Anwar Hilal al Jabri, CEO of Jabreen Capital believes that the company’s recent acquisition of a stake in EastBridge Partners Singapore gives it a strong base in South East Asia and will act as a bridge between Asia and the Middle East region. Excerpts from an interview
Can you give us a brief background of Jabreen Capital?
Jabreen Capital was established in 2015 and it was launched as a full-fledged private equity house in 2018. Jabreen owns a number of companies and has assets under management of over $700mn. Major investments in our portfolio include a 10 per cent stake in Bank Muscat, an eight per cent stake in Ahli Bank; and we are the largest shareholder of Takaful Oman Insurance and the second largest shareholder of Al Ahlia Insurance. Jabreen Capital is aiming to invest in non-cyclical sectors like education, healthcare etc. to diversify our portfolio from its overweight in financial services.
How is Jabreen Capital planning to utilise its RO100mn capital base?
We have already deployed our capital and it increased our return on equity (ROE) substantially. Our ROE has increased from single digit in 2017 to double digits in 2019. It has one of the highest ROEs in the region, compared to peers. This was made possible by picking the right investments at the right valuation, while having an optimised capital structure.
Jabreen Capital has global ambitions in terms of geographical diversification. How are you going to identify the right global opportunities and manage your geographically diversified portfolio?
There were different views regarding where to invest, hence we decided to first identify target sectors and geographical focus. We conducted a thorough research on global mega trends such as the rise of middle class, change in demographics, population growth, technological adoption and scarcity of resources. This process helped us to identify South East Asia as a good investment opportunity. The GDP of the ASEAN-6 countries (Indonesia, Malaysia, the Philippines, Singapore, Vietnam and Thailand) has virtually doubled in real terms since the start of the millennium with per-capita GDP rising 2-4 times across various countries. With a combined population of 700 million and GDP of $2.3tn ASEAN has emerged as an economic bloc in its own right.
Southeast Asia has become an important global production centre for the manufacturer of an increasing number of products and components and has emerged as a key player in global supply chains. Many global players in various industries already have their presence in the Southeast Asia. More than 80 per cent of the global Fortune 500 companies have operations in the region and top 10 global automotive companies as well as top 10 global auto parts manufacturers have operations in Southeast Asia. Its proximity to major economies like China, Australia and India is a major enabler for capacity expansion. Lastly, South East Asia has a growing middle class that creates a lot of demand in healthcare, education, retail, and infrastructure – areas that we are interested in.
To get exposure to South East Asia, Jabreen Capital recently concluded the acquisition of a stake in EastBridge Partners Singapore, an experienced private equity firm. EastBridge Partners Singapore focuses on mid-market investments and targets proprietary transactions, an area where the team has a substantial competitive advantage due to their longstanding experience, network and reputation in the market. The acquisition has positioned Jabreen Capital as a gateway to attractive private investment opportunities in South East Asia. Having a platform in Singapore and our team over there along with the experience of EastBridge Partners will create a two-way bridge between the Middle East and Asia.
In what ways will the stake acquisition in EastBridge Partners Singapore help Jabreen Capital tap into the South East Asia market?
We have taken a 43 per cent stake in EastBridge Partners. It’s our platform over there, and the two entities are going to co-manage it. The platform will in turn manage third party money. Going back to our model, it is a private equity model. In this model, you usually have two buckets – one bucket is your money called a prop-book, which you manage on your own, and which we are doing presently. The other bucket or stream of income is to manage third party money. We decided to invest in Singapore to have an entity that manages third party money as our partner. These platforms will give us an opportunity to execute direct deals in the region as well.
You spoke about following a private equity model. Does this mean that Jabreen Capital is going to unlock value in its investments periodically?
Private equity has two arms – one, you can establish a fund for a particular period i.e. five years with another five years to exit and close the fund. That is a typical model and with that you unlock value in between or enhance value. The other is a deal by deal model wherein you convince partners that you want to acquire the company, turn it around, create, extract value and then exit. That is the prop-book model. We are following both models.
What is your view of Oman economy and investment opportunities in Oman?
The recent data on Oman’s fiscal position is very encouraging. Oman’s budget deficit reduced by 67 per cent in the first five months of 2019 as compared to same period in 2018. Oman’s fiscal deficit stood just at RO358mn, the lowest shortfall for the first five months since 2014. The improvement in fiscal position prompted rating agencies to reaffirm their stable outlook on Oman. This also had a positive impact on Oman’s bond issuance, as it issued $3bn in July 2019 at attractive rate and the issue was oversubscribed by over three times. Oman’s financial system remains strong as banks are well capitalised with sufficient capital buffers and credit quality remains strong with adequate provision coverage. With macro improvement, Oman’s MSM30 Index appears very attractive. The 13 per cent decline in the MSM30 index in the year-to-date, has resulted in compelling valuations with a forward P/E of 6.2x, which is well below its historical average of 10x, and dividend yield of 7.3 per cent, the highest in the region. Hence, we believe the local market presents compelling investment opportunities and we continue to look opportunistically at medium to large ticket deals in Oman that can add substantial value to our overall portfolio.
What are the advantages that Jabreen Capital can leverage as a part of the Ominvest Group?
We draw a lot of support from the parent company, the biggest of which is funding. In addition, being a subsidiary of a highly regulated publicly held company, our standards of corporate governance are high.
What are your future plans for Jabreen Capital?
We believe that sky is the limit. We currently manage $700mn worth of investments but we have many sectors and geographies to cover and expand. Once you build the base and the expertise, the only thing in future is to expand and create enhanced shareholder value.