Round-trip ticket on Zain Air

November 1, 2009 by Keynesian


Alpha Dinar has been screaming “sell” on Zain since the beginnings of the buyout saga. With virtually no float (46% Kharafi consortium + 25% KIA + Others), how can the stock still afford to fall? Why doesn’t anyone bother to buy the shares of a company supposedly valued at KD 2 for a mere KD 1.160 (>40% discount). More worrying is the fact that Zain sale beneficiary investment companies (Coast & NIC) are both down 40% from 200 fils and 740 fils respectively from their recent highs.

If you are still dreaming of a deal, please wake up. Keep your seat-belts fastened for the Zain round-trip to sub KD 1.000.

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15 Responses to “Round-trip ticket on Zain Air”

  1. AAA+ says:

    There are two interesting mention about Zain

    Here is Ajman Bank CEO happy about Zain syndication

    “successful blue chip companies like Zain that enjoy a solid position in the market, strong track record, and viable financials.”

    and Here is Viva taking a 10% market share—study


    Keynesian Reply:


    I guess the 2nd piece is very significant. Although the Kuwaiti market makes up only 10% of Zain’s revenues, it comprises 50% of their net income! This means that Viva taking 10% really hurts their net.


  2. CuRiouS says:

    Any update on shareholder’s appeal to cancel ZAIN deal procedures ????


    Keynesian Reply:

    I didn’t hear of any appeals. If a deal could happen, I wouldn’t understand why a shareholder would oppose it since he/she will be able to sell for KD2 vs. the current stock market price of KD1


  3. Keynesian says:

    The roundtrip on Zain Air continues as Zain is down 60 fils to KD1.100, NIC and Coast plummet limit down today!


  4. Saud says:

    Nasser Al Kharafi announced that they are still in the process of negotiation and he will not accept anything below 2KD,, in other words no deal!


  5. Ra'ad says:

    Who else has exposure to Kharafi Group? What about the local Banks, NBK for sure !

    Look out for fire sale by K. Group , they owe and owe !


  6. Yacoub says:

    I have read the whole world pessimism in this post. I’m not against you or against your recommendation on Zain. I do agree that there has been a lot of rumors on Zain. A huge propaganda played by MAK Group. Yet we should not ignore the fact that MAC Group is highly squeezed right now and they have a big thrust for cash. Thus, they must divest, they are in deep need to divest from their investment to pay back debtors and also their opened accounts with their suppliers.

    I highly see the deal going through, but probably not at KD2. Valuation wise, the KD 2 is about 10.5x their EV/EBIT, while the median on telecos majority takeover has been around 10x. However, giving the current economy conditions it might not take place at KD2 it might get a lower valuation, but the deal has to go through at any possible price, because the big guy is screwed!


    Saud Reply:

    I really do hope that the deal goes through. But I think KD2 is too expensive given a lot of factors we talked about in previous posts. Nevertheless, Nasser Al Kharafi announced that he will not accept any bid below KD2, hence we are not too optimistic.


  7. Keynesian says:


    Glad to see a comment from you. I don’t see that much pessimism in the post. A pessimist would see a glass half full as being half empty. I consider myself a realist: the glass is empty so I see it as is.

    MAK group is indeed squeezed and some people may argue that they are too big to fail. I for one wouldn’t want to see them in big trouble because of the significant repercussions on Kuwait and even the region. This is why I might close one eye on some minority shareholders being screwed, NIC making all this money, Zain opening its books for a mere investor, and the probability of insider trading ahead of their initial announcement.

    I guess desperate times call for desperate measures and that is the reason they are selling Zain. When I say I don’t see the deal happening I mean I don’t see it happening at its current conditions and price of KD 2. I don’t see the pessimism in doing my analysis and revealing that I don’t thing 1+1= 5. I also don’t see sub-prime Vavasi closing such a deal.

    Again, we always seek diverse opinions in Alpha Dinar. I always try to present a different point of view that Saud. Further, if you have reasons to be optimistic about Zain and think there is value, please don’t hesitate to send us an article and it will be published.


  8. CuRiouS says:

    Any update on ZAIN Deal (17-Dec-2009)?
    Deal related stocks are up NIC, COAST, ALMAL ….


    Keynesian Reply:

    I don’t think there is any. There were rumors that potential buyers are ready to pay 10% down, but I believe they’re just rumors. The whole market is rallying due to the political victory scored by the gov’t (for once!), successful KIA sale of Citi shares, Dubai resolution, and the rescheduling of Global’s debt.


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