Morabaha Marina one of fastest-growing finance companies in Saudi Arabia: MD

Waleed Al-Ghumlas, Managing Director of Morabaha Marina Financing Co.

Morabaha Marina Financing Co. is one of the fastest-growing independent non-banking finance companies in the Kingdom, Managing Director Waleed Al-Ghumlas told Argaam in an interview.

He added that net Islamic finance receivables grew at a compound annual growth rate (CAGR) of 25% to SAR 924.1 million in 2021, compared with SAR 590.4 million in 2019.

Al-Ghumlas expressed his optimism at the future of financing sector in the Kingdom amid the robust economic growth, demographics, and government initiatives aimed at diversifying the economy and supporting small and medium-sized enterprises (SMEs).

He stressed that there is a great opportunity to promote growth in the region's credit services through mergers and acquisitions (M&As), as well as formation of partnerships and enhancement of digital transformation efforts.

Here are details of the interview:

Q: Why did you decide to float the company's shares? Why didn't Morabaha Marina continue to operate as a private company?

A: The decision to float the company's shares was driven by some key factors, including boosting the capital base to support future growth in financing activities through providing additional financing capacity that enables the company to serve more individual customers and SMEs in the Kingdom.

This is in addition to shedding light on the company's brand and business for the benefit of customers and shareholders.

Morabaha Marina also aimed to cut the cost of financing, given that it is a joint stock company listed in on the Saudi Exchange (Tadawul). Furthermore, the initial public offering (IPO) allows investors to benefit from the company's growth, participate in the offering and trade the company's shares after listing.

Q: Why did you choose the offering via capital increase rather than the exit of current shareholders?

A: The IPO aims to boost the firm's capital base to support future growth in financing activities and provide additional financing capacity that enables the company to serve more individual customers and SMEs in the Kingdom.

We also believe that the capital increase will allow the firm to seize the expected significant growth opportunities in the near future. These opportunities are expected to come from the digital transformation which the company is working on, and which would be completed in the third quarter. They also include starting to launch some payment and transfer solutions products via electronic wallets of the subsidiary, Loop.  This is in addition to the strategic partnership with Hunger Station Co., under which the company will provide financial technology (FinTech) products and services to cater to the needs of Hunger Station's customers and shareholders.

This also reflects the current shareholders' commitment and support for the company's capital base growth and development of business. Accordingly, they injected SAR 144.6 million in the fiscal year ending on Dec. 31, 2022.

The IPOs that took place through capital increase on Tadawul reached three only compared to 25 offerings that took place via the exit of current shareholders over the past three years.

The IPO to float 21.42 million ordinary shares will be reflected in the company's book value, as it will reach approximately SAR 870 million as of Q1 2023 after adding the offering proceeds. Thus, the price-to-book value (P/B) will reach 1.20x based on the offering price of SAR 14.60 compared to the banking sector's average P/B of 1.67x and 1.52x of a listed peer company having the same business model as of May 2023.

We also target capital of SAR 1 billion in the long term, which will allow the company to apply for a license from the Saudi Central Bank (SAMA) to receive deposits from customers. This will help the company to become a digital bank through the integration of payment and transfer solutions via the e-wallets provided by Loop.

Q: Could you give us insight into the company's business?

A: Morabaha Marina is one of the premier companies in the field of independent non-banking financing in Saudi Arabia. Established in 2012, the company offers a wide range of Shariah-compliant innovative and flexible financing solutions to individual clients and SMEs, including Tawarruq, Ijarah and Murabaha products.

The company offers its financing solutions through a network of 16 branches in 13 cities in the Kingdom, in addition to its headquarters in Riyadh. We also rely on various channels through the distribution network of our partners, particularly Saudi Post, Riyad Bank, and the Small and Medium Enterprises General Authority (Monshaat).

We specialize in providing financing solutions for SMEs that play a major role in boosting the local economy. We also have a strong and successful financing record and a robust customer network, which enables us to continue growing in the coming years.

The Saudi government launched several initiatives to support the SMEs sector, which contributed to increasing demand for our services even further.

Q: How about the company's current financial position?

A: We are one of the fastest-growing independent non-banking finance companies in Saudi Arabia, as the company's net Islamic financing receivables grew at a CAGR of 25% to SAR 924.1 million as of Dec. 31, 2021, compared with SAR 590.4 million as of Dec. 31, 2019.

Total comprehensive income amounted to SAR 40.6 million as of Dec. 31, 2021, growing at a CAGR of 17.9% from SAR 29.1 million as of Dec. 31, 2019.

In addition, the Islamic financing receivables rose by 8.4% to SAR 1 billion as of June 30, 2022, compared to Dec. 31, 2021.

Gross comprehensive income for the six-month period ending on June 30, 2022 rose 36% to SAR 26.4 million, compared with SAR 19.4 million a year earlier.

Morabaha Marina is one of leading companies that recorded strong growth in Q1 2023, compared with the sector, amid the current challenges of the market and thanks to the company's flexible business model and its diversified credit portfolio.

In addition, the firm managed to cut its non-performing current loans by 8.5% in Q1 2023, due to the continued concentration on boosting its credit portfolio quality.

Q: Why do you think this opportunity is important for investors?

A: This is a unique opportunity that allows investors to benefit from our success, as we have a proven track record in the field of financing individuals and SMEs. The company also has a unique and diversified credit portfolio that is almost equally balanced between financing individuals and SMEs.

In addition, we have a strong capital base and financing capacity, which helps us to continue our growth trend and meet the growing demand for financing services in the Kingdom. The company's professional management team of specialized experts built a strong network of partnerships with banks, financial institutions, and suppliers. The IPO allows investors to benefit from the company's expected significant growth through partnerships, such as its strategic partnership with Hunger Station to provide innovative FinTech products and services, complete the digital transformation in the third quarter, and start some payment and transfer solutions through e-wallets of the subsidiary, Loop.

Q:  What are your strategic plans to enhance post-listing value?

A: Our post-IPO strategy is based on three main pillars, namely expansion of our financing capacity, diversification of the sources of income, and enhancement of performance through investing in digital transformation.

We plan to enhance our financing capacity, which will allow us to provide our services to a larger number of SMEs in the region. This will contribute to increasing our income and supporting economic development in the Kingdom through providing more financing to support the growth of SMEs.

We plan to diversify our sources of income, as e-wallets are one of the most promising channels for expansion. We have recently acquired a majority stake in the digital payments company, Loop, as part of our digital transformation strategy.

Finally, we plan to invest in technology to enhance the company's performance, cut costs and improve our customers' experience. In addition, we seek to integrate our operations to provide better and faster services to our customers through adopting digital platforms.

Q: Could you highlight the company's current and future plans to promote digital transformation and invest in technology?

A: Technology and digital transformation play an important role in enhancing our business and they are an important part of our growth strategy. We invest in topnotch technology and digital transformation with the aim of integrating and streamlining our business, as well as providing better and faster service to our customers.

Moreover, we plan to further enhance our digital capabilities by investing in the improvement of our e-systems, providing better and faster services to our customers and improving their experience. We also seek to reduce the time required to complete credit approval procedures and deposit financing amounts through the company's website and smartphone apps.

In addition, we aim to adopt advanced apps in the future to improve the risk assessment, provide faster credit approvals, and enhance the security and transparency of our operations.

Our current and future plans focus on technology and digital transformation to provide better and more efficient services for our customers, facilitate our operations and adopt top-notch applications.

The company’s acquisition of an 80% stake in Digital Payments Company for FinTech (Loop) is an important step to explore expansion opportunities.

Q: Morabaha Marina acquired 80% of Loop last year. How can the deal help redefine your future strategy?

A: The acquisition will help us expand our basic financing operations to include integrated e-payment and finance services.

SAMA license, which allows the company to provide finance services and payment solutions through Loop, helps accelerate the company’s digital transformation and enhance its services and solutions by offering new unique and innovative products. Further, the integration of our products with Loop will contribute to using e-wallets when customers receive finance. This, in turn, will increase transparency, cash flows control and credit quality.

These offerings will meet the needs of individuals as well as SMEs and allow them a safe access to various financial solutions.

Morabaha Marina aims to drive the development of the digital finance and payments sector in the Kingdom through the integration with Loop to create a comprehensive package of digital payments and finance products, along with an integrated platform to serve SMEs and individual customers under the supervision of SAMA.