Amlak International for Real Estate Finance (“Amlak”, “Amlak International” or “the Company”), Saudi Arabia’s leading non-bank real estate finance company, announces its intention to proceed with an Initial Public Offering (the “IPO” or the “Offering”) on the Main Market of the Saudi Stock Exchange (“Tadawul”). The Offering will comprise 27,180,000 Ordinary Shares. The Offer Shares represent 30% of the Company’s Share Capital, and the Net Proceeds of the Offering will be paid to the Selling Shareholders on a pro-rata basis. The Capital Market Authority (“CMA”) issued its resolution on 25 December 2019, approving the application for the offering. The Company has appointed NCB Capital Company as Sole Financial Advisor, Sole Bookrunner, Sole Underwriter and Lead Manager in relation to the Offer Shares.

OVERVIEW OF AMLAK INTERNATIONAL

  • Amlak International is a Saudi non-bank real estate finance company established in 2007 and licensed by the Saudi Arabian Monetary Authority (“SAMA”) in 2013 to provide Sharia-compliant real estate financing solutions to corporate (including high-net-worth-individuals “HNWIs”) and individual clients.
  • Highlights:
  • Among the most efficient in its sector with Earnings Before Tax (“EBT”) margin of 34.4% in 2019 and 44% in Q1 2020
  • Strong and stable payout record with 42% of capital paid back in cash dividends since 2013
  • State-of-the-art Temenos T24 technology platform enables efficient scalability of operations
  • Resilient and predictable revenues from diverse corporate and individuals real estate financing portfolio
  • Robust capital base and low debt/equity ratio of 1.88x with headroom for growth, SAR 1.37 billion in unutilized bank facilities as at Q1 2020
  • Amlak’s objective is to be the Kingdom’s leading provider of Sharia-compliant real estate finance services, and to achieve balanced and steadily increasing revenues, thereby cementing its leadership position within the Saudi real estate finance industry.
  • The Company benefits from a highly-experienced management team, responsible for implementation of strategy, achieving positive and stable performance along with high levels of operational efficiency.

Mr. Abdullah Al Howaish, Chairman of Amlak International, commented:

“The announcement of our intention to list on Tadawul is a historic moment for the Company, with the forthcoming IPO a testament to our commitment to future growth. Amlak International plays a leading role in Saudi Arabia’s burgeoning non-bank real estate financing industry, and has positioned itself to take full advantage of the opportunities that today’s market presents. Our listing on Tadawul marks a new chapter in the story of the Company, and the Board has every expectation that management and staff will fulfil the trust that the market places in us. We look forward to delivering on the strategic roadmap we have set out for the years ahead.”

Mr. Abdullah Al Sudairy, Chief Executive Officer at Amlak International, said:

“We are ready to capture a growing number of opportunities, in particular those provided by the positive market dynamics created by the Kingdom’s Vision 2030 reform programme. Among our most important competitive advantages is our diverse lending portfolio, which covers the full corporate and individuals spectrum. This will enable Amlak to build on its strong position in the corporate real estate financing segment, while supporting Saudi nationals in their ambitions to buy and build homes. Demand for real estate financing is accelerating, and our substantial funding base and first-class technology platform put us in a position to increase momentum.”

ATTRACTIVE MARKET DYNAMICS

  • Real estate financing is expected to grow 2.3x during the next 10 years[1]

There is growing demand for residential and commercial real estate, and Saudi Vision 2030 targets increasing the size of real estate financing relative to GDP from 5% to 10%. With White Land Tax expected to stimulate development and increase supply, the size of the real estate financing market is expected to grow by a CAGR of 8.7% from 2019 to 2029, to exceed SAR 1 trillion in value.

  • Saudi Arabia needs up to 207,000 houses per year for the next 10 years[2]

Driven by population growth and supportive government policy, housing demand in the Kingdom is expected to increase to 188,000 units per year until 2021, increasing to 203,000 per year from 2022-2025 and to 219,000 per year from 2026-2029. As compared to 179,217 new individuals contracts disbursed in 2019[3] (at a value of SAR 79 billion), the Ministry of Housing is targeting 204,000 new individuals contracts in 2020[4].

  • Real estate finance companies have become more competitive in the market

Supportive regulation and advances in technology are driving growth for the industry. Real estate finance companies are positioned to grow with the wider market, due to improving regulatory and legal frameworks, government profit/interest rate subsidies, portfolio purchases by the Saudi Real Estate Refinance Company (“SRC”), flexible financing solutions for real estate developers, improving financial technology platforms, and specialized lending solutions. As at 31 December 2019, Amlak accounted  for approximately 28% of the total value of real estate financing companies’ combined on-balance sheet portfolio.

INVESTMENT HIGHLIGHTS

A range of factors have enabled Amlak International to achieve a healthy rate of top- and bottom-line growth since 2007. With industry-strong profitability metrics, the most diverse lending portfolio in its peer group, and access to a substantial funding base, the Company has created a solid platform for the future.

Amlak leads its peer group on profitability

  • With revenue of SAR 296 million and earnings before tax (“EBT”) of SAR 102 million at a margin of 34.4%in 2019, and most recently revenue of SAR 75 million and EBT of SAR 33 million at a margin of 44% in Q1 2020, Amlak is expected to maintain its strong position among real estate finance companies. The Company generates above-average operating margins and returns compared to its competitors.

Client-centric and integrated lending platform

  • Amlak’s financing solutions are diverse and complete, covering the full corporate and individuals spectrum. Financing is delivered by an integrated and scalable system, that streamlines a high volume of applications and manages approvals in real-time. The platform delivers approvals within one week to one month, enabling the Company to accommodate up to 100,000 clients without the need for significant investment in software or fixed assets. Preliminary credit approvals are made within 3-72 hours for residential properties and within one week for commercial properties. Over 90% of residential contracts are generated by referrals and digital channels.

Capitalizing on growing demand from corporates and individuals

  • The Company has identified a clear opportunity to cater to an under-served corporate sector that is supported by Vision 2030’s commitment to the private sector. The sector shows strong growth potential, and corporate real estate financing delivers attractive returns to non-bank lenders. Driven by a focus on well-positioned sectors such as services, education and healthcare, Amlak grew disbursements in its corporate book by 29% from 2018 to 2019, with average corporate portfolio yield above 9% at year-end 2019. The Company’s corporate lending book comprises 69% of its on-balance sheet portfolio.
  • After portfolio sales, Amlak’s total portfolio increased to SAR 3.3 billion in Q1 2020. The Company has built a fruitful relationship with the SRC, to whom it has sold more than SAR 400 million in individuals contracts from its portfolio to date – benefitting from fee based income, an additional competitive source of funding, and off-loading of risk from the individuals lending book. This is an important component in the programme for capitalizing on growing demand for financing among prospective Saudi homeowners and homebuilders.
  • Sales efforts across the individuals and corporate portfolios have resulted in rapid growth in origination. New disbursements across the portfolio increased by 45.4% from 2018 to 2019.

Diversified funding model with room to innovate

  • Amlak’s funding model enables it to maintain a healthy balance sheet that provides significant headroom for growth and innovation. The Company has access to a wide and diverse range of funding sources, with SAR 3.5 billion in available credit with banks, of which more than 39% is unutilized. As at 31 December 2019, 65% of Amlak’s funding was provided by Sharia-compliant debt, and 35% from internal resources. Funding provided by portfolio sales to SRC provided an additional funding source. The Company’s debt/equity ratio stood at 1.8x at year-end 2019, with a 2.84x receivables/equity ratio that is well within the 5.0x regulatory limit determined by SAMA.

Prudent risk management and credit strategy result in high asset quality

  • The Company’s multistage risk management methodology encompasses its credit strategy, risk and liquidity management, digitalized infrastructure and efficient controls and procedures. The credit strategy is characterized by a prudent due diligence process, a carefully selected target market, and annual revaluation of collateral for large exposures. The Company’s NPLs are on average 140% secured by real estate collateral and supported by the appropriate provisions.
  • Sound risk and liquidity management is achieved by an appropriate mix of corporate and individuals lending, sound asset liability management, and hedging against fixed rate contracts. Amlak has a liquidity surplus of approximately SAR 1.2 billion for more than one year as of year-end 2019.
  • The Company’s industry-leading digital infrastructure is subject to continuous enhancement and advanced cyber-security measures, achieving zero cyber-related losses. Stringent controls, processes and origination procedures coupled with a rigorous Business Continuity Plan supported the seamless execution of a 119% increase in the number of residential mortgage contracts disbursed in 2019.

Seasoned Board, experienced management

  • Amlak’s Board of Directors is composed of independent and non-independent members with deep sector experience, as well as with publicly listed companies. Sector specialization across the Board’s membership includes financial services, real estate, retail, transportation, industrials, healthcare, food and beverages, entertainment, and telecommunications. The Company’s senior management is highly experienced in the real estate finance industry, with a combined track record of more than 145 years. More than half of senior management have been with Amlak for over 10 years.

BOARD OF DIRECTORS

The Board of Directors comprises individuals with diverse professional experience, as follows:

  • Abdullah Ibrahim Al-Howaish – Chairman
    • Sector experience: Financial services, real estate, retail, industrial and transportation
  • Mansour bin Abdulaziz Albusaily – Vice-Chairman (Independent)
    • Sector experience: financial services, real estate, retail, transportation
  • Faisal Abdullah Al Omran – Director
    • Sector experience: financial services, healthcare
  • Khaled Abdulaziz Al Rayes – Director
    • Sector experience: financial services, food and beverage
  • Amr Mohamed Kamel – Director (Independent)
    • Sector experience: real estate, telecommunications, medical equipment
  • Majed bin Abdulghani Fakih – Director
    • Sector experience: financial services
  • Sultan Fawaz Al Hokair – Director
    • Sector experience: real estate, retail, food and beverage, entertainment
  • Thamer Abdulkader Jan – Director (Independent)
    • Sector experience: financial services, real estate
  • Adel Hussein Ahmed – Director
    • Sector experience: financial services

SENIOR MANAGEMENT

Amlak International, with the direction provided by its Board of Directors, benefits from a highly experienced management team, who possess market-leading experience in the real estate financing sector. Senior members of management include:

  • Abdullah Turki Al Sudairy – CEO
  • Ali bin Mohammed Alshashaa – Executive Director, Finance, Operations and IT
  • Tawfiq Yahya Maafa – Executive Director, Retail Segment
  • Saud Abdullah Al Shathri – Executive Director, Administrative & Human Resources
  • Mohammed Habeeb Al Salman – Executive Director, Risk & Credit
  • Nizar Saleh Al Suwaiyan – Executive Director, Corporate Management
  • Turki Otaibi Al Zahrani – Executive Director, Strategy & Marketing
  • Omar Sulaiman Abanomia – Board Secretary and Senior Manager, Governance & Legal Affairs
  • Abdullah bin Mohammed Al-Shahri – Senior Manager, Internal Audit Department

THE OFFERING

  • Listing of Ordinary Shares on the Main Market of the Saudi Stock Exchange (Tadawul).
  • The Offering comprises 27,180,000 Ordinary Shares (“Offer Shares”).
  • Immediately following the listing, Amlak International is expected to have a minimum free float of 30% of its issued share capital.
  • The IPO will comprise 27,180,000 ordinary shares representing 100% of the total number of Offer Shares. If there is sufficient demand by Individual Subscribers (“Retail Tranche”), and the Participating Entities (“Institutional Tranche”) subscribe to all of the Offer Shares allocated to them, the Lead Manager may reduce the Offer Shares allocated to Participating Entities to 24,462,000 Offer Shares, representing 90% of the total number of Offer Shares. A maximum of 2,718,000 shares, representing 10% of the total number of Offer Shares, will be available to Individual Subscribers through the Retail Tranche.
  • The offer of shares in the Institutional Tranche will be made as follows:
  • Public and private funds that invest in securities listed on the Saudi Stock Exchange as permitted by the fund's terms and conditions
  • Authorized persons who are licensed to deal as a principle
  • Clients of a person authorized by the CMA to conduct managing activities
  • Any legal persons allowed to open an investment account in the Kingdom, and an account with the depositary centre, including foreign legal persons (includes Qualified Foreign Investors) who are allowed to invest in the market where the shares of an issuer are to be listed
  • Government entities, any supranational authority recognized by the CMA, the Exchange, or any other stock exchange recognized by the CMA, or the Depositary Center
  • Government-owned Companies whether investing directly or through a portfolio manager
  • GCC companies, and GCC funds if the terms and conditions of the fund permit it
  • Over-subscription and allotment: Excess subscription monies, if any, will be refunded to the Subscribers without withholding any charge or commission by the Lead Manager or the Selling Agents. Announcement of the final allotment will be on 12 July 2020 and the refund of excess subscription monies, if any, will be made no later than 15 July 2020.
  • Lock-up period: The period during which the Major Shareholders shall be subject to a lock-up period is six months from the date on which trading of the Offer Shares commences on the Exchange. During such period, the Major Shareholders may not dispose of any of their Shares. After the end of the lock-up period, they may dispose of their Shares without prior approval from the CMA.
  • The Company has appointed NCB Capital Company as Sole Financial Advisor, Sole Bookrunner, Sole Underwriter and Lead Manager in relation to the Offer Shares.
  • The Company has appointed the Law Office of Looaye M. Al-Akkas in Association with Vinson & Elkins LLP as counsel for the IPO.

TIMETABLE

Start of Institutional Book Building: 22 June 2020

Close of Institutional Book Building: 29 June 2020

Announcement of Offer Price: 30 June 2020

Start of Retail Offer: 2 July 2020

Close of Retail Offer: 5 July 2020

Allocation of Shares Announcement: 12 July 2020

Refunds to All Subscribers (if any): 15 July 2020

Expected trading commencement date for the Shares: The shares trading commencement is expected to start after completion of all the relevant legal requirements and procedures. Announcement of the shares trading commencement will be made through Tadawul’s website (www.tadawul.com.sa).

[1] Market research by 4Sight

[2] Market research by 4Sight

[3] Source: SAMA

[4] Source: Ministry of Housing

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