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This is the first year of Business Today's Top 50, in which 80 companies that serve as the sample base, account for 94.6 per cent of the total MSM market capitalisation RO9.011bn as of December 31, 2007. The top 50 presented here have also been classified as per the sector it operates in and market capitalisation. In association with Gulf Baader Capital Markets, who have developed the criteria for ranking. BusinessToday is proud to present the companies to watch out for on the MSM

A comprehensive look at Oman’s corporate performance during the last three years shows healthy growth with overall performance levels augmented by favourable economic factors.

During this period, average crude prices have shot up from US$34 in 2004 to US$65 in 2007 and to an average of US$86 for the first two months of the current year. This has augmented the GDP growth and provided fiscal stimulus to public investments and private sector activity. In this high growth phase, we have explored the performances of 80 listed companies on Muscat Securities Market (MSM), which forms 94.6 per cent of the total MSM market capitalisation of RO9.011bn as on December 31, 2007.

The economic boom has led to market expansion across all sectors. Government funding of infrastructure and oil and gas related projects, along with rising per capita income of local population, has led to a healthy demand for products and services. The Omani corporate sector has capitalised well on this growth with capacity additions and focus on new areas of businesses in a high demand scenario. This is evident from the aggregate asset growth three-year CAGR (compound annual growth rate) of 24.3 per cent till 2007. During the last three years, aggregate assets of these companies have almost doubled to RO12.621bn, out of which BankMuscat has a lion’s share of 33.4 per cent in the banking sector’s total share of 63.7 per cent. The role of the Omani banking sector has been the key in asset formation across all sectors in the industry and among households.

Asset formation in banking, financial services and investment sector (which includes banking, leasing, insurance, investment holding and brokerage) has shown a three-year CAGR of 26 per cent and has more than doubled to RO9.955bn. Credit growth has bolstered overall assets for the banking and leasing sector. Aggregate commercial banking sector credit has seen a three-year CAGR of 22.9 per cent to RO6.513bn as on December 31, 2007. The industry sector, which has a relatively smaller share of 8.5 per cent as on December 31, 2007, has been aggressive in capacity addition. The aggregate asset for the sector has grown by a three-year CAGR of 25.6 per cent. Meanwhile, for the services sector it was 14.3 per cent for the same period.

Rising liquidity in the economy, easy access to funds and focused approach from managements have helped capacity build up. While the banking sector continues to be a major source for aiding this growth with relatively lower funding costs, the corporate sector has shown encouraging levels of capital raising initiatives from the capital market. Investor sentiments in Omani equities have remained positive with very high level of corporate governance norms and transparency. As a result of higher payouts from Omani corporate sector, the proportion of shareholder’s equity to fund this asset formation has remained in a range of 23.8-26.2 per cent during the last three years.

Demand-led capacity build up has resul-ted in healthy top line growth across all sectors. Aggregate top line for these 80 companies has improved by a three-year CAGR of 24.6 per cent to RO2.972bn as of 2007. While banking, cement, leasing, telecom, oil marketing, port services and other industry and services sectors have seen commendable improvement in core growth, investment holding companies and brokerages have benefited from continuous market performance. Complete transformations were seen in the banking and telecom sector with the entry of new players under vigilant regulators.

Healthy top line growth and higher efficiency levels have improved profitability and augmented returns on shareholder’s money. Overall return on average equity has improved from 21.4 per cent in 2004 to 24.5 per cent in 2007. Return on average assets improved from 4.8 per cent to 5.8 per cent. As a result the earnings have seen a three-year CAGR of 29.8 per cent among these companies.

Gulf Baader Capital Markets (GBCM), as part of its efforts to rank the companies based on its historical performances, has constructed a model (GBCM PPRM). The model uses five parameters, return on average equity, adjusted EPS growth, return on average assets, net profit margin and top line growth, which we believe is key for determining the performance of companies historically. Weights have been assigned for the specific time period with the nearest year carrying the highest weight and farthest period the lowest weight.

Subsequently, aggregate weighted growth is determined by assigning highest weights to RoAE followed by adjusted EPS growth, RoAA, NPM and top line growth. This takes care of the relative importance of each of the parameters.

Disclaimer: This document has been prepared and issued by Gulf Baader Capital Markets on the basis of publicly available information, internally developed data and other reliable sources. While all care has been taken to ensure that the facts stated are accurate and the opinions given are reasonable, neither the company nor any employee shall be in anyway responsible for the contents of this report.

Large-cap performers
Oman Cables Industry
Oman Cables is a leading manufacturer and exporter of medium voltage, low voltage electric cables, building wires, instrumentation cables and overhead transmission line conductors. The company caters to domestic and export markets. The demand for power has propelled investments in power related infrastructure globally. This, along with industrial expansions and buoyant real estate developments, has augmented the demand for power cables in the region in which the company is operating. The company has been able to capitalise on this boom by building new capacities. As a result, the top line has grown at a three-year compounded annual growth rate (CAGR) of 82.1 per cent while the profit has grown at a CAGR of 122.8 per cent over the same period. As of March 31, 2008, the company has an asset size of RO137.667mn and shareholder’s equity of RO39.193mn.

ONIC Holding
ONIC Holding is one among the premier investment holding companies of Oman. It owns two insurance companies, National Life & General Insurance and Al Ahlia Insurance, and has significant investments in other financial and non-financial assets in Oman and overseas. Its policy of focusing on achieving a level of sustainable income to be generated from core and strategic assets in a consistent and gradual manner has resulted in the company's top line growing by a three-year CAGR of 36.4 per cent while its net profit has grown at a CAGR of 35.9 per cent over the same period. As of December 31, 2007, the company has an asset size of RO168.617mn and shareholder’s equity of RO83.69mn.

Galfar Engineering & Contracting
Galfar Engineering & Contracting is one of the largest, multi-disciplined engineering, construction and contracting company in the Sultanate of Oman. The company was successfully listed on the Muscat Securities Market in 2007. It has expertise in project management, engineering, procurement and construction in areas like oil and gas, civil, electro-mechanical, roads and bridges and environmental projects. Buoyancy in the infrastructure development and the economic upswing that the sultanate is going through has benefited the company. The company's top line has grown at a healthy three-year CAGR of 50.4 per cent while its net profit has grown by 49 per cent over the same period. As of December 31, 2007, the company has an asset size of RO257.516mn and shareholders equity of RO70.4mn.

Mid-cap performers
Gulf Hotels (Oman)
Gulf Hotels (Oman) owns and operates the Crowne Plaza Hotel in Muscat. In the wake of the government's increasing focus on tourism industry, over the last few years the local hotel industry has seen escalating demand for services and thus growing revenues. Revenues of Gulf Hotel have grown at a three-year CAGR of 33.7 per cent while its net profit has grown by 340.9 per cent on a lower base during the same period. As of December 31, 2007, the company has an asset base of RO35.303mn and a shareholder’s equity of RO32.430mn.

Al Jazeira Services Company
Al Jazeira Services is a multi-faceted company with interests in contracting services, and strategic investment in Al Anwar Ceramic Tiles, besides other market investments. The contracting services business primarily involves the feeding and housing of workers and personnel engaged in the industrial, oil and gas sector, military and civilian defence forces, hospital and educational sectors. Over the years, increased government spending has provided better opportunities for the contracting services segment for the company. Besides, the region is going through a construction boom which has had a positive impact on the performance of its associate, Al Anwar Ceramic Tiles. This, along with healthy market performance, has resulted in revenue growth (three-year CAGR) of 14.4 per cent while the net profit has grown by 60.5 per cent over the same period. As of December 31, 2007, the company has an asset size of RO38.738mn and Shareholder’s equity of RO29.908mn.

Oman & Emirates Investment Holding Company
Oman & Emirates Investment Holding Company is yet another investment holding company with subsidiaries in the financial services sectors and in the area of food processing. Market investments have helped the company in generating a superior performance during the recent past. This, along with improvement in core businesses, have resul-ted in top line growth of 26.0 per cent while net profits have grown by 31.5 per cent during the same period. As of December 31, 2007, the company has an asset size of RO99.228mn and shareholder’s equity of RO46.893mn.

Small-cap performers
Gulf Mushroom Products
Gulf Mushroom Products Company is the largest mushroom farm in the Middle East. The company produces fresh mushrooms and also has a processing plant to process mushrooms for canning as well as bottling. The company says its focus on quality and customer service has got it’s a global export base. Though its performance has been improving consistently since the year 2001, the company achieved net break-even in 2005 for the first time in its history, and recorded net profit in 2006. For the year 2007, the net profits have improved by 31.9 per cent to RO380K after registering sales growth of 39.0 per cent during the year to RO3.097mn.

National Hospitality Institute
National Hospitality Institute is engaged in the business of providing training solutions in the hospitality, tourism and retail sectors. The board comprises representatives of the leading hotels and catering companies in Oman.The company’s business is predominantly from government-funded vocational training projects. Over the last few years the company has focused its efforts to strengthen its industry partnerships with both existing as well as the new players in the hospitality sector which helped significantly in the sourcing and building of corporate and privately funded training revenues. The result of these efforts is reflected in the turnaround which was seen post 2004.

Hotels Management Company International
Hotels Management Company International owns and operates The Chedi Muscat. The government has continued to give its full support to the tourism sector which has reflected positively in the hotel and tourism business of the sultanate. The Chedi Muscat too has benefited from the same and after recording losses in its initial years of operation, the hotel turned around in 2005 and since then has been on a growth path.