A Letter to the CEO (& Board) of European Islamic Investment Bank

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Ali Al Shihabi, AUM, EIIB, European Islamic Investment Bank, Guy Thomas, HBG Holdings, HBG Management Partners, Rasmala Holdings Limited, shareholder activism, tender offer, Zak Hydari, Zulfi Caar Hydari

Here’s a copy of a letter I’ve forwarded to EIIB’s CEO & board:

‘January 26, 2014

FAO:       Zulfi Caar Hydari, CEO

CC:         H.E. Abdallah Yahya Al-Mouallimi, Chairman

                 Mohammed Abdul Aziz Ibrahim Al Sarhan, Sr. Ind. Director

                 John Robertson Wright, Non-Exec. Director

                 Michael Willingham-Toxvaerd, Non-Exec. Director

                 Martin Gilbert Barrow, CBE, Non-Exec. Director

European Islamic Investment Bank plc (EIIB:LN)

Milton Gate

60 Chiswell Street

London EC1Y 4SA

United Kingdom

Dear Zak,

I’m writing this letter with the full support & active input of Guy Thomas (CIO, Hazell Carr Edwards FURB) and Ali Al Shihabi (founder & former Chairman of Rasmala Holdings Limited (‘Rasmala’)). You’ve obviously spoken & emailed with each of us, jointly or separately, on numerous occasions. We currently own an aggregate stake of between 4% and 5% in EIIB. In the last annual report, you stated ‘in 2013 we will begin to focus attention on translating our success into improved share price performance’. We’re disappointed by the subsequent lack of progress, and disturbed by a number of recent developments. To summarize:

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EIIB…Ex-Bank – Love It!

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Arab Spring, asset managers, AUM, banks, de-leveraging, DiamondCorp, EIIB, European Islamic Investment Bank, frontier markets, GCC countries, HBG Holdings, inflation, Islamic finance, John Burbank, MENA, NAV discount, oil, Rasmala Holdings, real assets, Saudi Arabia, Sharia'a, TBTF, Zak Hydari

I have a long-standing aversion to banks. To me, they represent the perfect collision of two really bad ideas:

i) Regular investment in bonds & loans – a strategy offering little prospect of capital gain, but which will (quite often) attempt to wipe out your capital. And the paltry yield you earn offers little compensation. I’ve never understood how people ever find this ridiculously biased risk/reward proposition attractive.

ii) The answer lies in leverage, I guess… Another terrible idea, but this is the incredible solution people usually seize upon to juice low returns. And it usually works just long enough for everybody to forget how savagely leverage can impact liquidity & solvency, when things take an inevitable turn for the worse.

Banks, of course, take this bad marriage to its ultimate & ludicrous extremity. [And require even more leverage to overcome the drag of their cost:income ratios]. But consider the private & public incentives – why wouldn’t they?! When times are good, leverage multiplies profits…which multiplies bonuses! And leverage makes it far easier to reach that ideal bank status: TBTF, where the taxpayer’s forced to pay for your mistakes (& bonuses).

EIIB – So, You Want to Run a Marathon..?!

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Damille, DiamondCorp, discount control mechanism, doughnut boy, EIIB, HBG Holdings, Laxey, marathon, NAV discount, Qannas Investments, quid pro quo, QVT, Rasmala, share buyback, sukuk, tender offer, Total Expense Ratio, track & field, Weiss

C’mon, you’re kidding..? No, seriously, you’re taking the mickey?! In March, the European Islamic Investment Bank (EIIB:LN) (which I last wrote about here) share price looked ready to challenge the GBP 3.9-4.25p resistance zone. This has capped EIIB for almost 3 years now. But here we are, 1 month later, and the price hit GBP 2.8p just in time for Easter – off 24%! No change in volume, or holdings…what’s going on?! And it’s not clear the board have noticed… But I’m sure they’re well aware of EIIB’s intrinsic value, and are focused on the marathon task of their new operating strategy…

All very well but, as any health professional will tell you, before embarking on (and to be successful in) a marathon, you should first do a health check and then scale up with plenty of walking, exercise, jogging, running and even some fartlek. So health check first, then track & field, and then marathon..! But the current share price (and NAV discount) certainly don’t present a healthy diagnosis of the budding athlete…

IMHO, EIIB is VIP!

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Abu Dhabi Capital Management, Brent, Dan Yergin, EIIB, GCC countries, HBG Holdings, Iran, John Burbank, JSM Indochina, Matthew Simmons, Passport Capital, Qannas Investments, WTI

Time to revisit European Islamic Investment Bank (EIIB:LN).

Call it a gut feeling, but in the past month or two I’ve become increasingly convinced oil has the potential for another price spike. The last 2 weeks have seen the first sustained break of $100 for WTI in the past year. The $111.50-114.50 zone should prove pretty tough resistance, but a potential break of this zone would definitely signal the oil price’s going into orbit. Brent‘s even closer to its key medium term resistance zone of about $125.50-127…

Perhaps I’m a touch cynical, but I’m completely bemused to see Obama hold himself out as the voice of reason in the whole Iran (and Israel) situation. WTF?! Where on earth do you think most of the sabre-rattling with Iran is coming from? Yeah, White House back-channels, of course… And expect the rhetoric, and paranoia, to get much worse as we head into summer. It’s always useful for a sitting President to play the defence/war/security card as he heads into an election…

How About Another Catalyst? (Part VII)

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activist investors, Clearance Capital, DCD Media, EIIB, HBG Holdings, Joe Lewis, Laxey, Leo Fund Managers, Max Property, Minco, Net LTV, Nick Leslau, Principle Capital, Quintain Estates, Sirius, stockbrokers selling sandwiches, Taube Hodson Stonex, Terra Catalyst, Timeweave, Weiss

Continued from here:

In my previous post, I highlighted over a dozen listed activist investor vehicles (some at v interesting discounts) you can invest in. Additionally, you might also want to look at individual company situations – as I commented about activists: ‘Use them wisely (and profitably) to cherry pick and/or endorse your conviction stocks.’ Here are some interesting examples:

Timeweave (TMW:LN):   I’ve written here about Timeweave, which has Joe Lewis on board with 29.99%, with another 5% in the hands of Leo Fund Managers. TMW has a steady business, pots of cash, and a whopping 10.4% dividend yield. If you strip out cash, it’s actually on a 4.7 P/E! Despite all this, it can’t seem to get any respect – take a look at the share price. But we all know shares like this, and wonder when we’ll see a decent return…

EIIB (EIIB:LN) – The Strongest Bank in the World? (Part II)

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activist investors, DiamondCorp, EIIB, Equity/Total Assets, HBG Holdings, Margin of Safety, Sharia'a, sukuk, value investing

European Islamic Investment Bank (EIIB:LN)

Mkt Price:  GBP 3.625p

Mkt Cap:  GBP 64.0 mio

Equity/Total Assets Ratio:  69.2%

P/B Ratio:  0.45  (adjusted)

P/C Ratio:  0.59  (adjusted) 

Fair Value:  GBP 8.09p

Upside Potential:  123%

Continuing from my previous EIIB post:     Let’s not forget that EIIB is a bank. Why am I re-stating the obvious? Well, I know it seems like banks are ten a penny (actually true in the US, with a recent count of 6,500 banks, if you can believe it!), but a new banking licence in the UK is a pretty rare thing. Especially an Islamic banking licence. I’ve no real idea of how much that’s worth, but it’s certainly a valuable intangible that isn’t listed anywhere on the B/S. EIIB presents a cheap entry to any financial institution who’s contemplating entering (or bulking up) in the UK and/or the Islamic finance market. When you consider the strength of EIIB’s B/S, the FSA licence (which would otherwise take at least a year to obtain) and the potential business contacts/opportunities gained, why not pay a premium to Book in a takeover situation? One should also consider the leverage potential implied – EIIB could almost quadruple its B/S, still be considered a very safe bank (with a near 20% Equity/Total Assets Ratio) and presumably achieve a radical transformation of its P&L and Return on Equity. Nobody’s cup of tea right now, and not a strategy that is being signaled by the company, but still something to consider…