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Arzan reveals motives behind capital cut - Report

Arzan reveals motives behind capital cut - Report
Arzan aims to diversify the assets that will be transferred to the new subsidiary
ARZAN
ARZAN
1.04% 195.00 2.00

By: Mohamed Farouk

Mubasher: Arzan Financial Group for Financing and Investment has released on Monday a disclosure to Boursa Kuwait on the goals of its capital cut.

The first goal is to separate current non-strategic long-term low-yield investments, which will positively reflect on shareholders.

Secondly, following a model of simplifying operations through a capital restructure and enhancing the company’s ability to distribute dividends to shareholders, which shall have a positive impact on the stock price.

The company also said that providing two independent opportunities for investment is among the goals of its capital reduction, as it will provide a better opportunity for evaluating the company’s performance.

Moreover, Arzan aims to diversify the assets that will be transferred to the new subsidiary. These assets are valued at KWD 51.288 million and will be distributed in the forms of shares in listed companies, stakes in non-listed companies, shares in sister companies and subsidiaries, as well as a share in a property portfolio and a cash lump sum.

The capital cut is expected to result in a decrease in asset value from KWD 160.065 million to KWD 112.836 million, and a decline in liabilities to KWD 51.423 million to KWD 51.357 million, with the capital being cut from KWD 80.288 million to KWD 29 million.

Furthermore, the procedure will raise the reserves fair value from KWD -6.996 million to KWD 89,556, as well as reducing non-controlling stakes from KWD 9.930 million to KWD 5.771 million, and achieving earnings of KWD 403,117.

The company’s board of directors has recently approved capital reduction.

Market analysts called for revealing the expected financial effect of the capital cut and the split.

Financial analyst Ahmed Jasem Alqamar told Mubasher that a shareholder should not vote on a decision in the general assembly meeting without being fully aware of its implications and results, calling upon Boursa Kuwait to suspend the trading of the Arzan stock until the financial effect is revealed.

Meanwhile, market analyst Talal Alyoussef said that the Kuwaiti stock exchange should maintain neutrality and professionalism towards the Arzan stock, to avoid any accusations of a conflict of interest.

Despite the company’s disclosure today, Alqamar asked how would shareholders who sold their shares on Sunday’s session be compensated.

Arzan recently revealed its financial results for the third quarter (Q3) of the year, reporting a 56.1% increase in profits during the first nine months of the year to KWD 3.95 million.