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Market Making Proposal - bank-abc.com · BATELCO INVCORP SALAM. ITHMR. BARKA BISB. KHCB. BHOTEL...
Transcript of Market Making Proposal - bank-abc.com · BATELCO INVCORP SALAM. ITHMR. BARKA BISB. KHCB. BHOTEL...
Market Making ProposalBank ABC AGM, 25th March 2018
Low Liquidity in Bahrain Market
Bahrain Market has the lowest average yearly Turnover-to-Market cap compared to its peers a clear sign of low liquidity and further potential to improve compared to its peer markets.
3%
10%13% 14%
21%
29%
49%
38%
59%
Bahrain Abu Dhabi Oman Qatar Kuwait Dubai Saudi S&P FTSE
Average yearly Turnover/ Market Cap
Bahrain Abu Dhabi Oman Qatar Kuwait Dubai Saudi S&P FTSE
Source:- Bloomberg; Period FY 2017, SICO
Strong Correlation of Valuation & Value Traded
Liquid stocks tend to trade at higher valuation as transactions can be swiftly executed with minimal spreads (bid-ask) and preference of large institutional investors to invest in these names
Source:- Bloomberg; Jan 30, 2017, SICO
ABC has Lower Free Float than Bahrain Peers
Major Bahraini companies have a free float of 45%, which is much higher than the c.10% free float of Bank ABC. However, companies such as ALBA also have low float and better liquidity aided by a market making arrangement.
Source: Bahrain Bourse except for BCFC, SICO
2.0%
3.4%3.8%
0.4%
2.2%1.6% 1.6%
2.7%
5.0%4.2%
0.7%1.7%
3.1%
7.0%
1.2%
AUB
ALBH
GFH
NBB BB
K
BATE
LCO
INVC
OR
P
SALA
M
ITH
MR
BAR
KA
BISB
KHC
B
BHO
TEL
BCFC
DU
TYF
ABC
Yearly Traded Value/ Market Cap. 20% *
53
10
93
4524 23 19
79
46
19 2035 45 53
72
10
AUB
ALBH
GFH
NBB BB
K
BATE
LCO
INVC
OR
P
SALA
M
ITH
MR
BAR
KA
BISB
KHC
B
BHO
TEL
BCFC
DU
TYF
ABC
Free Float %
* KHCB had a Yearly Traded Value to Market Cap of 20% for 2017, however removing a block trade of BHD 9.6mn in Sep 2017 would give 12.4%.
Bank ABC Shares – Low Current Valuation
Stock underperformance driven by market factors including lack of liquidity and trading volume.
StockUnder-Performance…
…despite healthy Fundamental Performance
Steady improvement in profitability
Due to low liquidity of stock
Low LiquidityOverall low trading volume on
Bahrain Bourse
Lack of sufficient free float
Relatively cheaper multiple than peers
Least expensive Bank in the GCC on PB
Source: SICO, ABC
Detail Proposed Path Matrix
Revenue*
Active market making to infuse
liquidity
Initiate active IR and PR team
Clarifying dividend policy
6 Months
Investor awareness with Flash Note &
Road shows
SICO
Act
ion
Bank
ABC
Act
ion
Action plan requires a combination of SICO and ABC activities, with degree of success being judged over the next 12 months
Research
Market Making
Source: SICO, ABC