The 2014 edition of Best Performing Companies Survey by OER’s sister publication Alam al-ktisad Wal A’mal (AIWA) reflects the growing diversity of Oman’s corporate sector with companies from a wide range of industries coming on top. Akshay Bhatnagar reports.
Sixty-four companies listed on the Muscat Securities Market (MSM) were in contention for the top positions in ‘AIWA Best Performing Companies Survey’ 2014. In 2013, the figure was pegged at 58, which means additional six companies were in the fray this time. In 2009, Alam al-Iktisaad Wal A’mal (AIWA) started the annual survey of best performing MSM listed companies to identify and recognise the organisations that are excelling in growth and efficiency parameters. This year marks the sixth edition of the annual survey of the best performing companies. The research survey was conducted by Gulf Baader Capital Markets (GBCM) and the rankings process and results were validated by KPMG. Top five best performing companies, based on their performance on select seven financial parameters in the last financial year, were identified in three different categories – large cap, mid cap and small (refer to the ranking methodology on page 50 for more details).
Every year, the top ranked companies are felicitated with AIWA Awards for Best Performing Companies in a gala event. Organised in association with the Capital Market Authority (CMA), this year marked the fourth edition of the annual AIWA Awards. Top five best performing companies, were felicitated in three different categories – large cap, mid cap and small cap. The red carpet awards ceremony was held on June 23 at Shangri-La’s Barr Al Jissah Resort & Spa. HE Dr Ali Bin Masoud Al Sunaidi, Minister of Commerce and Industry was the chief guest for the evening. His Excellency Abdullah bin Salem Al Salmi, executive president of Capital Market Authority, was the guest of honour. It was attended by over 275 industry leaders and senior bureaucrats.
With 64 companies vying for the top slots, the competition was much tougher than previous years for the top five positions in each of the three segments – large cap, mid cap and small cap – based on their financial performance in 2013. The tables of rankings (in the subsequent pages) with a detailed information on the performance on select seven financial parameters give a complete picture of the financial health of Omani corporate sector. Out of 15 winners from last year, only six have managed to be among the champions this year. We had seen a similar trend in last year’s rankings also indicating that the companies find it difficult to sustain their good performance on a consistent basis.
In the large cap segment, the last year’s rankings were dominated by the manufacturing and banking sectors. This year we have four manufacturing companies occupying the top four positions. Only Bank Sohar is the lone bank among the winners in this category. At the top is Al Anwar Ceramic Tiles which has moved up by two slots from last year. The company has performed consistently on most of the parameters. Sembcorp Salalah makes its maiden entry to AIWA Awards by taking up the second position. The company has developed, financed, built, owns and operates the Salalah Independent Water and Power Plant in Oman. The power plant is the largest and most energy-efficient power and water plant in the Dhofar region. Sembcorp Salalah has also returned the best Topline Growth and Earnings Growth in the large cap segment. Oman Cables Industry which experienced a historical change in its management leadership last year, jumped seven places to come third in the rankings. The manufacturing major also topped on the EBIT Growth parameter. Next in the slot is A’Saffa Foods which has been a regular fixture among the winners in AIWA Awards over the years. Thanks to an impressive increase in its market cap, the company has graduated to the large cap segment this year. Last year, it was placed in the second position in the mid cap segment. Bank Sohar, in the fifth position, completes the list of five winners in the large cap. Ahli Bank, among the winners in the last three years, missed the bus by a whisker this time.
The mid cap segment is ruled by the companies from the financial services sector. Oman United Insurance has come on top. Last year, the insurance company was placed third in the small cap.
The second place is occupied by Oman Investment and Finance. It has shown the most impressive jump in the segment. Last year, it was placed in the 14th rank. This year, it has also topped in three parameters – earnings growth, return on average equity (ROAE) and net profit margin (NPM). The third position is taken by Oman Orix Leasing. National Finance comes in the fourth place. Port Services Corporation comes in at the fifth position. With His Majesty’s directives to convert Port Sultan Qaboos into a tourism port and consequently transfer most of its commercial activities to Sohar Industrial Port, Port Services Corporation is expected to undergo a sea change in its activities in the coming years.
The small cap category has seen a major upheaval this year. From the last year’s winners, only Dhofar University has made it to the winning list. The education entity though has dropped from the pole position last year to the fifth position this year. Al Madina Takaful, a new entrant to the list, has made it to the top riding on the best performance in three parameters – topline growth, EBIT margin and net profit margin (NPM). Majan College, another new entrant to the list, comes in at the second position. Oman Chromite rose from 11th place last year to third this year. The fourth position goes to National Aluminium Products. The company topped in earnings growth and EBIT growth paramaters.
Based on the market capitalisation as at end of 2013, the listed companies in Muscat Securities Market (MSM) have been classified into three categories namely large-cap, mid-cap and small-cap companies. The large-cap companies are the ones with market capitalisation of more than RO75mn, while mid-cap companies have market capitalization between RO25-75mn and small-cap companies with market capitalization between RO10-2 mn. On the other hand, we have excluded the smaller companies which have market capitalization of less than RO10mn in our ranking. We have excluded investment holding and broking companies in our ranking model. The newly listed Islamic banks namely Bank Nizwa and Alizz Islamic Bank have been excluded due to non availability of historical data. Our research sample size for 2013 ranking process includes 64 listed companies in the MSM. The research survey and analysis were done by Gulf Baader Capital Markets (GBCM) and the rankings are validated by KPMG.
The purpose of the ranking model is to evaluate the top performing companies for 2013 in each segment based on the performance during the last fiscal year. We have calculated the top five rankings on each category taking into account of the defined set of broad parameters which includes growth factors, return ratios, productivity and the profitability ratios measuring the growth and efficiency of the sample companies.
The key financial inputs were taken from the reported financial statements of the listed companies published in the MSM. The ranking based on growth parameter is done by calculating the year-on-year (YoY) growth of revenue, operating profit (earnings before interest and tax – EBIT) and net profit for 2013. Efficiency is ranked based on the return on average assets (RoAA), return on average equity (RoAE), operating profit margin (EBIT) and the net profit margin (NPM) of the companies.
Return of average assets (RoAA) is calculated by taking net profit and dividing by average total assets for 2013. The average assets were calculated by taking the sum of total assets at the beginning and end of the period (2013), divided by two. Return on average equity (RoAE) is calculated by taking net profit and dividing by average equity for 2013. The average equity is calculated by taking the sum of total equity at the beginning and end of the period (2013), divided by two.
The productivity ratio (EBIT margin) is calculated as operating profit (EBIT) dividend by total revenue. The profitability ratio (net profit margin) is calculated as net income divided by total revenue. In our ranking model, we have used the net income after minority interest for the calculation of net profit margin.
- The closing prices of all the MSM listed companies have been taken from official MSM annual bulletin for 2013.
- For the banks and leasing companies, we have excluded impairment charges in our operating income calculations and not shown as part of operating expenses. We have also taken the net operating income after deduction of interest expenses.
- For the utilities sector companies, we have excluded hedging deficit in total shareholders’ equity.
- For insurance companies, we have taken the net underwriting results and investment income for the calculation of total revenue.
- Net income (profit after tax) is taken post minority interest and also net-worth figures are taken excluding minority interest.
- The companies with different fiscal year end have been separately worked to arrive at the financial performance for the calendar year 2013.