9th of February 2016 conference call with SEDCO Capital –
by Alexander Kalis, Portfolio Manager and Head of Manager Research at Milltrust International.

SEDCO Capital is one of fastest growing firms in the MENA region with close to $5bn AUM. The firm is dual regulated by the CMA in Saudi Arabia and the CSSF in Luxembourg. The firm has a strong ethical ethos in line with SEDCO’s heritage since it was established in the 1970s. The team is comprised of some top institutional investment professionals in the region, as demonstrated by its recent award for Best Saudi Asset Manager of the Year Award in 2016.

Yazan Abdeen, Lead Fund Manager and Head of MENA Capital Markets at SEDCO Capital is thrilled with the timing of the imminent launch of the daily liquid Milltrust SEDCO MENA (UCITS) Fund (expected March 2016) which he will be the portfolio manager of. Although the MENA markets are undergoing massive structural changes from a reform perspective, they are not being treated fairly from a valuation perspective, he argues. Historically, this valuation malfunction is not sustainable in the long run and investors have the opportunity now of capturing strong investment opportunities as valuations normalise, especially through local asset managers who are able to understand the impact of the reforms that are taking place on the regional companies.

To the misconception of many global investors, the MENA region was never an oil play, as there is not one oil company listed among the 1,517 listed stocks in the MENA markets. The planned partial listing of Aramco, the largest oil producer in the world, will not feature the oil reserves but simply the excavation activities.

SEDCO’S KEY THEMES FOR 2016:
SAUDI ARABIA

Saudi Arabia is preparing itself to upgrade to Emerging Markets status in 2017 or 2018 (from Frontier today). In terms of market cap, Saudi Arabia is already bigger than Russia, Mexico and close to the size of Brazil. Daily turnover represents close to 18% of the Emerging Markets combined.
Key sectors: banking, consumer, and selective stocks in aviation.

UAE 
The UAE has been diversifying out of oil in the last 10 years to focus on services, tourism, logistics, and banking. Dubai will be a direct beneficiary of Iranian fund inflows that are expected with the lifting of sanctions.
Key sectors: logistics and support businesses based on trade .

KUWAIT
Significant fiscal reserves. Capital spending has transformed spending attitude since 2015 which has triggered money flow into the economy. The country’s strengths is still with the consumer.
Key sectors: consumer discretionary and telecoms.

OTHER MENA REGIONAL MARKET HIGHLIGHTS
– Trading at 15% discount to their 5 year P/E (in line with 2011 P/E, triggered at the time by the Arab Spring)
–  26% discount to 10 year P/B average, and at all time low
– Close to 5% dividend yield in USD terms with no currency risk.

To listen to the conference call replay or for additional information, please email us at: info@milltrust.com