Author Archives: Sabah al-Binali

Profit without Value

April 1, 2019 By in Analysis Tags: , ,

The debate of value creation versus value extraction is an important one when markets are developing and is a crucial driver of share prices. The danger, however, is that the impact on share prices is opposite to the impact on the value of the company. The result can be business destruction to the benefit of a single stakeholder.

What do we mean by value creation versus value extraction?

Value creation is developing the ability to keep producing value, e.g. building a productive asset.

Value extraction is monetizing, or liquidating, value, e.g. selling a productive asset.

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Foreign Companies are Good for the Economy

March 11, 2019 By in Entrepreneurship Tags: ,

I previously tweeted about an interview in which Mohammed Alabbar, Chairman of the e-commerce company noon “ called for new legislation that imposes 51% local ownership of e-commerce related businesses ranging from payment service firms to logistics companies, in order to protect the national economy from global giants such as Amazon.” I pointed out that the article only looked at one stakeholder, noon, and didn’t consider other stakeholders such as consumers. This led to a lively debate on the subject across the twittersphere and is worthy of a revisit.

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GFH Buys Backs Shares, Issues Bonus Shares

February 16, 2019 By in Analysis Tags:

Last week, Gulf Finance House (GFH) announced that it would recommend distributing bonus shares. That comes on the heels of a share buyback program launched last year. The idea of a share buyback program is that shares of GFH are cheap and so it makes sense for the company to buy them back. The reverse, issuing bonus shares, makes sense for GFH when shares are expensive. So the two are, on the face of it, inconsistent if executed at the same time.

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The UAE’s Equity Market Performance

July 25, 2018 By in Investments Tags: , ,

My last article regarding the effect of rising interest rates on the UAE’s equity markets sparked quite a bit of debate on LinkedIn and got me to thinking about how the equity markets have been performing. So I looked at the year to date (YTD) return for Abu Dhabi’s market at found out it is 9.82% as of today (source Bloomberg). For Dubai’s financial market the YTD return is -12.62% (source Bloomberg). This doesn’t tell me much about the overall equity performance on a national level. Continue reading →

Abraaj’s flawed operating model

July 7, 2018 By in Analysis Tags: , ,

A lot has been written recently about Abraaj Capital, the private equity company based in the Dubai International Financial Center. The current focus is around Abraaj’s actions with regards to the potential co-mingling of client funds with its own operating funds. News is updated on a relatively frequent basis about the subject and there is clearly a lot to learn on many fronts. However, it is too early to do a full post-mortem as investigations and legal cases have not come to a conclusion. But there are some things that can be gleaned that could be instructive for investors. The aim of this post is not to judge Abraaj, the courts will do that. The aim is to try to see if there are lessons that can be used by investors to better manage their portfolios. Continue reading →

VAT’s Impact on Business Strategy

April 9, 2018 By in Strategy Tags:

Disclaimer: I am not an expert on VAT and I am not providing advice. I am simply trying to expand the discussion around VAT from how it is applied to what it might mean to business strategy.

The first point that I want to discuss is the idea that this is a value added tax levied by the government and collected by various vendors and suppliers. From my understanding this is a legally correct definition. The problem is that this phrasing does not change the laws of supply and demand. If the price of a good or service moves, it matters not why it has moved in terms of the effect of demand. Price up, demand is usually down. Continue reading →