(EIIB) European Islamic Inv Bnk

EIIB - Closing The Value Gap

Links, etc: See the Wexboy Blog

Text:

In mid-April, I realized it was a full year since I’d last posted about European Islamic Investment Bank (EIIB:LN). No real neglect on my part (EIIB is now a Top 3 holding for me), but simply an undimmed confidence in their underlying story & intrinsic value. A fresh write-up made sense (esp. with 2012 final results due for release), as I suspected EIIB would be a brand new & interesting stock for a lot of (more recent) readers. [The stock actually rallied +15% in the week after my post].

The results speak for themselves, and received an enthusiastic reception from current & prospective shareholders. [EIIB shares are now up +27% since my last post]. These are the first set of results to properly illustrate EIIB’s new asset management strategy, its operational turn-around & progress to date, and the exciting potential of the MENA region. Again, see my prior post, but I definitely encourage you to read the full set of results – or even better, the entire annual report! Let’s divide the rest of this post into four sections:

Highlights:

- Assets under Management (AUM) increased +53% to $922 million, including a mandate win from Norway’s sovereign wealth fund

- EIIB & Rasmala staff/operating expense costs were basically halved - ahead of forecast, with some further efficiencies targeted for 2013

- Underlying business operating near-breakeven (GBP 0.6 mio pre-tax loss, exc. write-downs & discontinued ops.)

- A reduced GBP 13.3 mio in legacy assets targeted for an orderly exit

- Balance sheet risk continues to reduce, with 75%+ of assets invested in cash, deposits & fixed income, and liabilities limited to 25% of total assets

- Wholesale strategy confirmed, with new distribution agreements signed & existing relationships deepened. Re-iterated $3 billion AUM target by 2016

Also, this commitment from the CEO particularly grabbed my attention:

‘Our share price performance during 2012 remained flat; however, we are continuing to deliver the strategic realignment of the Bank and in 2013 we will begin to focus attention on translating our success into improved share price performance.’

The first step is a new GBP 5.0 mio share buyback program.

NAV Update:

My recent 7.2p estimate wasn’t too bad… I anticipated the Arcapita & DiamondCorp (DCP:LN) write-downs, the underlying operational loss, and net outstanding shares fairly well – coming up with a GBP 123.7 mio net equity estimate. However, I couldn’t anticipate further write-downs of 3.2 mio re Accelerator Technology Holdings & 1.3 mio re Carian Bay. [btw Irish readers may be fascinated to see Denis O'Brien is an ATH director!] Which basically explains their actual 2012 yr-end 119.8 mio of net equity, or GBP 6.9p NAV per share.

Hopefully, we’ve reached a point now where further legacy write-downs prove unnecessary. It’s important here to highlight we really can’t blame the new CEO/team for these losses: a) they’re attributable to legacy assets acquired before they arrived (e.g. the original $30 mio Arcapita loan was a ludicrous over-commitment for a bank of EIIB’s size), and b) I suspect a fire-sale of these assets might ultimately have produced similar losses.

But we can definitely blame them for not taking a kitchen-sink approach to write-downs after their arrival. Unfortunately, when it comes to stocks, too many investors prefer to mistakenly dwell on a terrible past, or even a glorious future - which can severely impair their investment opportunities & returns. And EIIB certainly has a terrible past… The constant drip-feed of write-downs has (unsurprisingly) been greeted each time with the same old tired chorus of complaints. And whoever shouts loudest (not smartest) on the message boards often gets far more attention than deserved, cementing EIIB’s old reputation in the minds of many investors.

Hopefully, this over-hang of negative sentiment is now dissipating

Pretty sure that large trade today was a buy ,bought a few more of these over the last few days and thinking of adding more,found wexboys take on it a great read ,

Now available on the website http://www.eiib.co.uk/html/. Much more info than the RNS.

Max 10% outstanding with a floor @ 2.83. More good news for starters. Pushes the NAV back up to last year's level @ 7.5p.

AUM - great. Legacy workout - great. Staff costs - EIIB reduced to GBP2.5m however gone up in the accounts. No update on share buyback - still dangling the carrot. Overall - work to be done.......

Looks to be a good move ,seems to have vast experience in Asia ,involved in another comp of mine bailie Gifford

Cheers m sorry to here you got so burned ,I'm just dipping back in after I was robbed in the langbar fiasco ,just a small amount here , thanks greg

yes copshaw..pre ipo at 8p and also more at 25p..ouch..have traded down over the years but still sat on a hefty loss and now just a passing interest as i still use this stock as my reality check when i ever think about loading up heavy of any other speculative punt..just feel like we were taken for a ride by the original shareholders who were talking about using EIIB as a conduit for spreading islamic banking to Europe and when they launched and made their money they did nothing to support the shareprice or help the company in opening doors to building the brand..

did think its was a good idea in principal but with no support its just languished and dont see these new guys doing too much as from what i heard they seem to be pushing things through without explaining why they are doing it ( arcapita sukuk sold for peanuts so another big loss..why..) and what the plans are for our money...

it may come good but for me i have wasted too much time on it over the years but dont think you have too much to lose at these levels with the amount of cash they are sat on..

Cheers

M

anyone know the purchase price paid by HGB?

Thanks murg ,will keep a close eye ,are you a holder cheers

good luck with that copshaw but be wary..dont think these new guys are looking after shareholder funds any better than the previous hopeless characters l who have been associated with EIIB..no news..no nothing..seems like these guys bought in then took over and sacked the ceo who brought them on board and since then sold things like arcapita sukuk for bargain basement price which would have been secured loan agaisnt land or property as with most islamic loans..why didnt they take the land or property?

the silence is deafening..no volume no deals....no return of shareholder funds as one of divis that have been mentioned..thats why its going under the radar...dead duck it appears..

Bought in at 2.58 ,picked up wexboys blogg on wed and had a read at euroboys input looks good ,a very quiet board as well so I don't think this can be on a lot of people's radars at the mo

EIIB…Ex-Bank – Love It!

I have a long-standing aversion to banks. To me, they represent the perfect collision of two really bad ideas:

i) Regular investment in bonds & loans – a strategy offering little prospect of capital gain, but which will (quite often) attempt to wipe out your capital. And the paltry yield you earn offers little compensation. I’ve never understood how people ever find this ridiculously biased risk/reward proposition attractive.

ii) The answer lies in leverage, I guess… Another terrible idea, but this is the incredible solution people usually seize upon to juice low returns. And it usually works just long enough for everybody to forget how savagely leverage can impact liquidity & solvency, when things take an inevitable turn for the worse.

Banks, of course, take this bad marriage to its ultimate & ludicrous extremity. [And require even more leverage to overcome the drag of their cost:income ratios]. But consider the private & public incentives – why wouldn’t they?! When times are good, leverage multiplies profits…which multiplies bonuses! And leverage makes it far easier to reach that ideal bank status: TBTF, where the taxpayer’s forced to pay for your mistakes (& bonuses).

Now, I’m sure you’ll occasionally make money investing in bank shares, but their pro-cyclical nature always guarantees the next disaster’s coming – you’re really just trading on the greater fool theory. Far better to focus on finding a decent investment, or two – and we don’t need to stray v far:

What I like to call the non-bank sector offers up v attractive opportunities. OK, I’m being a little flippant, call ‘em what you will – but (generally) these are banks with drastically lower leverage, misunderstood businesses, and/or substantially mis-priced market valuations… Basically, they’re NOT banks!

I own a few of them (with another handful on my buy list): For example, I have an undisclosed holding which is ostensibly a bank, but in reality is a distressed asset/work-out investor. Actually, I tell a lie…it’s really an attractive (indirect) agri-business play, which may offer eventual upside potential of 400-500%! Another holding is Tetragon Financial (TFG:NA) – ostensibly an investment fund, but really a bank (by proxy). Again, I’m telling fibs…I now own TFG because I believe it’s transforming itself into a listed alternative asset manager, complete with fund seeding platform & portfolio. But the largest & best holding I own in this category is:

European Islamic Investment Bank plc (EIIB:LN)

I’ve written about EIIB a number of times before – originally, in this Part I & II, and then here & here. It’s a full year since my last post – which may surprise you, as the stock’s a (Top 5) 5.7% portfolio holding for me. But I’ve always remained highly confident of EIIB’s intrinsic value & prospects, and been happy to increase my holding along the way as the share price bounces off 4 year lows yet again. Let’s re-visit their story:

EIIB was listed in May-06 on London’s AIM market. [The share price halved within a fortnight, from a GBP 25p IPO price - a harbinger of things to come...] It’s an Islamic finance institution which operates in accordance with Sharia’a law, and bridges the gap between the financial markets of the West/OECD & the resource-rich fast growing markets of the Middle East & North Africa (MENA) region. Of course, things looked v rosy at the time & management embarked on a steady expansion. Within 2 years, the balance sheet nearly doubled in size, and presumably their original plan called for a continued & aggressive scaling-up. However, it was then more than obvious the major developed economies were in the throes of a full-blown financial crisis – EIIB’s plans for a leveraged balance sheet were abruptly abandoned…

In retrospect, this proved a wise decision (though I suspect management were simply scared stiff!). Even though EIIB’s credit losses were ultimately limited – for example, a near-mis

http://www.foxbusiness.com/news/2013/02/12/european-islamic-investment-bank-sells-arcapita-facility-for-81-million/

"We are now reviewing options for possible future capital returns to shareholders and expect to reach a conclusion early next year after having finalised our long term capital requirements in consultation with the regulator." Notice the plural used here - more than one? 20m for starters....

Looks like more people have left EIIB in the UK. Maybe they have moved to Rasmala in Dubai or just left. Anyways the lower headcount will lead to lower overheads and the UK outfit looking more and more like a shell holding company. Interims due shortly. Surplus capital side looks interesting.....

qib (uk) 2011 - 264k profit. issued capital 25 million. losses carried forward 7.92 million. shareholders funds 17.07 million.

gatehouse bank 2011 - 4.25 million loss. issued capital up from 58 million to 158 million. losses carried forward 42.79 million. shareholders funds 115.20 million.

ibb 2011 - 8.99 million loss. issued capital 25.46 million. losses carried forward 63.24 million. shareholders funds 17.07 million.

blme 2011 - 10.84 million loss. shareholders funds 238.64 million.

eiib - 8.49 million loss. shareholder funds 128.66 million.

distributable reserves sounds good. as per last time?

http://www.hedgeweek.com/2012/07/15/doug-bitcon-rasmala-%E2%80%9Csukuk-benefit-expanding-investment-universe-improved-secondary-marke

http://www.proactiveinvestors.co.uk/companies/news/44088/diamondcorp-shares-should-rise-once-idc-funding-is-finalised-analysts-44088.html

http://www.cpifinancial.net/news/post/14764/rasmala-gcc-fixed-income-fund-declares-semi-annual-dividend-of-3-share

http://www.cpifinancial.net/news/post/14714/rasmala-announces-first-dividend-for-the-rasmala-palestine-equity-fund

EIIB - continues to be my largest portfolio holding at 8.3% - see more detailed portfolio metrics at Wexboy blog.

http://www.lse.co.uk/FinanceNews.asp?ArticleCode=em4h3406ashlpe7&ArticleHeadline=Gulf_sukuk_funds_grow_but_liquidity_is_problem

DiamondCorp plc

JSE share code: DMC
AIM share code: DCP
ISIN: GB00B183ZC46
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
('DiamondCorp' or 'the Company')



Loan Funding Term Sheet with IDC





DiamondCorp plc, the African diamond mine development and exploration company, is pleased to announce that it's 74%-owned subsidiary, Lace Diamond Mines (Proprietary) Limited has entered into a loan funding term sheet with the Industrial Development Corporation of South Africa Limited ("IDC"). Under the terms of the loan funding term sheet, IDC has agreed to make a loan available to Lace Diamond Mines (Proprietary) Limited to the value of R280 million (approximately $33.6 million), subject to the satisfactory conclusion of due diligence and certain other conditions precedent.



Commenting on the loan funding term sheet, DiamondCorp CEO, Paul Loudon said: "The key driver for management in seeking funding for the Lace mine development has been to find the optimum financing method which is the least dilutive for shareholders of the Company. Therefore, we are delighted that we and our Black Economic Empowerment ("BEE") partners have been able to agree in principle a debt financing proposal from the IDC to provide over 98% of the estimated capital required to establish a block cave development on the 47 level at the Lace mine. This is a significant milestone in DiamondCorp's transition from developer to producer and we welcome the support of the IDC in funding this potentially long-life diamond mine in the Free State Province."



On 18th May, DiamondCorp's 74%-owned subsidiary, Lace Diamond Mines (Proprietary) Limited (the "Borrower") entered into a detailed loan funding term sheet, pursuant to which the main terms of the proposed loan funding were agreed in principle. It is intended that the loan funding term sheet will form the basis of the final loan financing agreement. Under the terms of the loan funding term sheet, IDC (the "Lender") has agreed to provide a loan facility to the Borrower to the value of R280 million (approximately $33.6 million) for the purpose of underground development and purchase of mining equipment at the Lace mine.



The loan will be secured over the assets of the Borrower and will be guaranteed by the Company. The term of the loan is expected to be 7 years. It is anticipated that the loan will attract an interest rate of 2% over the South African Prime Rate (which is currently 9%), such interest to be capitalised for the first two years from the draw down date and payable semi-annually in arrears thereafter. There will also be a two year moratorium on loan repayments. The provision of the loan is subject to certain conditions precedent, including the completion of satisfactory due diligence by the Lender and unconditional approval by the Lender's executive committee and/or board of directors. Subject to satisfactory completion of due diligence and satisfaction of the conditions precedent, including approval for the upgrade of the electricity supply to the mine by Eskom, DiamondCorp anticipates that the loan financing agreement will be finalised by the end of July 2012. The loan financing agreement will include representations and warranties from the Borrower that are usual for transactions of this nature.



Management's latest estimate for the total cost of development at Lace is R384 million but with revenue expected from diamond sales after 18 months, the peak funding requirement is forecast to be R285 million.









BACKGROUND - LACE MINE, FREE STATE PROVINCE, SOUTH AFRICA



The Lace diamond mine is located 25km northwest of the town of Kroonstad in the Free State Province of South Africa. The mine operated from 1896 to 1931, and according to mine records produced approximately 700,000 carats of diamonds from 4.5 million tonnes of kimberlite at a recovered grade of 16 car

http://www.rasmala.com/presentations/Rasmala_Sukuk_presentation.pdf

1 May 2012

DiamondCorp plc



Directorate Change



The Board of Directors of DiamondCorp plc ("DiamondCorp" or "the Company") is pleased to announce the appointment of Michael Toxvaerd to the Board as Non-executive Director with immediate effect.



Mr Toxvaerd is Chief Investment Officer of HBG Management Partners, a leading UK private equity firm serving high net worth private and institutional clients in the Arabian Gulf. He has more than 15 years of experience founding, operating, acquiring, integrating and leading a variety of businesses in private equity and public markets at board and senior management level. Mr Toxvaerd was most recently Founder, CEO and Deputy Chairman of NeutraHealth plc, an AIM listed company. He holds an MBA from Cranfield School of Management.



Mr Toxvaerd is also a non-executive Director of European Islamic Investment Bank plc ("EIIB"), an AIM listed company and significant shareholder of DiamondCorp. EIIB is interested in a total of 55,761,412 ordinary shares in the Company, which represents approximately 23.02% of the issued share capital of the Company.



HBG Management Partners, via its wholly owned subsidiaries, is interested in 274,633,802 ordinary shares of EIIB, which represents approximately 15.55% of the issued share capital of EIIB.



Euan Worthington, Chairman commented:



"We are very pleased to welcome Michael on to the Board and believe that his financial background will help to finalise the financing for Lace while his entrepreneurial experience will help us evaluate other opportunities in the diamond sector".



Please see the Appendix below for further disclosure with regard to Michael Toxvaerd in accordance with the AIM Rules for Companies.

European Islamic Investment Bank (EIIB:LN) - 143% Upside Potential & 3 Easy Steps to Realize Current Net Asset Value:

http://wexboy.wordpress.com/2012/04/11/eiib-so-you-want-to-run-a-marathon/

Cheers,

Wexboy

and why would you think if EIIB goes private money might be made?

Nico - Some of us have forever thought this share will fly! We are still waiting.

Nico, EIIB is a plaything of the major shareholders. Only the chosen few know the real score as to the underlying asset values. I doubt if the auditors are even in the loop. Take it from me as one who was lucky to escape several months ago with a profit. Perhaps the only way that money might be made is if EIIB goes private - and why would that be done?

I have a feeling this will fly soon

rpol and euroboy1 - I can't believe that you are still following this dog. EIIB is just a plaything for some of the larger shareholders and the board. It isn't going anywhere soon. Dream on! Enjoy your weekend. d xx

I do not think they will declare a dividend as was intimated last year. The money that might have paid the dividend is being put into Rasmala.

http://www.cpifinancial.net/news/post/13374/eiib-to-expand-rasmalas-asset-management-business

Results published last year on 08 April 2011........

perhaps another share buyback at 7p would be more beneficial to investors?????

I wouldn't hold your breath. I think the idea of a dividend died when the last CEO was replaced. I hope I'm wrong though.

dividend???????

Hey folks,

Just posted a fresh commentary on EIIB, and increased my portfolio stake:

http://wexboy.wordpress.com/2012/03/06/imho-eiib-is-vip/

Cheers,

Wexboy

Hi folks,

I've included EIIB in my latest Catalyst article, where I look at 4 interesting companies/situations with activist investor(s) on board:

http://wexboy.wordpress.com/2012/02/16/how-about-another-catalyst-part-vii/

Cheers,

Wexboy

subject to certain post completion adjustments + has issued to EIIB a majority of management shares + The consideration payable to Mr Ali Al Shihabi shall be satisfied over a two year period = 2 year window for conversion into an islamic bank and a part of the EIIB network.............

Who knew?

http://wexboy.wordpress.com/2011/11/14/eiib-eiibln-%E2%80%93-the-strongest-bank-in-the-world/

http://wexboy.wordpress.com/2011/11/15/eiib-eiibln-%E2%80%93-the-strongest-bank-in-the-world-part-ii/

10-Jan-12

11:25:12

7.00

250,000

Buy*

3.20

4.00

17.50k