Change is coming: Saudi 2030 vision, privatization
Frontera recently spoke to James Bannan, Frontier Markets Fund manager at Coeli Asset Management. Coeli’s frontier market (FRN) (FM) equity fund currently had a total of $322 million worth of strategic assets under management as of March 2017. Saudi Arabia (KSA) commands a 4.4% share of the frontier market portfolio at Coeli.
Now, with oil still low, privatization sales are gaining priority in the Gulf (GULF) (GAF). Private sector involvement could help plug budget deficits while improving operational efficiencies in these countries. Saudi Arabia is already making attempts to diversify beyond oil. As part of its “Saudi 2030” vision, Saudi Arabia is set to privatize as many as 16 government entities, including healthcare, education and airport organizations. The kingdom already has plans to take the oil titan Saudi Aramco public. If the plan goes through, Aramco’s IPO could be the largest IPO in history.
Coeli has its bets on this health insurer
Given the expected rise in private-sector involvement in foreign investment in the country, Bannan is positive on Bupa Arabia.
Bupa Arabia for Cooperative Insurance is a Saudi-owned and operated publicly traded company with about $213.32 million in paid up capital. The health insurer recently ranked 8th among the Kingdom’s top 20 most valuable Saudi Arabian brands.
“The growth drivers for the company are four-fold,” Bannan told Frontera.
- “The increasing size of the private sector workforce – this structural shift is driven by the government’s focus on reducing the size of the public sector and promoting private enterprise.
- Better enforcement of the regulations for the whole private sector to have private health insurance – currently, almost all foreigners are and now the government is clamping down on enforcement of locals.
- Consolidation of the insurance sector which is ongoing; and
- Higher medical costs.”
Bupa Arabia currently trades under the ticker 8210 at the Tadawul Stock Exchange. The stock was down 6.76% YTD (as of April 13), but has risen by 38% over the past two years (chart above).