S A L
Your Investment Reference
THE LEBANON BRIEF
ISSUE 931 Week of 10 - 14 August, 2015
ECONOMIC RESEARCH DEPARTMENT BLOMINVEST Bank Headquarters Bab Idriss, Beirut, Lebanon T (01) 991 784/2 F (+961) 1 991 732 [email protected] www.blom.com.lb
TABLE OF CONTENT
FINANCIAL MARKETS 3 Equity Market 3 Foreign Exchange Market 5 Money & Treasury Bills Markets 5 Eurobond Market 6
ECONOMIC AND FINANCIAL NEWS 7 Commercial Bank Assets Hit the $180.08B Mark in H1 7 Lebanon’s Trade Deficit Plunged by 18.78% y-o-y to $7B in H1 8 Lebanon Registered a Deficit of $1.32B on its Balance of Payments in H1 9 Outstanding Loans to the Private Sector Stagnated in Q1 2015 9 Transfers to EDL went up by 3.3% yearly to 2.09B in 2014 10 Saida’s Custom Office Saw the Largest Upturn in Volume Imported 11
CORPORATE DEVELOPMENTS 12 In its third year of operations, Odeabank Registered $7.14M Profit as at June 30, 2015 12
FOCUS IN BRIEF 13 Lebanese Malls Adopting the Philosophy of “Build it! They Will Come!” 13
This report is published for information purposes only. The information herein has been compiled from, or based upon sources we believe to be reliable, but we do not guarantee or accept responsibility for its completeness or accuracy. This document should not be construed as a solicitation to take part in any investment, or as constituting any representation or warranty on our part. The consequences of any action taken on the basis of information contained herein are solely the responsibility of the recipient.
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FINANCIAL MARKETS Equity Market Stock Market The BLOM Stock Index (BSI) gained 0.58% over the past week to register 1,174.69 points. The average 14/08/2015 07/08/2015 % Change traded volume and value grew substantially from BLOM Stock Index* 1,174.69 1,167.91 0.58% 71,507 shares worth $724,010 to 215,424 shares Average Traded Volume 215,424 71,507 201.26% worth $3.44M. Accordingly, the market Average Traded Value 3,442,460 724,010 375.47% capitalization increased from $9.83B to $9.89B. *22 January 1996 = 1000 BLOM Stock Index The BSI managed to outperform the S&P Pan Arab HI: 1,236.40 1250 Composite Large-Mid-Cap Index, the Morgan Stanley Emerging Markets Index (MSCI) and the 1230 S&P AFE 40 Index which recorded respective weekly losses of 0.29%, 2.27% and 0.68%. 1210
1190 On the regional front, Egypt’s stock exchange was the biggest loser with a 2.89% weekly drop 1170 followed by a 1.74% drop for Muscat’s stock LO: 1,159.48 exchange. Qatar’s bourse registered the biggest 1150 gain of 0.75% followed by a 0.34% uptick on the Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Saudi Arabian bourse.
Banking Sector Back to the Beirut Stock Exchange, the banking sector captured 93.9% of the total traded value Mkt 14/08/2015 07/08/2015 % Change during the week while the real estate sector BLOM (GDR) BSE $10.00 $10.10 -0.99% occupied 6% and the industrial sector 0.1%. BLOM BLOM Listed BSE $9.60 $9.50 1.05% Bank’s listed shares gained 1.05% over the past BLOM (GDR) LSE $10.00 $10.00 0.00% week to reach $9.6 while the bank’s GDR shares shed 0.99% to settle at $10.00. Bank Audi’s GDR Audi (GDR) BSE $6.01 $6.00 0.17% and listed shares both added 0.17% and 0.34% to Audi Listed BSE $5.95 $5.93 0.34% reach $6.01 and $5.95, respectively. Audi (GDR) LSE $5.90 $6.00 -1.67%
Byblos (C) BSE $1.63 $1.63 0.00% No weekly change in price was registered amongst Byblos (GDR) LSE $80.50 $80.50 0.00% preferred shares, leaving the BLOM Preferred Bank of Beirut (C) BSE $18.40 $18.40 0.00% Shares Index steady at 105.09 points. BLC (C) BSE $1.70 $1.70 0.00%
Fransabank (B) OTC $27.00 $27.00 0.00% In the real-estate sector, Solidere A shares rose by BEMO (C) BSE $1.90 $1.90 0.00% 1.09% to $11.11 and Solidere B shares gained 4.11% to $11.39.
Mkt 14/08/2015 07/08/2015 % Change In the industrial sector, Ciments Blancs Bearer and Banks’ Preferred 105.09 105.09 0.00% Nominal Shares grew by 6.06% and 12.73% to Shares Index * Audi Pref. E BSE $102.20 $102.20 0.00% settle at $3.50 and $3.10, respectively. Audi Pref. F BSE $100.50 $100.50 0.00% Audi Pref. G BSE $100.50 $100.50 0.00% Audi Pref. H BSE $100.60 $100.60 0.00% Byblos Preferred 08 BSE $101.10 $101.10 0.00% Byblos Preferred 09 BSE $102.00 $102.00 0.00% Bank of Beirut Pref. E BSE $25.50 $25.50 0.00% Bank of Beirut Pref. I BSE $25.75 $25.75 0.00% Bank of Beirut Pref. H BSE $25.60 $25.60 0.00% BLOM Preferred 2011 BSE $10.10 $10.10 0.00% BEMO Preferred 2013 BSE $101.10 $101.10 0.00% * 25 August 2006 = 100
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Real Estate On the London Stock Exchange, Solidere’s GDR shares grew by 0.45% to $11.05 while Audi’s Mkt 14/08/2015 07/08/2015 % Change GDR shares declined by 1.67% to $5.90. Solidere (A) BSE $11.11 $10.99 1.09% Solidere (B) BSE $11.39 $10.94 4.11% For the coming week, it remains to be seen Solidere (GDR) LSE $11.05 $11.00 0.45% whether trading on the Lebanese Bourse will be affected by the ongoing political deadlock and political tensions.
Manufacturing Sector
Mkt 14/08/2015 07/08/2015 % Change HOLCIM Liban BSE $15.10 $15.10 0.00% Ciments Blancs (B) BSE $3.50 $3.30 6.06% Ciments Blancs (N) BSE $3.10 $2.75 12.73%
Funds
Mkt 13/08/2015 06/08/2015 % Change BLOM Cedars Balanced ----- $7,544.97 $7,525.11 0.26% Fund Tranche “A” BLOM Cedars Balanced ----- $4,984.92 $4,970.73 0.29% Fund Tranche “B” BLOM Cedars Balanced ----- $5,730.46 $5,715.38 0.26% Fund Tranche “C” BLOM Bond Fund ----- $9,484.65 $9,484.65 0.00%
Retail Sector
Mkt 14/08/2015 07/08/2015 % Change RYMCO BSE $3.23 $3.23 0.00% ABC (New) OTC $27.00 $27.00 0.00%
Tourism Sector
Mkt 14/08/2015 07/08/2015 % Change Casino Du Liban OTC $323.00 $323.00 0.00% SGHL OTC $7.00 $7.00 0.00%
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Demand for the dollar in the Lebanese Forex market Foreign Exchange Market weakened during the week as the Lebanese pound Lebanese Forex Market appreciated against the dollar from $/LP 1,505–1,509 with 14/08/2015 07/08/2015 %Change a mid-price of $/LP 1,507 to $/LP 1,504–1,508 with a mid- Dollar / LP 1.1149 1.0926 2.04% price of $/LP 1,506. Foreign assets (excluding gold) at the Euro / LP 1.5610 1.5520 0.58% Central Bank dropped by a monthly 0.12% to reach Swiss Franc / LP 0.9746 0.9827 -0.82% $38.81B at the end of July. As for the dollarization rate of Yen / LP 124.15 124.75 -0.48% private sector deposits, it slid from 65.71% in December Sterling / LP 1.1149 1.0926 2.04% 2014 to 65.08% by June. NEER Index** 166.41 166.86 -0.27% *Close of GMT 09:00+2 **Nominal Effective Exchange Rate; Base Year Jan 2006=100 **The unadjusted weighted average value of a country’s currency relative to all major currencies being traded within a pool of currencies. The NEER represents the approximate relative price a consumer will pay for an imported good. The euro was bullish against the dollar over the week, at it Nominal Effective Exchange Rate (NEER) appreciated by 0.23% to €/$ 1.1149. Combination of Chinese deflationary pressures and poor US Non-Farm Payroll (NFP) 168 figures last week, in which 215K new jobs were created 165 162 comparted to the average monthly 245K for the past year have 159 given the Euro a breather. Furthermore, the 86B Euros Greek 156 153 bailout agreement aided the single currency over the week. 150 Gold improved from last week’s quote of $1,089.65/ounce to 147 $1,119.00/ounce, possibly due to the weak performance of the 144 141 dollar. 138 135 132 129 By Friday 14th of August, 2015, 11:30 pm Beirut time, the Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 dollar-pegged LP also depreciated against the euro going from €/LP 1,647.09 to €/LP 1,680.71. The Nominal effective exchange Rate (NEER) declined by a weekly 0.27% to 166.41 points, bringing its year-to-date gains to 12.96%. Money & Treasury Bills Markets During the week ending July 16 2015, broad Money M3 increased by LP 182B ($121.01M), to reach LP 181,763B ($120.57B) with a 4.59% yearly growth and a 2.46% y-t-d Money Market Rates uptick. In contrast, M1 decreased by LP 286B ($189.85M) due to the decrease in demand deposits by LP 113B ($74.96M) 13/08/2015 06/08/2015 Change bps and the decline in money in circulation by LP 173B Overnight Interbank 3.00% 2.75% 0 ($114.76M).
BDL 45-day CD 3.57% 3.57% 0 Total deposits (excluding demand deposits) went up by LP BDL 60-day CD 3.85% 3.85% 0 468B ($310.87M), over the week, given the LP 94B growth in term and saving deposits and the $248M expansion in
deposits denominated in foreign currencies. Over the above mentioned period, the broad money dollarization rate Treasury Yields experienced an up-tick from 57.97% on July 9, to 58.12% on 13/08/2015 06/08/2015 Change bps July 16. According to the Central Bank, the overnight 3-M TB yield 4.39% 4.39% 0 interbank rate dropped from 3.00% at the end of April 2015 to 6-M TB yield 4.87% 4.87% 0 2.75% at the end of May 2015.
12-M TB yield 5.08% 5.08% 0 In the TBs auction held on the 6th of August 2015, the Ministry 24-M TB coupon 5.84% 5.84% 0 of Finance raised LP 556B ($368.82M), through the issuance 36-M TB coupon 6.50% 6.50% 0 of bills and notes maturing in 6M, 2Y and 7Y. The highest 60-M TB coupon 6.74% 6.74% 0 demand was achieved on the 7Y notes, with a 49.46% share of total subscriptions, while the 2Y notes and 6M bills captured 37.59% and 12.95%, respectively. The 6M notes and 2Y bills yielded 4.87% and 5.84%, respectively while the coupon rate of the 7Y notes stood at 7.08%.
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Eurobond Market Eurobonds Index and Yield 13/08/2015 06/08/2015 Change Year to Date BLOM Bond Index (BBI)* 107.148 107.131 0.02% 1.01% Weighted Yield** 5.48% 5.47% 0 46 Weighted Spread*** 388 384 4 -42 *Base Year 2000 = 100; includes US$ sovereign bonds traded on the OTC market ** The change is in basis points ***Against US Treasuries (in basis points)
Lebanese Government Eurobonds 13/08/2015 06/08/2015 Weekly 13/08/2015 06/08/2015 Weekly Maturity - Coupon Price* Price* Change% Yield Yield Change bps 2016, Nov - 4.750% 100.87 100.88 -0.01% 4.01% 4.01% 0 2017, Mar - 9.000% 107.23 107.31 -0.07% 4.28% 4.28% 0 2017, Oct - 5.000% 101.11 101.12 -0.01% 4.45% 4.45% 0 2018, Jun - 5.150% 101.43 101.44 -0.01% 4.60% 4.60% 0 2018, Nov - 5.150% 100.88 101.19 -0.31% 4.85% 4.75% 10 2019, Apr - 5.500% 101.25 101.38 -0.13% 5.12% 5.09% 4 2020, Mar - 6.375% 104.00 104.00 0.00% 5.38% 5.38% 0 2020, Apr - 5.800% 101.50 101.63 -0.13% 5.43% 5.40% 3 2020, Jun - 6.150% 102.75 103 -0.24% 5.49% 5.44% 6 2021, Apr - 8.250% 113.00 113.00 0.00% 5.54% 5.55% -1 2022, Oct - 6.100% 101.75 101.88 -0.13% 5.80% 5.77% 2 2023, Jan - 6.000% 101.13 101.00 0.13% 5.81% 5.83% -2 2024, Dec - 7.000% 106.75 106.88 -0.12% 6.04% 6.02% 2 2025, Jun - 6.250% 101.00 100.75 0.25% 6.06% 6.09% -3 2026, Nov - 6.600% 102.88 102.75 0.13% 6.24% 6.26% -2 2027, Nov - 6.750% 103.88 103.75 0.13% 6.29% 6.31% -2 Mid Prices ; BLOMINVEST bank
Weighted Effective Yield of Eurobonds 6.00%
5.50%
5.00%
4.50% Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15
The BLOM Bond Index (BBI) registered a minor uptick of 0.02% over the past week to reach 107.148 points. The Lebanese gauge outperformed the JP Morgan Emerging Markets’ Bond Index which lost a weekly 0.11% to 672.15 points.
The yield on the Lebanese Eurobonds maturing in 5Y rose by one basis point (bp) from 5.34% to 5.35%, while that of the 10Y declined by 2 basis points (bps) to 6.21%. Demand for US treasuries was more pronounced over the past week. In fact, the yield on the 5Y notes declined from last week’s 1.62% to 1.58% and the yield on the 10Y treasuries slid from 2.23% to 2.19%. Although China has trimmed its holdings of US treasuries by around $180B in order to support its sluggish growth and failing stock market, demand for US treasuries is still strong due to a broad buyers’ base. Accordingly the spread between the yields on the 5Y Lebanese Eurobonds and their US comparable broadened from 372 bps to 377 bps while the 10Y spread widened from 400 bps to 402 bps.
Lebanon’s 5Y Credit Default Swaps (CDS) broadened from last week’s 350-383 bps to 358-383 bps , the 5Y CDS quotes of Saudi Arabia also grew from 60-68 bps to 61-66 bps, Dubai’s 5Y CDS quote widened from 173-188 bps to 182-191 bps and Turkey’s 5Y CDS quotes grew from 237-240 bps to 257-260 bps. In contrast, Brazil’s 5Y CDS quotes narrowed from 329-333 bps to 307-311 bps.
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ECONOMIC AND FINANCIAL NEWS
Commercial Bank Assets Hit the $180.08B Mark in H1
Commercial Banks’ Assets by June Total consolidated assets of commercial banks amounted to 182 7% $180.08B in H1, a 2.50% growth since year start, and an 180 improvement of 6.20% year-on-year (y-o-y). 6% 178 In terms of assets, total reserves, with a weight of 37.28%, grew by 5% 176 5.74% year-to-date (y-t-d) to $67.13B by June of this year. Loans to the private sector, which constituted 28.73% of total assets, edged 4% 174 up by 1.66% y-t-d to $51.74B by June. This was due to the respective 4.83% and 0.63% y-t-d increases in private sector loans 172 3% denominated in local and foreign currencies to $13.04B and 170 $38.70B. Accordingly, the dollarization of private sector loans went 2% from 75.56% by the end of 2014 to 74.80% by June 2015. During 168 the same period, claims on the public sector, constituting 21.07% 1% 166 of total assets, also augmented by 1.59% y-t-d to settle at $37.95B. As a matter of fact, Eurobonds increased by 5.60% to $17.22B 164 0% partly due to the $2.2B Eurobond issuance in February, and which
was partially offset by the 1.44% decline in T-bills to $20.64B, from
Jul-14
Oct-14
Jan-15
Apr-15
Feb-15
Jun-14 Jun-15
Dec-14
Sep-14
Mar-15
Nov-14 Aug-14 May-15 the beginning of the year. y-o-y Growth Rate (In %) Source: BDL On the liabilities side, resident private sector deposits (64.92%
weight in total liabilities) progressed by 2.44% since December
2014 to $116.90B by June this year. The dollarization rate of
resident and non-resident private sector deposits slid from 65.71% in December 2014 to 65.08% by June, as private LBP deposits grew at a pace of 4.77% y-t-d to $51.89B, faster than the 1.89% y-t- d growth to $96.69B of foreign private sector deposits.
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Lebanon’s Trade Deficit Plunged by 18.78% y-o-y to
$7B in H1 Lebanon Imports/Exports by June (in $B) Lebanon’s trade deficit dropped by 18.78% year-on-year (y-o-y) in 3.19 3.19 H1, 2015 to record $7B due to a 16.77% decrease in overall 2.17 2.31 1.66 1.55 imports outpacing the 6.34% decline in total exports. This was mainly due to the prominent trend of the depreciating Euro and falling international oil prices, over the same period.
Total imports, in the first six months of the year, tallied $8.56B -8.58 -8.56 compared to $10.28B during the same period last year. -9.23 -10.08 -10.80 -10.28 In more details, the three major product categories that were imported to Lebanon by June were mineral products (16.2% share of total imports), “machinery and electrical instruments” (12.2% share of total imports) and “products of the chemical or allied industries” (11.5% share of total imports). The yearly change in imported mineral products, displayed a substantial drop of 42.10% from June 2014 to $1.38B. With demand for that commodity being Exports Imports inelastic, the nose dive in mineral imports goes hand in hand with the average 45% decrease in the price of international oil since Source: Customs June of last year. In addition, “machinery and electrical instruments” went down by 8.32% y-o-y by June, despite the increase in tonnage imported from 119 tons by June 2014 to 376 tons this year. So this downturn might be attributed to the drop in overall Chinese prices and the depreciating Euro since China and Europe sell a large bulk of electrical appliances to Lebanon. “Products of the chemical or allied industries” also downturned by an annual 4.19% despite a rather stable demand for the related product, illustrated by the slight decrease in tonnage from 260 to 255 by June 2015. Notably, the three major countries that Lebanon imported goods from were China, Germany and France with corresponding weights of 11.63%, 6.56% and 6.83%.
Similarly, total exports fell yearly by 6.34% to $1.55B by June 2014 despite the 1.42% increase in volume of overall exports to 969 tons.
Specifically, exported “prepared foodstuffs, beverages, and tobacco” (16.33% share of total exports) experienced a yearly detraction of 4.62% by June as the volume exported declined from 181 tons to 167 tons. Furthermore, exported “pearls, precious stones, and metals”, constituting 15.29% of total exports, went down by 21.59% y-o-y partially due to the average 6.81% y-o-y fall of international price of gold to 1,180.37 $/ounce. In contrast,
“Machinery and electrical instruments” (14.75% share of total
exports) underwent a 1.38% improvement in the value of exports
due to the rise in export prices. In terms of the major destinations
of the Lebanese exports, Saudi Arabia, United Arab Emirates and
Iraq grasped respective weights of 12.78%, 10.29% and 7.34%.
In June alone, total exports dropped by 4.08% from June 2014 to $281.30M this year. In parallel, overall imports down ticked by 7.04% to $1.46B. In turn, the trade deficit narrowed from $1.289B to $1.18B in June.
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Lebanon Registered a Deficit of $1.32B on its Balance
of Payments in H1 Balance of Payments Up to June ($M) In spite of a 21% year-on-year (y-o-y) contraction in trade deficit and 1,313.50 an improved performance in the tourism sector, Lebanon’s Balance of Payments (BoP) revealed a deficit of $1.32B in H1 2015, compared to a surplus of $215.7M, in the same period last year. This might be due to the overall weakening in European and GCCs economies following the deprecation of the Euro and the falling oil 215.70 prices that in turn might have affected remittances.
Up until June, Net Foreign Assets (NFA) of the Central Bank (BDL) rose by $1.83B, while those of commercial banks fell by $3.15B.
-382.10 -479.20 However, In June alone, Lebanon’s BoP registered a deficit of $794M, compared to a lower deficit of $560.7M a month earlier. NFAs of BDL declined by $351.5M as well as those of commercial -1,021.00 banks, which dropped by $442.8B, from the prior month. -1,319.30 2010 2011 2012 2013 2014 2015
Source: BDL
Outstanding Loans to the Private Sector Stagnated in Q1 2015 Biggest Categories Benefitting from Loans, March
2015 According to the Central Bank of Lebanon, the value of outstanding loans to the private sector rose by 0.47% since year-start to $54.17B by March 2015. The largest category of these disbursed loans is the category of individual loans with a share of 30%, 27.0% 30% followed by a share of 18% for contracting and construction, 15% for wholesale trade and 10% for processing industries. To give a glimpse over the banks’ exposure to real estate, the sum of the value of housing loans and contracting and construction loans represents 37% of the total loans disbursed in the financial sector. In terms of individual loans as a whole, they slid by a slight 0.03% year-to-date to $16.52B. The value of housing loans increased by 10% 2% since year start to reach $10.06B by March while consumption loans saw their value fall by 2% to reach $4.31B and car loans also decreased by 3% to $1.44B. 18%
15% In terms of contracting and construction, the value of loans increased by 2% to $9.75B.
Meanwhile, wholesale trade loans saw their value drop by 2% to Individuals Contracting and Construction$8.25B by March. In fact, loans dedicated for foodstuffs and Wholesale Trade Processing Industries beverages rose by 4% to $1.64B but that was outweighed by the 19% drop in loans disbursed in the category of oil and oil products. Others Finally, loans handed for processing industries saw their value grow
Source: BDL by a mere 0.17% since year start and totaled $5.65B by March 2015.
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Transfers to EDL went up by 3.3% yearly to 2.09B in
Yearly Transfers to EdL Out of Primary 2014 Expenditures According to the Ministry of Finance, transfers to EDL increased by 12 24% a yearly 3.3% to reach $2.09B during year 2014. In hindsight, 24% reimbursements for the purchase of gas and fuel from the two 10 23% suppliers KPC and Sonatrach went up by a yearly 4.5% to $2.07B up to December 2014. In contrast, payment of debt services 8 23% 7.48 dropped by 50.9% year-on-year (y-o-y) to $21.30M, over the same 22% period. 6 7.24 7.63 22% 4 21% The imported quantity of gas oil covering consumption for the period between May 2013 and July 2014 was 7.92% less than that 21% 2 imported between May 2012-June 2013. In contrast, the quantity of 2.26 2.03 2.09 20% fuel imported between August 2013 and August 2014 was 30.46% 0 20% higher than those imported in July 2012-Aug 2013. 2012 2013 2014 Throughout 2014, transfers to EdL represented 21.9% of the government’s primary expenditures, as slight increase from the Other Primary Expenditures 21.0% paid in 2014.
Transfers to EDL In June alone, the number of tourists also progressed by 3.45% y-o- Transfers to EDL (% of total primary exp) y to 147,064. The tally of Arab, European and American tourists all grew by 2.58% to 38,290, 14.68% to 46,970 and 15.76% to 34,171, Source: Ministry of Finance respectively compared to the same month last year.
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Saida’s Custom Office Saw the Largest Upturn in Imports Tonnage Relating to Lebanon’s Main Volume Imported Custom Offices 5,000,000 Despite the 5.20% year-on-year (y-o-y) decline of the overall imports’ tonnage in the first five months of 2015 to 6.05M tons of 4,500,000 goods worth $7.1B, four out of nine custom offices revealed higher 4,000,000 volumes of imports compared to the same period in 2014.
3,500,000 Saida was the custom office to witness the largest upturn at 3,000,000 95.53% y-o-y increase to 589,278 tons imported until May 2015. Similarly, custom offices of Arida, Tyre saw annual rises of 61.07% 2,500,000 and 68.64% in imports’ volume to 52,622 tons and 1,737 tons, 2,000,000 respectively. The former’s ascent was largely due to Arida being a 1,500,000 safe passage to the North of Syria. Port of Tripoli also saw a 10.08% yearly improvement to 1,297,558 tons brought in, over the 1,000,000 same period. 500,000 The main decline in terms of imported tonnage was in Masnaa, 0 which illustrated a 39.5% y-o-y plunge from May 2014 to 64,948 Port Of Tripoli Saida Masnaa Beirut tons by May 2015 due the ongoing turbulences at the Lebanese/Syrian border. In details, imported goods at the 2015 Tonnage Imported 2014 Tonnage Imported mentioned gate plunged mainly due to Syrian rebels taking control
Source: Ministry of Finance of the Jordanian Nasib border crossing (between Syria and Jordan) in the beginning of April and kidnapping nine Lebanese truck drivers. Furthermore, PoB has suffered from labor strikes regarding the forth basin and the sluggish domestic demand seeing its imports shrink by 15.27% to reach 3.9M tons in volume worth $5.0B.
Importing activity in terms of volume at Rafik Hariri International Airport (RHIA) also declined by a mere 1.73% y-o-y to 23,035 tons of imported goods.
Separately, the imported volume through the custom office in Abboudieh remained relatively stagnant at 50,758 tons by May 2015 compared to 51,067 tons by May 2014.
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CORPORATE DEVELOPMENTS
In its third year of operations, Odeabank Registered $7.14M Profit as at June 30, 2015 Odeabank’s Financials ($) The unconsolidated financial statements of Odeabank, Bank Audi’s
Turkish subsidiary, revealed that the bank registered a $7.14M profit 30/06/2015 31/12/2014 %ch as at the end of June 2015 compared to a loss of $10.86M as at the Loans and 11% Receivables 6,994,813,000 6,304,011,000 end of June 2014. In fact, over the same period, Odeabank’s net interest income grew from $78.37M to $151.80M. Total Assets 13% 10,149,639,500 8,967,747,950 Total 12% Deposits 8,222,417,350 7,371,364,000 As for the balance sheet, it revealed a growth in total assets by 13% Shareholder year-to-date to $10.15B, an 11% year-to-date growth in loans and 1% s' Equity 470,393,700 468,037,850 receivables to $6.99B and a 12% year-to-date growth in total
Net deposits to $8.22B. (10,855,950) - Profit/loss 7,135,800 (*) (*): Figure relative to 30/06/2014 Source: Bank Audi
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FOCUS IN BRIEF
Lebanese Malls Adopting the Philosophy of “Build it! They Will Come!”
Shopping malls have become the centerpieces for rejuvenation of cities in Lebanon. The concept of a singularly owned and operated multi-tenant commercial property is thriving. The shopping center industry forms an important layer of the mainstay that buttresses the Lebanese economy and society. As a principal facilitator of retail sales, it is a major contributor to private consumption, and has a significant impact on investment. Moreover, shopping centers are a prime generator of employment among young adults and a critical source of flexible working opportunities for students.
The major shopping centers in Lebanon are ABC, Beirut City Center, Beirut Souks, Citymall, Le Mall, and Dunes. The competitive environment that a mall faces today is considerably different from that faced in earlier days when their primary competition was a downtown business district or shopping streets. Today, a mall’s primary competition is more likely to be another mall.
Selected Malls in Lebanon
Mall's Name Year Opened Location ABC Dbayeh 1979 Dbayeh Dunes 1997 Verdun ABC Achrafieh 2003 Achrafieh Citymall 2005 Dora Beirut Souks 2009 Beirut Le Mall Sin el Fil 2009 Sin el Fil Le Mall Saida 2010 Saida Karout Mall 2012 Chiah Le Mall Dbayeh 2012 Dbayeh City Center 2013 Hazmieh Source: Companies’ Websites
One of the oldest shopping malls was ABC which opened its first department store in 1936. Over the years, it has expanded all over Lebanon to tend to the largest number of customer base. ABC Dbayeh opened in 1979 on a 17,700 sqm land plot. It was expanded in 2009 to reach 32,500 sqm. ABC Achrafieh opened in 2003 over a 120,000 sqm of built up area with 35,000 sqm of gross leasable area (GLA). According to marketing director, Dalida Nahas, other than being strategically located, ABC malls present to their targeted customers what they expect in terms of shopping, entertainment, F&B, and lifestyle. Furthermore, ABC offers a customer service and experience that, today, is still unmatched domestically.
ABC Department store is the main anchor of ABC. Adjacent to it are international brands such as Zara, H&M, Victoria’s Secret, Virgin, and local retailers driving traffic such as Aizone, GS and many others. Moreover, ABC is presently the exclusive franchise in Lebanon for major international brands such as Andre, Caroll, Kookai, Maje, Sandro, Adolf Dominguez, Desigual and Tommy Hilfiger.
Citymall followed in 2004, building a 70,000 sqm shopping center. According to Arlette Nahas, marketing manager at Citymall, the mall’s location on the Dora highway and the ease of its accessibility are its main competitive advantages. Its major anchor tenant is BHV, which takes the largest area among all tenants. Despite its early customer retention and uniqueness, traffic towards Citymall experienced headwind in the shape of the launching of Le mall in Sin el Fil (2009), and Dbayeh (2012).
According to Le Mall marketing department, the major advantage that it benefits from is the brand-mix, targeting the middle class which is considered the biggest social class in Lebanon. Le Mall’s anchor tenants are Zara, Decathlon, Gap, Joue Club and Mike Sport.
In 2013, Beirut City Centre was Majid Al Futtaim’s first mall to open in the Levant region, with a 62,000 sqm GLA. Total investment in the mall was around $350M, with almost $2.5M invested in municipal road infrastructure. The flagship mall features over 200 specialty stores including 40 new brands that opened in Lebanon for the first time, creating a dominant retail and entertainment destination for Beirut. This includes the country's first Carrefour hypermarket and the largest in the
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Middle East at 13,000 sqm, the first Multi-screen VOX Cinemas offering the latest in cinematic innovations, and the first Magic Planet family entertainment centre. Beirut City Centre also features the first Marks & Spencer store for the Lebanese market, along with the largest H&M and the newest Centrepoint, among many more brands. Beirut City Centre houses over 40 international restaurants and cafés, including a food court with 16 diners and an open-air rooftop terrace with 12 destination restaurants.
Worth mentioning that for the purpose of this focus, other malls were contacted, like Beirut Souks, City Center and Karout Mall, however they either did not answer in a timely manner or they refrained from sharing information.
Most Lebanese shopping centers have seen occupancy rates ranging between 88% and 99%. Both ABC flagships and Le Mall Saida have been registering occupancy rates above 95%, while it reached 99% in Le Mall’s Dbayeh and Sin el Fil branches. Le Mall experiences a tenant turnover rate of 3 years, where the mall’s management advises each lessee underperforming the average to close down, and replaces it with a new occupier that would be more capable of reeling in more income and consumer traffic. Beirut Souks managed to stabilize its turnover rate in the past year, after it restructured its rental fees.
The evolution of shopping centers over the years has dictated a paradigm shift that has transformed malls to act not only as a point of sale, but also as a place for leisure. As shopping centers seek to broaden their appeal as a consumer destination and not just a shopping location, the tenant mix of schemes has expanded to include a greater proportion of consumer services. Included among these non-traditional tenants are food-and-beverage and leisure occupiers, fitness and spa amenities and a wide array of educational, cultural, and entertainment facilities. For instance, 30% of Dunes consists of entertainment area, 20% goes to F&B, and 20% of it is the Holiday Inn Hotel. ABC has lately fine-tuned its F&B mix to offer a comprehensive mix of both casual and fine dining experience. Most malls in Lebanon include a kids’ entertainment area and movie theaters. On the other hand, many malls offer personal care services such as hairstyling, make-up, and car wash. Restaurants, entertainment areas, and personal care services have been proven to increase the strength of shopping malls and drive traffic to the center on a recurring basis. For instance, according to Solidere, the launching of the Cinema, which sold almost 550,000 tickets of the estimated 1,000,000 tickets sold in Lebanon last year, and the opening of the food court afterwards, drastically increased footfall to Beirut Souks.
Malls displayed opposing footfall trends in the past 3 years. ABC and Le Mall witnessed positive footfall trend, although some months were a bit challenging. To ensure that this trend will keep on growing and in order to protect the business of operating tenants, ABC has been very keen on addressing the economic situation by investing in new brands and by implementing an all year round marketing calendar. On the other hand, Dunes and Citymall suffered from a declining trend, to the extent where lessees at Dunes pressured owners, and succeeded at decreasing rent costs. Dunes is highly affected by tourism activity as a large part of the mall’s clientele are the visitors at its hotel, The Holiday Inn.
Looking at rental costs, most shopping center apply sales overage, an international best practice in which occupiers pay a percentage of their sales to mall owner in addition to a fixed rent. The average rent/sqm is very dependent on the location. For instance, average yearly rent costs in Le Mall vary from $350-$400/sqm in Saida, $800/sqm in Sin el Fil and $1000/sqm in Dbayeh, and the percentage of sales is around 10%. Citymall charges its tenants 10% to 15% of total sales, while ABC’s sales overage is reliant on the business itself and the industry of the operator. According to Cushman & Wakefield’s report “Main Streets across the World”, ABC Achrafieh ranked the 37th most expensive retail rent charges worldwide with a quote of $2,000/sqm annually. Dunes apply a similar strategy to the above mentioned malls; however it is only enforced on the tenants in the F&B sector. It charges a fixed rent for the retail sector.
Due to the increase in the number of shopping centers, most malls are taking steps towards renewal, to remain competitive in the industry. For instance, plans to renovate Citymall are being examined, ABC is constantly trying to innovate and offer unique, more and better services, and Le Mall is hosting many events and game-competitions.
Nevertheless, shopping centres displayed optimistic expectations for the coming years, and implied that the market is still underserved, as there are a lot of expansion plans. ABC is in the process of building its 3rd flagship in Verdun over a 150,000 sqm built up area that will offer 50,000 sqm GLA. ABC Verdun is expected to house the world’s most renowned brands in fashion, F&B and a top notch entertainment. Le Mall has ideas of launching branches both in and outside of Lebanon. Citymall and Dunes also are planning on expansions however they kept this information confidential. Majid Al Futtaim is also opening its second mall in Lebanon, the Waterfront City Center, which is expected to open in 2017. This regional mall sits at the eastern edge of the Waterfront City, along the Beirut-Tripoli highway in the Naccache-Dbayeh area. With its 3 levels of retails (150 retail shops), a roof top cinema and restaurants section, it aims to serve the new city as well as the surrounding area.
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Selected Malls Expected to Open in Lebanon
Mall's Name Expected Year to Open Location Centerfalls 2016 Elissar Cascada Mall 2016 Bekaa Waterfront City Center 2016 Dbayeh The Spot 2016 Choueifat The Spot 2016 Tayouneh Baabda Outlet Mall 2016 Baabda ABC Verdun 2017 Verdun Source: Companies’ Websites
New malls are also expected to be launched in the coming years. Centerfalls, an outlet mall selling high-end brands at discounted prices, is expected to open in November 2016 in Elissar. Centerfalls, the first designer outlet resort in the Middle East, integrated 72,000 sqm resort concept, breaking new grounds in Lebanon by bringing to its visitors the widest selection of luxury goods, sold all year long at discounted prices of 30% to 70% off. Additionally, according to Bilal Yamout, SIDCOM’s head of development and leasing, the layout will be divided into three sections: restaurants, outlets and a high end supermarket. Centerfalls has drawn its name from a unique architectural layout that includes the world’s largest waterfall ever built in a shopping mall which will flow down five floors to a central fountain. The mall has succeeded in reaching a 95% occupancy rate up till now. Bilal Yamout stated that like all malls, Centerfalls will also apply sales overage; however, rent costs would be 40% less than the average in Lebanon. Centerfalls’ main aim is to attract people from Beirut.
Cascada Mall is also under construction in the Bekaa and is expected to open in April 2016 over a 135,000 sqm of built up area, offering 54,000 sqm GLA. It will consist of 200 retail spaces spread over 2 floors, a spacious food court, an entertainment center, and an 11 screen multiplex movie theatre to be operated by Empire Cinemas. Besides the movie theatre, Hypermarket Carrefour will be among the mall’s anchor tenants, spreading over a 10,000 sqm space. To date, despite having difficulties convincing some local retailers to rent in the Bekaa, 62% of the retail spaces have already been leased. New operators will be attempting their first venture in Lebanon at Cascada Mall, such as the children’s entertainment center, which will be run by the Italian company Terra Magica. To attract shoppers from all over Lebanon, Cascada Mall will have a wide range of prices that caters all budgets.
In addition, other malls are expected to open, such as “The Spot” anchored by Spinneys in Tayouneh and Choueifat, and Baabda Outlet Mall.
It seems that shopping centers in Lebanon are following the theory of “Build it! They will come!” as they became the biggest entertainment places of today’s life, welcoming people of all ages. Shopping centers will remain at the forefront of Lebanese commerce as they continue to adapt to meet the changing needs and wants of consumers.
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Research Department:
Wael Khoury [email protected] Lana Saadeh [email protected] S A L Riwa Daou [email protected] Mirna Chami [email protected] Your Investment Reference Marwan Mikhael [email protected]