Real estate developers need to put the pedal to the metal to keep pace with demand

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WHAT WE’RE TRACKING TODAY

THIS MORNING: A Saudi delegation is in Islamabad for a two-day investment conference. Plus: Aramco is releasing its 1Q 2024 earnings today

Good morning, ladies and gentlemen, and welcome to an unexpectedly (very) busy hump day. We have news of Aramco closing in on an agreement to buy Shell’s fuel station business in Malaysia, as well as a duo of reports from S&P Global on growing real estate demand in the Kingdom and projections of a potential increase in government debt to finance Vision 2030 projects.

^^ We have chapter and verse on these stories and more in this morning’s newswell, below.

HAPPENING TODAY-

Aramco will release 1Q 2024 results. Analysts will be looking for guidance on how Opec+ production cuts could impact profitability and, as a result, the company’s plans to pay some USD 34 bn in performance-based dividends this year.

The Saudi Smart Manufacturing trade fair is in its second day at the Riyadh International Convention & Exhibition Center as part of Riyadh international industry week. It brings together government officials, industry professionals, international and local manufacturers, and buyers to share knowledge and showcase new smart manufacturing technologies and goods. The event is held concurrently at the same location with Saudi Plastics & Petrochem, Saudi Print & Pack and Saudi Smart Logistics. It runs until Thursday, 9 May.

It’s day two of the Arabian Travel Market in the UAE. Expect plenty more tourism and aviation news today — and check out our report in the Aviation section of this morning’s news well, below.

For our fellow iSheep: Apple is expected to unveil new iPads this afternoon at 5pm Saudi time (7am Pacific). The expectation: a revamp of the line that restores some coherence to the offering (and for the Pro to get a FaceTime camera on the long edge). You can stream the announcement from Apple’s website or its Youtube channel.

WEATHER- Riyadh is looking rather cloudy today with a high of 37°C and a low of 22°C. Expect some winds in Makkah which is still on the hot side at a high of 39°C and a low of 26°C, and more winds in Al Taif with a high of 30°C and a low of 19°C

DATA POINT-

There are some 2.5k active licenses in the mining sector, including 1.6k for building materials quarries, 611 for exploration, 195 for exploitation, 42 for reconnaissance, and 28 surplus mineral ore licenses, according to Industry and Mineral Resources Ministry data. The ministry issued 20 new mining licenses in February 2024, including five exploration licenses, nine building materials quarry licenses, and six surplus mineral ores licenses.

WATCH THIS SPACE-

#1- A delegation of senior Saudi officials led by Assistant Investment Minister Ibrahim Al Mubarak landed in Pakistan yesterday for a two-day investment conference, state-run Pakistani news wire APP reports. The delegation is expected to sign several MoUs across sectors in Pakistan, which Al Mubarak described as “a high priority economic, investment and business” destination in his opening remarks at the conference (watch, runtime: 5:15).

ALSO- An agreement on Pakistan’s Reko Diq could be coming: The delegation includes executives from Manara Minerals who are looking to continue talks on the acquisition of a stake in Barrick Gold’s Reko Diq copper and gold mining project in Pakistan, Reuters reports, citing a Pakistan government document it says it has seen.

BACKGROUND- Manara is a joint venture between the Public Investment Fund and mining giant Ma’aden. Manara was said to be close to a USD 1 bn investment in the mining project — one of the world's largest undeveloped copper-gold areas. A preliminary agreement could be made public in a matter of weeks, sources said last month.

We’ve been getting closer with Islamabad: Foreign Minister Prince Faisal bin Farhan was in the Pakistani capital last month, nearly a week after Pakistan’s prime minister discussed a USD 5 bn investment package during a meeting in Makkah with Crown Prince Mohammed bin Salman. Saudi has been among key backers of crisis-hit Pakistan, extending the term of a USD 3 bn in deposit at the State Bank of Pakistan for an additional year to mature in December 2024. This is in addition to USD 2 bn in financial assistance from the Kingdom last year to shore up the country’s finances.

#2- The region’s largest water theme park, courtesy of Qiddiya: The board of PIF’s Qiddiya Investment Company has approved the launch of a new water theme park that is slated to be the first of its kind in Saudi and the largest in the region, state news agency SPA reports. The water park — dubbed Aquarabia — will be home to 22 water games and attractions, including the world’s first double water loop and roller coaster with the highest jump among other record-breaking water games. It is set to complement Qiddiya’s Six Flags Theme Park.

REMEMBER- Qiddiya, a USD multi-bn development, aims to become the world’s largest entertainment hub. The district will be home to the world’s first-ever Dragon Ball themed park and a multi-use stadium where it plans to host major sports, cultural and entertainment events, including games at the 2034 Fifa World Cup. The destination will also be home to the world’s first gaming and esports district.

#3- The Kingdom’s “first 18-hole island golf course” is coming to PIF-backed Red Sea Global’s Shura Island next year, according to a statement. Shura Links, a par 72 championship length course, will span across 7.5k yards of green featuring multiple tees. It was designed in partnership with acclaimed golf architect Brian Curley, who was the mastermind behind Mission Hills Golf Club, the world’s largest golf facility.

#4- Radisson Hotel Group plans to have the Kingdom account for 70% of its portfolio in the region over the next three years, Vice President for Development Elie Milky told Argaam yesterday. Radisson currently operates 30 hotels, resorts, and hotel-apartment properties in the country, with another 20 under construction. It aims to operate 100 hotels or 20k rooms in Saudi by the end of the decade, Milky said.

#5- Local restaurants and food outlets may soon be obliged to have a tracking system for the exact food ingredients and packaging used to prepare their meals, the Saudi Gazette reported yesterday. The system would allow the operator to know and track the source and quantity of the ingredients being used to ensure food safety and quality. It would allow food items to be recalled in the event of violating food safety rules.

The system, proposed by the Housing, Rural Affairs and Municipal Ministry, follows a recent food poisoning outbreak linked to a local hamburger chain. One person reportedly died of food poisoning and more than 70 were made sick.

#6- The Saudi Fund for Development (SFD) and the UK’s Foreign Commonwealth and Development Office will work to improve the lives of the most vulnerable globally after signing a joint cooperation agreement, SFD said in a statement. The agreement will see the two collaborate on refining donor management, humanitarian aid transparency, and accountability, in addition to improving monitoring and evaluation schemes.

#7- Eight water bottling and distribution companies were fined for engaging in anti-competitive practices, the General Authority for Competition said in a post on X. The companies were handed fines ranging between SAR 100k and SAR 1 mn for price fixing. The authority didn’t name the companies.

PSAs-

#1- Tenants must pay a one-time security deposit through the Ejar platform against potential damage to the property during the rental period, Okaz reported yesterday. The security deposit can be itemized when both parties document the rental contract on Ejar, with the platform acting as a neutral party holding the deposit, it said. The agreed-upon unit delivery form dictates the process of automatic refund to both parties in their electronic wallets upon leasing contract expiration or cancellation, it added. If damage occurs, the deposit can cover costs or be returned to the tenant upon mutual agreement.

#2- Citizens traveling outside the region must ensure their passport has a minimum validity of six months, or three months for visits to Arab countries, the General Directorate of Passports said in a post on X.

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DID YOU KNOW that we also cover Egypt and the UAE?

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THE BIG STORY ABROAD-

Hamas has accepted a ceasefire proposal — Israel says it’s not enough and is hammering Rafah. Here’s what you need to know this morning:

Hamas accepted a proposal from Egyptian and Qatari mediators;
Israel says it doesn’t go far enough and plans to take over the Rafah border crossing;
Israeli forces are attacking Rafah by air and on the ground. More than 1 mn people have sought refuge in city on Egypt’s border, and the Israeli army is now telling at least 100k of them in east Rafah to move into a so-called “humanitarian zone;
Shuttle diplomacy continues today in Cairo after both sides said they’d continue indirect talks.

The Foreign Ministry has warned Israel against invading Rafah as part of its “systematic bloody campaign” against Gaza, it said in a post on X. Riyadh reiterated a call for the international community to intervene immediately to “stop the genocide carried out by the occupation forces against defenseless civilians in the occupied Palestinian territories.”

There’s more foreign policy ugliness in the headlines: Russia has rattled Western capitals with an announcement that it’s running drills on the use of tactical nuclear weapons. Pundits say the Kremlin is putting on pressure in response to French and British statements on Ukraine.

SOUND SMART- Tactical nukes are smaller, less-powerful weapons designed for use on the battlefield. Strategic nuclear weapons are the things designed to take-out cities.

IN THE BUSINESS PAGES- Reuters won a Pulitzer Prize for its long-term investigation into Elon Musk’s business empire, including Tesla and SpaceX. The newswire also won for its photography of the war between Hamas and Israel. You can read the full series here, read the Pulitzer announcement, or check out the long list (pdf).

CIRCLE YOUR CALENDAR-

The European Chamber of Commerce in the Kingdom of Saudi Arabia is set to launch tomorrow, the chamber said on LinkedIn. It will be the first EU chamber of commerce in the Gulf. The launch event will take place at the Cultural Palace in Riyadh.

Are you subject to withholding tax? You have until Sunday, 12 May to submit and pay withholding taxes for April, according to a Zatca statement. Late payers will face a fine equivalent to 1% of unpaid fees for every 30 days of delay.

The Saudi Giga Projects Summit will open next Monday, 13 May at the Hilton Riyadh Hotel and Residences. The Meed event will showcase Saudi’s USD 870 bn giga projects drive. It brings together contractors, suppliers and relevant stakeholders from the region and elsewhere for discussions on potential investments.

The MENA Construction Summit will kick off next Tuesday, 14 May at the Hilton Riyadh Hotel & Residences. Also organized by Meed, the one-day event will bring together developers, contractors, key executives and others to discuss the latest innovations in the construction industry.

Saudi restate developers need to put the pedal to the metal to keep pace with demand, says S&P Global

Growing demand for property amid an influx of expat workers and a push to boost home ownership is giving real estate developers in the Kingdom a shot in the arm, according to a report by S&P Global. Demand for housing will remain “steady” thanks to appetite from Saudi buyers and streamlined ownership requirements for foreigners.

Developers need to ramp up supply to meet growing demand, as the country’s population is on track to grow, with the share of expats rising to 50% from a current 42% by 2030. S&P Global expects Riyadh to see the fastest population growth, putting more pressure on the capital’s already-tight real estate market, where “new supply will likely not meet the incremental demand.” Increased demand will be compounded by population flows from smaller cities to main cities Riyadh and Jeddah, S&P suggests. Foreign buyers are also buying into real estate to benefit from simplified ownership and residency rules under the premium residency program

Mortgage lending is still growing, albeit at a softer pace: Some 30-40% of locals buy properties with mortgage finance, which come with fixed rates, according to S&P Global. Mortgage loans were estimated at SAR 607 bn at the end of 2023, although overall growth was down 45% y-o-y due to the high interest rate environment. High interest rates, coupled with tighter liquidity, pushed the number of new mortgage contracts down 33% in 2023, while mortgage lending growth decelerated to 10% last year from 23% a year earlier.

The government has been a key backer of mortgage lending — and that’s likely going to continue to be the case, as the government continues to back overall real estate development, S&P Global says. The government has rolled out several key initiatives, including the Housing Ministry’s Sakani program, no-interest mortgage loans from the Real Estate Development Fund, and a lower tax of 5% on real estate sales and 2.5% tax on untapped land. It also had its PIF-owned Saudi Real Estate Refinance Company buying mortgage loans estimated at SAR 26.7 bn, representing 5% of local banks’ mortgage lending book.

And its holding in real estate developers is key: S&P Global sees the government’s direct ownership in real estate developers through the PIF — including Roshn, Emaar Economic City and Saudi Real Estate Co — helping it achieve its goal of having 70% of Saudis owning homes by 2030.

Financing needs are poised to be significant given the pipeline of real estate projects and the population boom, according to the report. This would require everyone in the market, including listed real estate developers, to look at diversifying funding sources and tapping capital markets amid tighter liquidity in the banking system and “still relatively high funding costs.” Off-plan property sales are expected to rise, which will help curb the sector’s financing needs due to its fitting model of pre-financing construction through fund collection and alleviated risks for developers.

Healthy demand = profitability: S&P Global sees a healthy demand boosting developers’ net income and revenue this year and in 2025 after a “mixed revenue performance” last year. It said an improved average income margin since last year would help boost further growth especially as projects scale up. “We expect healthy demand will keep driving their revenue and [bottom lines] in 2024-2025, with some help from expected lower interest rates.”

Alat launches new units to help meet global demand for AI infrastructure

PIF’s Alat launches business units for electrification, AI infrastructure: Alat, the advanced manufacturing investment platform launched earlier this year by the Public Investment Fund (PIF), has opened the doors at two units focused on electrification and artificial intelligence infrastructure, it said in a statement yesterday. The new units will “address unprecedented global demand for AI infrastructure and the urgent need to support global energy transition by strengthening electricity grid technology.”

The electrification business unit will work on advancing transmission and distribution technologies with a focus on connecting renewable energy sources to the grid, according to the statement. Its scope of work will include advanced technologies for gas and hydrogen generation and compression. The AI infrastructure unit aims to develop AI manufacturing solutions, including network and communications equipment, servers, data center storage and networking equipment, industry 4.0 computing, and others.

SMART POLICY- Alat wants to keep pace with emerging global trends for environmentally friendly computing by using renewable energy sources, including solar, wind, and others for data centers. It expects the future of AI infrastructure will include green data centers to help reduce the environmental footprint of data processing. AI infrastructure is seen playing a vital role in the electrification of transportation, especially in autonomous vehicles and electric mobility.

About Alat: The PIF unit was set up in February with a focus on key sustainable manufacturing sectors, including “advanced industries and semiconductors, smart appliances, smart health, smart devices, and smart buildings, in addition to next generation infrastructure.” It plans to invest USD 100 bn through 2030 across its nine business units, and contribute USD 9.3 bn in direct non-oil GDP by 2030, according to its website.

Alat had a busy quarter, unveiling four new global partnerships a few weeks after its launch as part of a plan to create a sustainable manufacturing hub in the Kingdom. The partnerships include Alat investing USD 150 mn with Japanese technology investment giant Softbank to create an industrial automation venture that will manufacture advanced industrial robots.

Aramco in talks to buy Shell’s fuel station network in Malaysia

Aramco is in talks to acquire Shell’s gas station unit in Malaysia, Reuters reports, citing four sources it says have knowledge of the matter. The potential acquisition — which would mark the oil giant’s entry into the Malaysian fuel market — could be worth as much as USD 1.06 bn, the newswire reports. A final agreement could be hammered out in the coming months, following talks that reportedly began in late 2023, one of the sources said.

What’s on offer: The Shell-owned business is the second-largest network of its kind in Malaysia. The London-listed energy giant owns a total of 950 gas stations across the country, according to its website.

Shell has been offloading assets: Shell plans to divest 500 gas stations this year and next year as part of a rationalization drive led by CEO Wael Sawan. It is currently in the process of exiting from its refinery and petrochems facility in Singapore. The potential sale of its fuel retail business in Malaysia follows the sale of its refinery in Singapore, which supplies the network, according to one of the sources.

It wouldn’t be Aramco’s first venture into Malaysia: The state-owned oil giant holds a 50% stake in Pengerang refinery in Johor under a JV with Petronas. The complex produces up to 300k barrels of oil per day slated for local consumption and exports.

The oil giant has been making moves in the fuel retail market for some time: Aramco recently completed its acquisition of a 100% equity stake in Chile’s fuel distributor Esmax Distribución, marking its entry into fuel retailing in South America, in March. It is reportedly also mulling an entry into the fuel retail sector in Southeast Asia and Africa as it looks to tap countries with fast-growing economies. Late last year, Aramco inked a binding agreement to acquire a 40% stake in the oil retail company Gas & Oil Pakistan. It also set up a subsidiary Saudi Aramco Retail in 2018 as part of a strategy to bolster its downstream value globally.

On the local front: Aramco launched in 2021 with French oil giant TotalEnergies a joint retail network under a 50-50 JV that plans to invest USD 1 bn through 2025. The Aramco-TotalEnergies JV aims to expand fuel retail offering here, acquiring an existing network of 270 service stations from local Tas’helat Marketing Company and Sahel Transport Company.

Flyadeal has major expansion plans for its fleet + international routes

Budget airline Flyadeal, a unit of Saudia, aims to more than triple its fleet to 100 aircraft within the next five years, as it looks to expand its route network to 100 within four years, CEO Steven Greenway tells The National. The airline hopes to hit a target of carrying 10 mn passengers by the end of 2024.

Eyeing a larger Airbus fleet: The operator — whose entire fleet is comprised of Airbuses — is mulling ordering more single-aisle Airbus jets and upgrading a separate existing order for 50 A320neo and A321neo aircraft, Greenway said. The potential upgrade would help the airline increase maximum take-off weight, and secure jets with high performing engines along with a certification that allows for longer flights over water.

The price tag: The exact value of the order “will depend on the modifications” Flyadeal decides to make, Greenway said.

Delivery schedule: The airline is set to receive six aircraft this year, with its 33rd A320neo expected to arrive in a couple of weeks, Greenway said. One-third of the airline's order book consists of A321 Neos, with delivery scheduled to start in 2026, while the remaining orders are for the smaller A320 Neos model, he added.

New routes in 2H 2024, with more focus on international network: The low-cost carrier is slated to launch new routes to southern Europe, India, and the GCC in 2H 2024, with flights between Riyadh and Dubai’s second hub, Al Maktoum International Airport, slated to start on 20 June. Flyadeal wants to reach an even split between its domestic and overseas flights, which are currently at an 80-20 split in favor of domestic routes. “The real focus of the aircraft deliveries over the next couple of years will be our international network.”

In context: Flyadeal currently operates flights to 18 domestic destinations and five international destinations year-round, including Amman, Cairo, Istanbul, and Dubai. This is in addition to seven seasonal summer destinations: Antalya, Baku, Bodrum, Sarajevo, Sharm El Sheikh, Tbilisi, and Trabzon.

REMEMBER- Flyadeal’s ownership could be transferred to the Public Investment Fund (PIF) if the fund goes through with unconfirmed plans to acquire state-owned Saudia as soon as next year. This would add to the aviation asset portfolio of the wealth fund which launched Riyadh Air in March last year.

IN OTHER AVIATION NEWS-

#1- Riyadh Air is looking to make follow-up aircraft orders to meet its fleet needs, ahead of the airline’s planned 2025 debut, Bloomberg reports. “We need a very large fleet, we’re going to make a number of additional orders,” CEO Tony Douglas told the business information service. The move would add to the airline’s order for up to 72 Boeing Dreamliners in March, Bloomberg says.

#2- Low-cost airline Flynas is adding Abu Dhabi, Sharjah, and the soon-to-be expanded Al Maktoum International Airport to its network as of September, from its bases in Riyadh, Dammam, Jeddah, and Al Madinah, Khaleej Times reports. The expansion will take the number of routes between the countries to nine, up from four currently. Flynas said in April that it could be looking at a Tadawul IPO this year

#3- A unified GCC visa could be in place by the end of the year, Khaleej Times quoted Chairman of the Sharjah Commerce and Tourism Authority (SCTDA) Khalid Jasim Al Midfa as saying at the event.

Neft Alsharq plans to IPO on Nomu with a 20% stake sale

Car oil manufacturer Neft Alsharq plans to offer a 20% stake in a secondary sale on parallel market Nomu, it said in a prospectus (pdf). The company lined up Capital Market Approval for the IPO back in March.

The offering: Some 5 mn ordinary shares are up for grabs, equivalent to a 20% stake in the company after it issued new shares and upped its share capital through a capital increase. The offering is only open to qualified investors. Investors can place orders for a maximum of 1.2 mn shares, and a minimum of 100 shares each.

Use of proceeds: Some SAR 2 mn of the proceeds will be channeled towards covering the offering’s expenses, while the rest is earmarked to support the company’s asset growth and working capital needs.

About Neft Alsharq: The Riyadh-based company manufactures industrial oils, greases and engine fluids for vehicles. It bills itself as an exporter of lubricants and oils to 35 countries, most of them in the Middle East, North Africa, and East Africa.

Post-IPO ownership structure: Neft Alsharq has five substantial shareholders selling down their positions in the offering: Sabeel Alriadh, Prime Investments, Ibrahim Ali Ibrahim Mohsen, Abdelaziz Abdullah Mohammed Alrasheed, and Assaad Rameeh Othman Alrameeh. Collectively, their shares will settle at 42.2%, down from 52.7% before the transaction.

Lockup period: Substantial shareholders will not be able to execute any transactions on their shares for a period of 12 months starting from the first day of trading.

The timeline: The subscription period runs from Sunday, 26 May through Sunday, 2 June. The final allocation of shares is slated for Thursday, 6 June.

ADVISORS- Yaqeen Capital is quarterbacking the transaction as financial advisor and lead manager. RSM provided counsel. Receiving agents include Alistithmar Capital, Alinma Investment, SNB Capital, AlJazira Capital, Riyadh Capital, ANB Capital, Albilad Capital, Al Rajhi Capital, Derayah and Saudi Fransi Capital. RSM

The economy is strongly positioned to endure a weakening net debt position- S&P Global

Even with more debt to finance gigaprojects, the government’s balance sheet is looking okay: The government’s net asset position “will deteriorate but remain strong, alongside prudent fiscal policies” with the controlled rise in government debt to finance projects under Vision 2030, according to the base scenario of an S&P Global report. The report’s base case sees both changes to project timelines and large public- and private-sector investments “could mitigate the impact on the government's balance sheet.” It then builds out three other scenarios in which the government takes on more debt to finance the projects.

The details: In its base scenario, the credit agency sees the Kingdom’s debt-to-GDP ratio rising to 26% by 2027, up from 14% in 2017, to accommodate rising financing needs for big Vision 2030 projects. PIF funding accounts for c. 30% of total debt issuance in the base case. The economy is expected to maintain a net asset position of 47% of GDP in 2027. This means that after subtracting the government’s debt from its liquid assets, we will still have liquid assets that are worth 47% of GDP.

What’s driving the base scenario: Top of the list is the government’s newly-adopted strategy of pacing out growth at a rate that doesn’t strain public finances, add additional burden to its import bill, or crowd-out private-sector access to domestic bank financing. The expected debt-to-GDP ratio also factors in potential private sector and external investments, including Neom looking to raise SAR 5 bn in sukuk issuances this year alone. The capital market is also maturing to a level where listed companies are deliberately looking for funding from outside the local banking system leaving the economy with breathing room.

Beating the G20 average on both fronts: The forecasted hike in debt-to-GDP falls far below the expected 79% increase in debt-to-GDP ratio for G20 countries — on average.G20 countries are also expected to struggle with a net debtor position of 63% over the same period.

The alternative scenarios: The financial solutions provider drew three scenarios in which the government and PIF issue more debt than expected for Vision 2030 projects and other spending costs. In the most pessimistic scenario — in which total government debt issuances hit USD 110 bn over the next six years, as opposed to the USD 30 bn assumed in the base case — the government would flip to a very slight net debt position by 2030.

What could make the alternative scenarios materialize: Potential triggers include expected foreign investments falling through, or the government and PIF continuing to line up debt to finance their diversification ambitions. PIF funding would account for the majority of total debt issuances at 55% in the alternative scenarios. Other downside risks include a decline in oil prices and / or sustained oil production cuts.

Backing it all: Each of the scenarios in the report is based on the assumption of that Brent crude will be at USD 85 per barrel in 2024 and then USD 80 through 2027. They also presume the government will raise debt rather than sell assets — and they assumes no significant interest rate hikes, which would raise the cost of debt service.

Domestic tourism had a strong 1Q 2024, according to AlMosafer

Domestic destinations accounted for 53% of total bookings by Saudi travelers during the first four months of 2024, according to a report (pdf) by Seera Group travel unit Al Mosafer. The report compares booking data from Almosafer’s consumer travel business between 1 January-20 April in 2023 and 2024.

Riyadh, Jeddah, Makkah, Al Khobar and Abha maintained their positions as top destinations for domestic travel, while AlUla, Tabuk and Hail are trending destinations this year.

Total bookings for domestic destinations rose 29% y-o-y, with flight bookings surging 27% y-o-y and hotels 40% y-o-y, the report showed. Some 91% of total bookings were made online, while 9% of bookings were made through retail channels.

For Saudis vacationing abroad, Dubai, Doha, Manama, Cairo, and Istanbul continued to be top picks. Asian destinations including Tokyo, Singapore, and Bangkok are gaining popularity this season, and European capitals such as Madrid and Amsterdam are also trending as destinations, the data showed.

Low-cost flight bookings accounted for 62% of total bookings in 1Q 2024, with international low-cost flight bookings representing 46% of bookings. Domestic bookings accounted for 72% over the same period, the data showed. The report attributes this shift to efforts in the Kingdom’s aviation sector, such as the introduction of flight routes and airports with higher capacities, making low-cost carrier flight options more affordable.

REMEMBER- The government is investing some USD 800 bn into the tourism sector under plans to build new future destinations, including Neom, the Red Sea, Diriyah, and Qiddiyah among others. The private sector, supported by the Tourism Development Fund, is pouring investments to build new hotels, he added.

More travelers incoming: The Tourism Ministry recently doubled its target for 2030, hoping now to be host to 150 mn tourist trips after it hit its target last year ahead of schedule. The new 2030 target includes 80 mn trips from domestic travelers and 70 mn from international travelers.

IN OTHER TOURISM NEWS-

The Kingdom and Egypt maintained their top positions in travel booking app Wego’s 2024 ranking of top destinations for international travel for travelers from the region, according to a statement. Saudi and Egypt’s top spots have been largely uninterrupted since the app started tracking data in 2014.

Saudi startups raised a combined USD 4.8 mn in April

Three Saudi startups raised a combined USD 4.8 mn in April 2024, Wamda reports. That’s a 60% y-o-y increase compared to the USD 3 mn three Saudi startups raised in April 2023, according to Enterprise calculations based on Wamda figures from last year.

Who raised money: Homegrown B2B SaaS procurement platform Penny Software raised an undisclosed amount in a pre-series A funding led by Dubai-based venture capital firm Iliad Partners last month. Wamda does not provide further information on the two other startups it says raised funding last month.

A sharp decline on a monthly basis: Local startup investments dropped 97% m-o-m in April, after lining up USD 198 mn in funding in March from 25 transactions, including a USD 130 mn pre-IPO round for e-commerce app Salla. The weaker m-o-m figure is partially due to the base effect from a jump in investments made at tech event Leap 2024 in Riyadh.

THE REGIONAL PICTURE-

Investments in MENA startups rose 7x y-o-y to USD 55 mn in April, according to our math. Meanwhile, that figure shrank 78% on a monthly basis with startups landing USD 254 mn in March 2024.

UAE reclaims top position in April, eclipsing KSA: UAE-based startups raised a combined USD 32 mn across six transactions last month, followed by Egyptian companies, with five startups raising a combined USD 8.7 mn. UAE fintech Fortis Digital Solutions bagged the highest ticket of the monthat USD 20 mn in a series A round, followed by Dubai-based e-commerce platform Wee Marketplace at USD 10 mn in a pre-series A round. Tunisia’s AI company Qodek bagged USD 8 in series B funding.

Fintech is king: Four fintech companies from the region bagged USD 25.7 mn in April, followed by ecommerce at USD 10.5 mn, AI companies at USD 8 mn, and SaaS providers at USD 3.5 mn. The bulk of funding went to companies that are at stages beyond the seed level.

Investors are bullish on B2B startups, with USD 42.5 mn raised by B2B companies across 12 transactions, while B2B2C companies landed USD 11 mn, and those with a B2C model bagged USD 1.2 mn.

Only one female founder was funded in April with a slim USD 100k, while male-founded startups reeled in USD 43 mn during the month. The remaining USD 11.9 mn went towards startups with mixed-gender leadership.

Speedinvest taps Rana Abdel Latif as new partner

Speedinvest has appointed our friend Rana Abdel Latif (LinkedIn) as partner on its emerging markets team as the European early-stage VC fund looks to expand its footprint in the region, according to a statement (pdf). Abdel Latif, who holds an MBA from Columbia Business School and London Business School, brings two decades of experience in asset management and banking along with prior experience in mergers and acquisitions. She is joining Speedinvest from Cairo-based fintech investment platform Nclude, where she co-led the closing of six transactions for the portfolio. At regional investment firm Qalaa Holdings, Abdel Latif led M&A and financing transactions across North and East Africa.

Speed invest has more than EUR 1 bn in assets under management from more than 40 limited partners. It has more than 300 companies in its portfolio.

The board of Tihama, the advertising, public relations, publishing, and media group, appointed Hatem bin Ali Bargashas chairman, effective this past Sunday, it said in a disclosure to Tadawul. Bargash succeeds Muhammad Al Shabib, who stepped down from the position for personal reasons. Al Shabib will continue to serve as a non-executive member of the board.

Lucid, Bupa Arabia + Al Rajhi Takaful report 1Q 2024 results

LUCID

PIF-backed EV maker Lucid reported a net loss of nearly USD 685 mn on revenues of USD almost USD 173 mn for 1Q 2024, according to its earnings release (pdf). While the net loss is better than the USD 779.5 mn loss it reported in the same quarter last year, it fell short of analyst expectations, Bloomberg writes. The company’s shares dipped nearly 5% after the announcement.

By the numbers: Lucid produced more than 1.7k vehicles in the quarter and delivered nearly 2k. It says it’s on track to produce some 9k cars this year. Those figures agree with the production update it released last month. The company should start production this year on its Gravity SUV and a more affordable midsize sedan.

The catch: 9k vehicles falls short of Wall Street expectations set before analysts started to sour on the near-term growth prospects of the EV market, Reuters writes.

Lucid plans to ramp up its capex spending to about USD 1.5 bn as it launches production of the Gravity, invests in its Arizona facility, and builds out its plant in Saudi, Lucid CFO Gagan Dhingra told Reuters.

BACKGROUND- The Public Investment Fund committed another USD 1 bn to Lucid in a follow-on investment back in March.

Bupa Arabia-

Bupa Arabia for Cooperative Ins. saw its net income rise 90.6% y-o-yto SAR 359.4 mn in 1Q 2024, it said in a disclosure to Tadawul yesterday. Revenues grew 16.6% y-o-y to SAR 4.4 bn during the quarter. Bupa Arabia attributed the rise in net income to higher net ins. services thanks to growth in its life ins. segment. Gross written premiums increased 34% y-o-y to SAR 5.4 mn in the last quarter.

AL RAJHI TAKAFUL-

Al Rajhi for Cooperation Ins. saw its net income rise 81.7% y-o-y to SAR 111.4 mn in 1Q 2024 on the back of a growth in net ins. services and total investment income, it said in a disclosure to Tadawul yesterday. Ins. revenues were up 50.6% y-o-y to SAR 1.3 bn.

Saudi National Bank + Al Rajhi led a strong 1Q 2024 earnings season for listed banks

Listed Saudi banks delivered solid earnings in 1Q 2024, with their combined net income rising 8.2% y-o-y to SAR 18.7 bn, Mubasher reports, citing Tadawul data it has compiled on 10 locally listed lenders. Total bank earnings grew 7.4% q-o-q in the first quarter of the year.

The Saudi National Bank (SNB) accounted for the lion’s share of this season’s gains, generating 27% of local banks’ total net income in 1Q 2024. SNB’s bottomline recorded a 0.4% y-o-y uptick to SAR 5 bn.

Al Rajhi Bank came in second, reporting SAR 4.4 bn in net income, up 6.3% y-o-y in the first quarter. Riyad Bank was third with a bottomline of SAR 2.1 bn over the same period, up 2.6% y-o-y. Al Awwal Bank, Alinma Bank, Arab National Bank, Saudi Fransi Bank, Bank Albilad, Saudi Investment Bank, and Bank AlJazira followed suit in that order.

A snapshot of 2023’s results: Listed Saudi banks reported 11.9% y-o-y growth in net income to SAR 70 bn in 2023, up from SAR 62.5 bn a year earlier.

SAL Saudi Logistics launches unit for integrated fulfillment services. Plus: oil and gas and desalination

OIL & GAS-

Tadawul-listed oil and gas drilling company Ades Holding has secured a SAR 350 mn jack-up drilling contract in Qatar from TotalEnergies, it said in a disclosure to Tadawul. Operations are slated to start in 2H 2024. The contract runs for a period of 12 months with the option of an 18-month extension. This is the second jack-up drilling contract Ades secured this week, following a SAR 161 mn jack-up drilling project in the Gulf of Suez on Sunday.

LOGISTICS-

Cargo firm SAL Saudi Logistics Services launched its fulfillment business unit to help meet growing demand for integrated fulfillment services in the local market, it said in a statement yesterday. The center, which combines air cargo handling and logistics solutions, will make available an advanced warehouse management system to allow clients real-time access to operational data and metrics. It will also allow clients to place orders, monitor progress and others. It said its integrated system will “extend from the first mile to the last.” Sal said it plans to open facilities in Riyadh and the ports of Jeddah and Dammam.

Fulfillment center? The service serves as a center for all logistics processes necessary to get products from sellers to customers. It handles the full order fulfillment process, helping streamline operations for retailers.

DESALINATION-

Bidding for Duba’s seawater reverse osmosis (SWRO) desalination plant will wrap on Saturday, 25 May, according to Bnc Network. Neom’s utility subsidiary Enowa will evaluate the bids to select the EPC contractor for the SWRO facility in Tabuk. Local firm Alfanar construction is reportedly among those vying for the project.

About the project: The SWRO desalination facility in the Red Sea coastal city is set to have a production capacity of 150 mn liters of water per day. Its components include waste treatment, storage reservoirs, chlorination systems, screening, filtering and others.

DIFC is looking forward to its “busiest year ever”

2024 is set to be Dubai International Financial Center’s (DIFC) “busiest year ever,” Dubai Financial Services Authority (DFSA) CEO Ian Johnston tells Bloomberg, saying the financial center will see a “record number of firms” registering in 2024. The financial hub is “already about 50% ahead” of its record registrations last year, which saw the DFSA issue over 112 financial services licenses.

Another Chinese lender will soon set up shop in DIFC, Johnston also said, without disclosing the name of the Chinese bank, marking the fifth to establish a presence in the business center. “Of the 29 globally systemically important banks in the world, we have 27 doing business in DIFC,” Johnston said.

REFRESHER- DFSA saw a 125% y-o-y uptick in registrations by hedge fund managers in 2023 and expects continued strong interest from global hedge funds looking to set up shop in DIFC, Johnston said in February. DIFC company registrations jumped 34% y-o-y, with 1.4k firms registering to set up shop in the freezone. The record growth in registrations was “supported by both financial and innovation companies and non-financial companies.”

MARKETS THIS MORNING-

Asian markets are in the green this morning as traders in Korea and Japan returned from a holiday long weekend. The sole exception is the Hang Seng. US stock futures were largely unchanged in overnight trading, while European futures are doing a bit better, pointing to a comfortable start to the trading day.

TASI	12,373	0.0% (YTD: +3.4%)
MSCI Tadawul 30	1,549	-0.2% (YTD: -0.1%)
NomuC	26,791	0% (YTD: +9.2%)
USD : SAR (SAMA)	3.75 Sell	3.75 Buy
Interest rates	6% repo	5.5% reverse repo
EGX30	26,114	+3.3% (YTD: +4.9%)
ADX	9,035	0.0% (YTD: -5.7%)
DFM	4,156	+0.3% (YTD: +2.4%)
S&P 500	5,181	+1.0% (YTD: +8.6%)
FTSE 100	8,213	+0.5% (YTD: +6.2%)
Euro Stoxx 50	4,957	+0.7% (YTD: +9.6%)
Brent crude	USD 83.46	+0.6%
Natural gas (Nymex)	USD 2.19	+2.5%
Gold	USD 2,331.20	+1.0%
BTC	USD 63,476.20	-0.6% (YTD: +50.1%)

THE CLOSING BELL: TADAWUL-

The TASI closed flat yesterday on turnover of SAR 7.4 bn. The index is up 3.4% YTD.

In the green: Bupa Arabia (+10%), MedGulf (+10%) and AlRajhi Takaful (+9.9%).

In the red: Solutions (-4.5%), Saudi Cable (-3.6%) and GIG (-3%).

THE CLOSING BELL: NOMU-

The NomuC closed flat yesterday on turnover of SAR 39.3 mn. The index is up 9.2% YTD.

In the green: Academy of Learning (+6.3%), Ghida Alsultan (+4.7%) and Ladun (+4.4%).

In the red: Horizon Food (-9.8%), Future Care (-7.6%) and Raoom (-6.9%)

CALENDAR

MAY

4-11 May (Saturday-Saturday): Saudi Smash 2024.

6-9 May (Monday-Thursday): Saudi Smart Manufacturing, Riyadh.

6-9 May (Monday-Thursday): Saudi Smart Logistics, Riyadh.

12 May (Sunday): Bookbuilding starts for Rasan’s Tadawul IPO.

13-15 May (Monday-Wednesday): Smart Future Expo, Riyadh.

13-15 May (Monday-Wednesday): Poultry Expo Riyadh.

13 May (Monday): Saudi Giga Projects, Riyadh.

13-15 May (Monday-Wednesday): Middle East Poultry Expo, Riyadh.

14-15 May (Tuesday-Wednesday): Saudi Great Futures, Riyadh.

15-16 May (Wednesday-Thursday): Arab Forum of Anti-Corruption, Riyadh.

19-21 May (Sunday-Tuesday): Saudi Energy Convention, Riyadh.

20-21 May (Monday-Tuesday): Future Projects Forum, Four Seasons Hotel, Riyadh.

20-22 May (Monday-Wednesday): Future Aviation Forum 2024, Riyadh.

21-23 May (Tuesday-Thursday): The Saudi Food Show, Riyadh.

25 May (Saturday): Bidding deadline for Duba’s seawater reverse osmosis desalination plant in Tabuk.

27-28 May (Monday-Tuesday): Smart Data & AI Summit Saudi, JW Marriott Hotel, Riyadh.

Signposted to happen sometime in May:

Global Trade Review (GTR): KSA
Saudi Energy Convention

JUNE

2-3 June (Sunday-Monday): Global Project Management Forum, Riyadh.

4-7 June (Tuesday-Friday): Saudi Sports Show, Riyadh.

4-7 June (Tuesday-Friday): Aqarat Expo, Riyadh.

5 June (Wednesday): World Environment Day.

14-22 June (Friday-Saturday): Banks and capital markets closed for Eid Al Adha holiday.

AUGUST

12-15 August (Monday-Thursday): The Saudi Food Expo, Riyadh

SEPTEMBER

11-12 September (Wednesday-Thursday): The Saudi Event Show, Riyadh.

17-19 September (Tuesday-Thursday): EV Auto Show, Riyadh.

23 September (Monday): National Day (national holiday)

24-26 September (Tuesday-Thursday) Saudi Infrastructure Expo, Riyadh International Convention and Exhibition Center, Riyadh.

NOVEMBER

2-9 November (Saturday- Saturday): WTA Finals, Riyadh.

11-14 November (Monday-Thursday): Cityscape Global, Riyadh.

25-27 November (Monday-Wednesday): World Investment Conference, Riyadh.

26-28 November (Tuesday-Thursday): Saudi Electricity Expo, Riyadh.

DECEMBER

2-13 December (Monday-Friday): Conference of the Parties (COP16) to the United Nations Convention to Combat Desertification, Riyadh.

Signposted to happen sometime in 2024:

The AFC Champions League Elite

2025

FEBRUARY 2024

10-13 February (Monday-Thursday): Leap 2025, the Kingdom’s premier tech investment conference.

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