this news service reported
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Ahmad Hamad Saudi Other Potential Legal & 18-Mar-10 AHAB is expected to meet its short term debt
Algosaibi and Arabia Regulatory obligations but the outcome of its suit against
Brothers (AHAB) Action Saad Group may hamper its ability to repay
long term liabilties, this news service reported
Investment Dar Kuwait Financial Potential Significant 14-Mar-10 The next court hearing on 5 May for an
Company K.S.C. Services Business application by The Investment Dar (TID) for
Events protection under Kuwait’s Financial Stability
Law is likely to be adjourned again without
resolution
Aldar Properties United Real Estate Potential Significant 04-Mar-10 Aldar Properties increases its share capital to
PJSC Arab Business AED 2.9bn through the conversion of bonds
Emirates Events issued to Mubadala Development Company,
according to a company statement
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Sharjah Islamic Bank Financial Services Corporate USD 18-May-2011 Standard Chartered Marketing a US dollar sukuk;
(formerly known as Bond Plc , HSBC Holdings investor meetings from 9-16 May
National Bank of Sharjah) Plc in the UAE, Asia and Europe.
Islamic Development Bank Financial Services Corporate USD May 2011 Deutsche Bank AG , IDB to hold roadshow on 1-8 May
Bond Standard Chartered in Middle East and Asia; plans to
Plc , HSBC Holdings visit Europe from 11-16 May.
Plc , BNP Paribas SA
Akar Properties Real Estate Corporate USD Q2 2011 Will try to issue a benchmark bond
Bond late in 2011 to fund future real-
estate developments.
Albaraka Banking Group Financial Services , Corporate USD 500 Q2 2011 Standard Chartered The Bahrain-based banking group
Real Estate Bond Plc is planning a USD 500m issue of
Shariah-compliant bond in 2Q11.
Emirates Aluminum Industrial products Corporate USD Q2 2011 Plans to issue a bond in 2011 to
and services Bond finance phase two of a smelter
project.
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09 May 2011
Hannah Jatwani, Dw/dR Analyst Middle East ; +44 20 7010 6367; +971 43697276; hannah.jatwani@dealreporter.com
Share price information AGLTY S&P rating NR Equity KWD 912m Assets KWD 1.50bn
Listed on the KSE Moody’s rating NR Cash KWD 204m Total debt KWD 129m
Price (09/05/2011) 0.40
Fitch rating NR EV/EBITDA 4.68x Price/Earnings 17.93x
52 WK High (12/05/2010) 0.60
52 WK Low (04/07/2010) 0.28
YTD Return -23.08%
Shares O/S (m) 1,047 BUSINESS
Market Cap (09/05/2011) 419
Agility Public Warehousing Company K.S.C. (Agility) is an integrated logistics company providing supply chain services in-
cluding freight forwarding, warehousing, distribution and specialized services in project logistics, fairs and events, fuels
Price, KWD
and chemicals. The company’s Defense and Government Services (DGS) division provides logistics services to governments,
0.7
ministries of defense and international organizations. Agility’s infrastructure group of companies manages commercial and
0.6
0.5
industrial real estate and offers solutions in customs optimization and clearance, waste management and recycling, aviation
0.4 services and remote infrastructure.
Agility was founded in Kuwait in 1979 by Emiri decree and has grown organically and through acquisitions to approximately
0.3
USD 6 billion in annual revenues. The company is listed on the Kuwait Stock Exchange and Dubai Financial Market and has
0.2
0.1
550 offices spread out over 100 countries.
In November 2009, the company announced the U.S. Department of Justice has intervened in a civil lawsuit under the
0
May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11
False Claims Act and filed a criminal lawsuit. The U.S. government has alleged that Agility committed fraud against the U.S.
government and violated the terms of its contract by overcharging the government in relation to food supply contracts
Shareholders for troops in the Middle East. The company has since denied the claims and continues to fight the allegations in court. The
Wataniya Real Estate 22% court case remains outstanding to date and the extent to which the company would be liable for damages has yet to be
determined. Due to the civil and criminal proceedings, the company has been suspended from bidding for additional gov-
General Social Insurance 21%
ernment contracts; however it continues to fulfill its obligations under the current contracts. In February 2011, the company
Other 57% announced the Defense Logistics Agency, a part of the U. S. Department of Defense, has extended its contract with Agility
for six months until August 2011.
2,000 20% • Uncertainty as to when the US court cases will be resolved and what damages the company may have to pay;
1,836
1,705
• Continued suspension of permission to bid for US government contracts is taking a toll on the company’s ability
1,667 1,606
1,600 16%
1,326 to generate revenue;
1,200 12%
• Company image has been tarnished and the viability of the DGS segment going forward is in question;
• The company has capacity for debt but given the outstanding legal issues its access to debt markets is limited;
800 8%
• Business focus shifted to Global Integrated Logistics (GIL) segment, DGS contributed only KWD 393m in 2010
400 4%
0 0% (2009: 715m).
2006 2007 2008 2009 2010
Revenues (left) EBITDA margin (right)
PROFITABILITY
EBITDA, Interest cover
Historically, Agility had demonstrated steady top-line growth, however, revenues have declined over the last two years
down to KWD 1.6bn (USD 5.8bn), representing a 13% decline since 2008. This is in large part due to the ongoing court case
KWD m
with the U.S. Department of Justice and the resulting ban on bidding for new government contracts. The DGS segment,
which is responsible for the US government contracts, has dropped from contributing 44% of total revenue in 2009 to only
250 217 230 100x
210 216
200 80x 24% in 2010. On the other hand, GIL division revenue grew 17% to KWD 1.2bn, from KWD 1bn a year earlier.
150 60x The company’s gross profit margin declined sharply in 2010 to 30% from its previous levels of approximately 36%-37% over
80 the 2006-2009 period. Agility recorded asset impairment losses in 2010 of KWD 35mn (USD 129m), 62% of it in goodwill,
mainly due to the loss of U.S. government contracts. The impairment losses and decline in gross profit margins resulted in
100 40x
50 20x EBIT margins falling to 2%, representing KWD 36m (USD 132m) in EBIT. Agility reported EBITDA of KWD 80m (USD 292m) for
2010, a y-o-y decline of 63%. The margin contraction is in large part attributed to the sharp decline in the DGS business which
typically has higher margins than the integrated logistics segment.
0 0x
2006 2007 2008 2009 2010
EBITDA (left) Interest cover (right)
Headquartered in the Middle East, the logistics provider derives 66% of its revenue from other regions. Despite overall rev-
enue decline, the Middle East segment was the only declining region with a y-o-y revenue drop of 34%; while Asia strength-
ened by 39% in 2010.
Net debt, Net leverage
KWD m
ANGLES TO CONSIDER
200 1.2x
160
150 0.8x (-) Legal dispute: Uncertainty around the timing and the extent of damages to be paid with regard to the U.S.
100 court cases, as well as the ban on bidding for new contracts, is a major cause for concern for
investors.
100 0.4x
50 39 0.0x (+) Realigned business strategy: The logistics provider is reducing its reliance on the government services business and has
refocused its efforts on the core global logistics segment, which grew revenue by 17% dur-
ing 2010. Management is looking to improve margins in the segment through technology
0 -0.4x
2006 2007 2008 2009 2010
-50 -0.8x standardization and process efficiency.
-60 (+) Growth prospects: Once the company successfully resolves its legal battle, it has the potential to grow rapidly
given its acquisitive background, global diversification and low leverage.
-100 -75 -1.2x
KWD 48m term loan KWD 23 The company’s current cash levels are higher than its gross financial debt for the first
time since 2006. Their debt consists of mainly revolving credit facilities and term loans.
Other loans KWD 46
Of the total debt outstanding, 54% was on a short-term basis which could explain the
Total debt KWD 129 need to maintain cash on hand. Agility holds debt in various currencies due to the global
nature of its business; however, 53% is denominated in USD. Most of the debt is held at
Cash and cash equivalents KWD 204
the parent level, with only 11% being held by subsidiaries of the company.
Net debt - KWD 75
USD
53%
SGD
12%
INR
Short-term liquidity outlook (KWD m) 7%
Est. net interest expenses 2 Cash and cash equivalents 204 Other AED
13% BHD 4%
Est. capex 48 Est. FY11EBITDA 105 3%
150
Liquidity 100 80
Due to the slowdown in business, Agility’s funds from operations declined 53% yo-y to
KWD 103m at the end of 2010. Conversely, better management of working capital ac- 50 31
43 45
counts helped curb the drop in operating cash flow, which stood at KWD 169m, to 27% 20
9
y-o-y. Although the company has been free cash flow negative for the last few years, 2 7 3 4 3
in 2009 and 2010 that was mainly because it repaid debt of KWD 75m and KWD 226m, 0
respectively. Agility reported a net decrease in cash of KWD 35m for 2010, compared to 2006 2007 2008 2009 2010
KWD 29m the previous year. EBITDA Net Interest Expense Capex
The company’s spending on net capital expenditures in 2010 was well below historical
standards due to cash inflows from disposals of property, plant and equipment. Agility Cash Flow Bridge (KWD m)
maintained its dividends payout of 40% (40 fils per share) despite uncertainty on its fu-
ture cash requirements for any penalty payments linked to the court cases. 350
Agility has a history of conducting acquisitions in an effort to increase operating scale; it 300
had however slowed down spending on acquisitions in 2010. Subsequent to year end the 250
company announced its acquisition of a 24% stake in Korek Telecom, the Iraqi mobile ser-
vice provider, for a USD 50m payment in addition to a USD 100m 4-year shareholder loan 200
and conversion of existing debt. The deal was structured as a joint venture with France
Telecom, which will own a 20% stake in the Iraqi subsidiary, for a USD 245m payment and
150
Agility currently has sufficient liquidity to repay its short term debt, invest in capital ex- 50
penditures, fund its acquisition of Korek Telecom and still have cash needed to run its dai-
ly operations. It has the ability to take on additional debt; however the need for funding
0
Dividend paid
Other financial
Net acquisition
Net capex
exchange rate
Cash at 1 Jan
Funds From
Δ in WC
Δ in debt from
Cash at 1 Jan
will depend on its future acquisition plans and the outcome of the ongoing legal dispute.
Operations
differences
financing
flows &
2010
2011
Legal Issues
Inflows Outflows Cash position
In addition to the pending U.S. court cases mentioned earlier, Agility has been subject to the following legal battles in recent times:
• In 2010, a subsidiary has settled a surcharge investigation case with New Zealand authorities and agreed to pay civil fine of KWD 525,000. The amount was paid
subsequent to year end;
• Another subsidiary in the United States has agreed to pay a KWD 193,000 civil fine in connection with a surcharge investigation. The settlement agreement is subject to
court approval;
• The company has also been named in an investigation, along with 20 other freight forwarding companies, by the Italian competition authority (ICA). The company is
awaiting a formal confirmation on the allegations being made by the ICA.
The company has not made any provisions on their balance sheet to account for any future penalties due to the difficulty in quantifying potential liabilities.
AGILITY PUBLIC WAREHOUSING COMPANY K.S.C.
Hannah Jatwani, Dw/dR Analyst Middle East ; +44 20 7010 6367; +971 43697276; hannah.jatwani@dealreporter.com
Aramex United Arab Emirates AED -535 2,694 2,159 278 7.76x -1.92x
Gulf Warehousing Company Qatar QAR 122 860 982 72 13.69x 1.71x
Kuwait & Gulf Link Transport Company 1 Kuwait KWD 117 36 153 26 5.77x 4.41x
Average 9.08x 1.40x
1
Based on 2009 results Median 7.76x 1.71x
Source data: SIX Telekurs, company website, company RNS announcements, dR and Dw proprietary research and DCF unless otherwise stated.
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