Unlisted flydubai says H1 net profit up 40% ahead of debut sukuk

Dubai: Budget carrier Dubai Aviation Corp, known as flydubai, posted a 40 per cent increase in net profit in the six months to June 30, it said in an investor presentation to market its potential debut sukuk.

The unlisted airline, which started operations in June 2009, made a net profit of $14 million in the first half of this year, said the document seen by Reuters. Revenue in the period was $515 million, up 17.1 per cent on the same six months of 2013.

The carrier, fully owned by the Dubai government, started meeting investors in Singapore on Thursday and plans to head to the Middle East and Europe through Tuesday ahead of selling a potential dollar-denominated Islamic bond.

Should flydubai complete an issue, it would be only the second Gulf carrier to raise funds through the debt capital markets after Dubai’s Emirates. Emirates’ previous sukuk offering, worth $1 billion, was sold in March last year.

In the past, flydubai has relied on term loans and leasing arrangements for funding so the sukuk will help to diversify its sources of financing, it said in the presentation.

As of June 30, outstanding debt at the company was $1.05 billion and it had authorised and contracted capital commitments in respect to its fleet of $11.4 billion.

Its costs in the six months to June 30 were $528 million, up from $449 million in the same period a year ago.

The firm has a network covering 71 destinations across 42 countries in Europe, Asia and the Middle East as of June.

Flydubai will issue the unrated Wakala-structured sukuk of benchmark size though the Al Shindagha Sukuk Limited special purpose vehicle, with the Islamic bond listed on Nasdaq Dubai and the Irish Stock Exchange, the document showed. Benchmark size traditionally means upwards of $500 million.

Wakala, in which one party manages assets on behalf of another, is becoming the structure of choice for many sukuk issuers, especially financial institutions, because of its clearer link to the assets backing the instrument.

Credit Agricole, Dubai Islamic Bank, Emirates NBD, HSBC, National Bank of Abu Dhabi, Noor Bank and Standard Chartered will arrange the sukuk sale.

(Gulfnews.com / 13 November 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Indonesia sharpens centralised Islamic finance oversight

Indonesia's capital market regulator has signed an agreement with the country's national sharia board to strengthen oversight of the Islamic finance industry, supporting a centralised approach being favoured elsewhere around the globe.

A country-level approach to regulating sharia-compliant financial services was pioneered by Malaysia in 1997 and is gaining traction elsewhere as authorities try to standardise industry practices and improve consumer perceptions.

The agreement would support efforts by Indonesia's financial services authority, Otoritas Jasa Keuangan (OJK), to formulate rules governing Islamic financial services, said OJK chairman Muliaman Hadad.

This would help create new sharia-compliant products, develop a wider pool of sharia scholars, and support education and awareness efforts in the industry, he added.

Indonesia's national sharia board has traditionally focused on broader religious matters, although it has issued 95 rulings relating to Islamic finance services, 14 of those related to the capital market.

But authorities want to encourage a wider product range to help Islamic banks grab a bigger share of the market, as the sector plays catch-up to more mature markets in Malaysia and the Middle East.

Indonesia has the world's biggest Muslim population but its Islamic finance market lags well behind that of Malaysia. Indonesia's Islamic banks held 4.9 percent of total banking assets in the country last year compared with more than 20 percent for their Malaysian counterparts.

CENTRALISED

A centralised model to supervising Islamic finance is increasingly being adopted across the global industry, although it remains a rarity in the Gulf region.

Previously, many countries left sharia boards in individual Islamic banks and financial firms to decide whether their products and activities obeyed religious principles.

This approach has been criticised for inviting potential conflicts of interest, and for producing conflicting rulings that confused investors.

Last month, Oman's central bank set up a five-member sharia board to help oversee the sultanate's Islamic banking industry, while Pakistan's securities commission established a nine-member sharia board in May of last year.

Morocco and Nigeria have made similar moves, while the United Arab Emirates plans to develop an independent authority which will be backed by specific legislation.

Authorities in Indonesia want to reshape the country's Islamic finance industry by encouraging consolidation and building a new regulatory system. Regulators are finalising a five-year roadmap to be presented this month to industry players, who have repeatedly called for clearer laws. 

(Reuters / 14 November 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com