Monarch : Need equity and management ?
- 1. TheBusinessWeekly n 20 April 2008 n 21 Amlak Finance, the largest real estate financier in the Middle East, announced the signing of a Dh1.4 billion syndication facil- ity with Emirates Islamic Bank (EIB). The Wakala facility is prima- rily intended to support Amlak’s real estate investments. “Amlak Finance’s finalising a financial transaction of this mag- nitude with a respected industry leader such as EIB is an impor- tant milestone in our continuing journey to drive growth through innovative and flexible funding structures and instruments,” said Arif Alharmi, chief executive of- ficer of Amlak. “We have aggressive growth plans for 2008 and beyond and will continue our strategy to focus on our core business and compe- tencies, real estate financing and investments. This transaction forms part of our overall funding requirements for 2008 to support our growth plans and interna- tional expansion. The syndication facility, which was substantially oversubscribed, exhibits the con- fidence in Amlak’s growth plans and strategy,” he added. “Emirates Islamic Bank has always been at the forefront of the economic growth in the UAE. Our portfolio of strategic alli- ances includes many of the most prominent organisations in the UAE, and Amlak is another sig- nificant addition to it. Getting together with such high-profile partners adds a new dimension to the agreement,” Ebrahim Fayez Alshamshi, chief executive officer, Emirates Islamic Bank, said. EIB’s partners in this venture are Al Watani Al Islami (ENBD), Dubai Islamic Bank, Habib Bank AG Zurich, Khaleeji Commercial Bank, Abu Dhabi Islamic Bank, National Bank of Abu Dhabi, Na- tional Bank of Umm Al Qaiwain, Sharjah Islamic Bank and Union National Bank. “We look forward to combin- ing our mutually proactive and in- novative approaches to the finance market to ensure that both organ- isations remain at the forefront of this rapidly developing industry,” Alharmi said. Amlak signed in 2007 with EIB a Dh800 million Wakala fa- cility, which was aimed at sup- porting the company’s multitude of activities in the UAE. Amlak, EIB sign Dh1.4b facility TBW Bureau Monarch Gold Mining Co Ltd., Australia, listed on DIFX, has pub- lished its quarterly activities report for the quarter ended December 31, 2007. The activity report has disclosed the consolidated statement of cash flows while the half-year ending report of even date disclosed the full set financial information, as reviewed by PriceWaterhouse- Coopers, Perth. The half-year ended report discloses an accumulated loss of A$65 million, which grew by 1.37 times over the 2007 year ending June 30, an accumulated loss of A$47 million. The total equity funds shrunk to 0.98 times, due to loss and boost- ed by contributed equity growth of 1.15 times from A$103 million to A$119 million. Internal conflict The gross revenue grew to A$13 million, against a mine operat- ing cost of A$24 million, and other overheads, a depreciation of A$6 million. Thus, the internal conflict in the financial structure of the company is driven by increasing loss, increasing and then drowning equity funds. The exploration expenditure deferred grew to A$57 million, by 1.39 times in the half year. The break-up of the exploration cost, if disclosed, could have thrown more insight into what drove the explo- ration costs so fast and uncontrolled with respect to the operating cash flow, if not the financing cash inflows. Once the company crosses a certain level of liquidity, working capi- tal deficiency, the game becomes very tight. Then miners have a great history of hopes lost and gold mined. The current liabilities, which were 64 per cent of current assets in June, grew to 229 per cent by six months. This should have placed tremendous pressure on the mining exploration and operations. The annual report needs to disclose what went wrong with the ex- ploration financial control to drive the company to disclose in the notes that ‘Going Concern’ assumption is distressed by a working capital deficiency of A$13 million. The turnaround of the company will be a great lesson in leadership and we need to expect to welcome a phoenix ris- ing from its ashes in the gold mines in Western Australia. Inadequate recovery Companies explore, mine and miss, but what makes Monarch pour more cash when the gold recovery was not adequate in terms of quan- tity with respect to the cash resources planned? The cash resources shrunk from A$22 million to A$1 million in the half year ending De- cember 31, 2007. Controlling this descend should have been the lesson for the capi- tal-budgeting process at Monarch. Monarch apparently has erred on its exploration and investment practice as it burned up its capital without increasing the capital ad- equately and ahead of exploration costs, risks and delays. Contrary to the Monarch practice of investment control, we have a few companies in the UAE which have raised huge capital to keep them deposited in banks, innovating ways of not spending the capital. Design a business model which does not burn up equity as much as cash while implementing the business model. The company should be the target for takeover by another success- ful management which has done its capital budgeting more shrewdly, which has the collective art to judge the risks and rewards of explora- tion and has reserved adequate capital to cover the risks of explora- tion. Since the risk assessment has gone wrong with respect to the capi- tal budget, its equity raisings, the shareholders should review the Go- ing Concern with the same set of decision-makers or change them. Or a set of new shareholders will buyout and place new management control anyway, if the Monarch mines more risk than gold. If the existing management does not provide the leadership to change, there could be action, run by not-so-marginal investors. That alone may protect the interest of the marginal investors. banking&finance Monarch:Need equity and management? E.Michael Johnson CORPORATE TICKET E Michael Johnson is a member of the UAE Chapter of ICWAI. The views expressed here are as a marginal investor in the financial markets. Dow Jones Indexes, a leading glo- bal index provider, has increased its presence in the UAE by open- ing an office in Dubai, its first in the Middle East. The office begins operations immediately and will handle business activities in the Middle East region. The Dubai office will provide client support, manage client rela- tions, promote and support Dow Jones Indexes’ conventional as well as sharia’a-compliant prod- ucts and develop new licensing opportunities in the Middle-East and North Africa region. Dow Jones Indexes’ expansion reflects the increasing interest in Middle East financial markets in recent years. Dow Jones Indexes in Dubai TBW Bureau TBW April 20 (b).indd 21 17/4/08 16:57:28