Gulf News - DFM-listed Al Ramz Corp. is a small-cap play investors can get keen about

Vijay Valecha, Special to Gulf News October 19, 2021

Al Ramz Corporation Investment & Development (Al Ramz), a DFM-listed company with a Dh401.4 million market cap, seems to have turned around its performance. The revenues had peaked in 2016 at Dh79.3 million, coinciding with the oil and real estate boom then. Ever since, the numbers had slid lower, and in 2019, bottomed out at Dh35.4 million.

Last year, however, saw a remarkable recovery, with revenues growing almost 27 per cent to Dh44.9 million. During the second quarter of 2021, revenues increased 42.6 percent over the comparable period last year to Dh14.3 million. So, on the whole, there seems to be a good story developing.

Al Ramz was certainly no slouch. The macroeconomic conditions that prevailed in the aftermath of the 2016 crisis were significant headwinds that impacted performance in the past. The scenario now is entirely different, with the headwinds abating and global financial markets flourishing. Moreover, the rise in crude oil prices has improved the fundamentals of the UAE.

Boosted by acquisitions

The company made well-thought-out moves to bolster its capital markets business. One of them was to acquire the market-making business of Shuaa Capital in 2020. With UAE financial regulators very much focused on improving trading volumes, the market-making business should thrive. The Shuaa acquisition was the fifth one by Al Ramz since inception and helped solidify its position. In 2019, it acquired a Dubai-based securities brokerage firm for Dh24 million, and continued a strategy wherein it could acquire businesses cheaply, taking advantage of market conditions.

The most attractive aspect of Al Ramz is its strong management, with an Abu Dhabi fund the largest shareholder. This aspect should give the shareholders a lot of assurance as the UAE government is firmly committed to developing the local financial market and related firms.

Buyback on track

Debt stands at Dh91 million while the cash and cash equivalents are Dh321 million, giving it net cash of Dh230 million. The company is prudently making use of the money. The management is undertaking a share buyback programme, and the Securities and Commodities Authority has approved extending it until April 23 next year. The plan is to buy almost 10 per cent of its issued shares, and it has already repurchased 5.47 per cent, with most of them done at Dh0.73 per share.

With the share price near Dh0.73, there is a lot of margin of safety for would-be investor. Buyback means the management believes that its stock is undervalued. Even though the market capitalization is Dh401 million, an investor is getting it at Dh171 million since the company has net cash of Dh230 million.

The shares with a yield of 2.74 per cent are suited for investors who understand the risks in small-cap investing.