Category Archives: Finance

Zombie companies can be harmful

The term “zombie company” has recently entered people’s lexicon as the phenomenon manifests itself in China. Yet this issue did not start with China, it is closely linked to the problems faced by Japan that started in the early 90’s, called Japan’s Lost Decade and sometimes the lost two decades, which arrested the development of…

UNB kicks off earnings season

Abu Dhabi lender Union National Bank announced its second-quarter financials. On the face of it things look positive with an increase in net profit of 7.2 per cent relative to the same period last year and that net income from interest and Islamic financing, the core business of a bank, rose 2.6 per cent. However, a quick peek…

Softbank Vision Fund highlights how investors should analyse structures

A Financial Times article recently described the structure of the SoftBank Vision Fund. The details reveal breathtaking audacity in terms of SoftBank laying claim to investor returns without transfer of an equivalent level of risk. To avoid competing accounts, I will use the FT as my source of information, as I am not so much…

Unmasking business shenanigans

I have recently pointed out that one of the warning signs that a business is facing issues is when core revenue, ie revenue from the main business lines, is down but profit is up. Why the combination? Why not simply flag a drop in core revenue? Because it is normal for revenue to fluctuate –…

Board drama, and crunching the numbers on oil

A few weeks ago I pointed out that Etisalat generated earnings of Dh0.97 per share and paid out Dh0.80 per share, which is a payout ratio of 82 per cent. I further pointed out that paying out such a high percentage of profits was consistent with a status quo strategy and inconsistent with an expansion…

Q1 results in the UAE mask less than stellar fundamentals

We have recently seen a flurry of reports regarding the financials for the first quarter of this year. Despite happy headlines, the fundamentals are not good. I will use some examples to show how to dig under the rosy announcements to get a better idea of the situation. Let’s start with the banking sector, the…