In the early 1980’s, the Mauritian Government gave some impetus to the economy by lowering the income tax rate and encouraging export industries. Companies in the Export Processing Zone (EPZ) were in full flight, creating employment and increasing turnover and profits. The management of the Mauritius Commercial Bank (MCB) saw then an opportunity to participate in the upside of a Mauritian economy coming out of a prolonged period of underperformance. The MCB had at that time two banking licences, the second being held by the MCB Finance Corporation (MCBFC), which was a 90+% owned subsidiary of the MCB, handling medium and long-term loans. Promotion and Development (PAD) was incorporated on the 23rd August 1984 with a share capital of MRs7 million as a subsidiary of the MCBFC. A small portfolio of shares in some of the country’s leading companies was sold by the MCB to PAD, and shares in PAD were offered to the MCBFC’s minority shareholders at the par value of MRs5. By this action, the MCBFC effectively reduced its stake in PAD to less than 50%.
Month: October 2016
1989: DEVELOPMENT OF LE CAUDAN WATERFRONT – A MAJOR MILESTONE
PAD purchased from United Docks a plot of land of approximately 5 Ha known as the Caudan Peninsula. Their partner in this adventure was the Happy World Group, and a company, Caudan Development (CDL), was incorporated with PAD holding 80% and Happy World 20% of the shares. The land consisted principally of old warehouses occupied by a number of commercial and industrial tenants. The tenants were moved and a master plan over 4 phases was elaborated in 1993. Funds for Phase I were raised in CDL via a private placing of shares and PAD subsequently bought out Happy World’s holding. The result was that PAD retained a 60% stake in CDL, with the remaining 40% held by the public. PAD also kept the management of CDL. In 1994, construction started on Phase I, and Le Caudan Waterfront saw the day in November 1996.
1996: OFFICIAL LISTING OF PAD ON THE STOCK EXCHANGE OF MAURITIUS
In the mid-late 1980’s, shares were still traded at the ‘Chambre des Courtiers’, which staged a weekly price fixing by way of an auction, and these prices were used over the counter for the rest of the week. With investors’ confidence sapped, shares were trading at low prices. Investors were looking for dividend yield, and because companies were reinvesting in their growing businesses, shares were trading at P/E ratios of sometimes less than 1. PAD took advantage of these low prices by buying shares on a scatter gun basis, with little regard for portfolio composition. In 1989, the Stock Exchange of Mauritius (SEM) was created, and this took share prices a level higher. The MCB was among the first (of 5) companies to be listed that year. While PAD was building up a portfolio of shares and starting to develop the Caudan Peninsula, pressure was being felt on its finances. Three rights issues were undertaken between 1990 and 1996, culminating in PAD’s listing on the official list of the SEM in 1996.
END OF 1998 – END OF 2000: FOCUS ON PROPERTY ASSETS AND DIVERSIFICATION OF PORTFOLIO OF SHARES
As Le Caudan Waterfront was growing in stature as the island’s premier shopping destination, so PAD’s investment portfolio began to be more focused on property assets, with these representing over 60 % of the value of the portfolio at the end of 1998. PAD had also begun to accumulate shares in the Flacq United Estates (FUEL) group of companies, which included Médine Sugar Estates (Médine). Combined, these two estates represent over 10% of the land area of Mauritius and as the island was progressing on the economic front, so land values would automatically grow given the island’s constraints. The shares of these companies were narrowly traded, and it took over a decade for PAD to become the largest individual shareholder in the group. In parallel with FUEL, investments were made in Naïade Resorts. In the early days of this entrepreneurial company, PAD held a 16% stake. By the year ending June 1999, PAD’s interest had been reduced to c. 10%. A number of cash calls from Naïade as the business was growing resulted in the company taking on board a number of new shareholders, and hence PAD’s dilution. The FUEL group via Forward Investment and Development Enterprises (FIDES), held at that time an important shareholding in Rogers and Company, which controlled New Mauritius Hotels (NMH). In 1999, Rogers paid out a special dividend in NMH shares, and the FUEL group subsequently passed its NMH shares on to its shareholders. The result was that by the end of 2000, the investments in NMH and Naïade Resorts represented 21% of PAD’s assets, with Caudan Development down to 26% of the portfolio, from over 40% in 1997.
2001: DISINVESTMENT FROM FUEL AND CONSOLIDATION OF INTEREST IN MÉDINE
The year 2001 was a major milestone in PAD’s history when the company disinvested from FUEL in order to consolidate its interest in Médine. PAD became Médine’s largest shareholder, with an economic interest of c. 30%. A profound re-think of Médine’s sugar-dominated strategy was then engaged. In a similar vein as Tongaat-Hulett in South Africa, Médine’s land and water resources have to be juggled continuously – a delicate balancing act. The sugar mill is the smallest of the four remaining mills in Mauritius, and it has no scale benefits. In 2005, a 20-year master plan for Médine was developed by a team consisting of architects, urban planners and sociologists. The basis of the Médine Master Plan (MMP) was sustainable integrated development. Médine has some of the best land for agriculture and property development on the island, but the factory area also harbours some pockets of absolute poverty. Médine’s Corporate Social Responsibility team is active on the ground, working with government and local NGOs in all aspects of community development. Sugar land is now making way for agricultural diversification, property development and other land uses as appropriate.
2002: OFFICIAL LISTING OF FINCORP INVESTMENT LTD ON THE STOCK EXCHANGE OF MAURITIUS
In 1994, the MCBFC gave up its banking licence and sold its banking business to the MCB. The MCB then unbundled just over 50 per cent of its holding in the MCBFC, and the renamed Fincorp Investment Ltd was listed on the official list of the SEM in 2002.
2003-2006 Three significant disinvestments
Three notable disinvestments have taken place since the FUEL/MEDINE de-merger, namely, Naïade Resorts (2003), Invescom (2005) and United Docks (2006). In all three cases, it was felt that the funds raised from the sales would be better utilised, primarily to consolidate PAD’s investments in its core holdings, namely Médine, Caudan Development and Mauritius Freeport Development (MFD).
2007-2009
The period from 2007 to 2009 was a volatile one with a boom to bust financial market cycle being precipitated by a bubble in the US property market. The resulting chain reaction which would rattle the world into a global recession presented a number of challenges for PAD and its underlying investments. At the same time, this period also came with its share of opportunities and was an exciting phase for the company.
Le Caudan Waterfront had by now positioned itself at the heart of the Mauritian culture. Phase II was opened in 2008 and branded Dias Pier after Diogo Dias, the 15th century Portuguese explorer who was the first European to discover Mauritius in 1500.
Caudan Development Ltd’s 100% owned subsidiary Caudan Security Services now employed 800 staff and was rapidly becoming the country’s leading provider of security solutions. Caudan Development remained a 60% owned subsidiary and made up 15.2% of PADs portfolio.
As part of its 20-year masterplan, Medine Sugar Estates Company underwent a rebranding exercise and ‘Sugar Estates Company’ was dropped from the name. This change cemented the company’s new operational focus on the property development and leisure sectors on top of the agricultural segment.
Meanwhile Mauritius Freeport Development’s ambitious expansionary development of its logisitics Freeport platform on a land extent of 30 hectares across four phases welcomed a relief of its completion deadline from 2010 to 2012 in light of the prevailing economic conditions. While operating conditions remained tight due to the development costs, the trend remained positive and PAD maintained it’s 2.8% stake in the company valued at Rs 143 Million.
2010-2012
While a recession affected developed economies globally, market participants in Mauritius over-zealously built new shopping complexes and offices resulting in an over-supply of available retail and office rental space. Benchmarking themselves on their prior success, shop owners opened additional outlets in these new shopping complexes. Unfortunately, the ‘demand pie’ had not gotten bigger; there were simply more people sharing in it. These market disruptions would lead to a decrease of rental rates across the industry as the market sought a new price-equilibrium level. This resulted in a period of depressed growth for Caudan Development. In times of uncertainty, one recalls the property investing mantra of ‘location, location, location’, and for this reason short term market turbulences did not sway PAD’s investment focus.
In 2011, MFD secured the financing and began construction on its fourth and final phase – the final step was in sight. By the end of construction, MFD would be the largest logistics centre in the region with 60,000 m2 of dry warehouses, 14,000 m2 of cold warehouses, 15,000 m2 of industrial zones, 6,000 m2 of offices and 25,000 m2 of container park all situated next to the Mauritius container terminal.
2013-2016
One of the key investments of Promotion and Development is Mauritius Freeport Development. Built under a 60 year BOT with government, this investment was always to be one characterised by 20 years of pain followed by 40 years of gain. Indeed, the early years were trying times, but PAD is now reaping the fruits of its diligence and patience as the activities of the port emulate the GDP growth of the island.
The sugar-cane industry in Mauritius and around the world has faced major challenges over the last decade. A such, Medine underwent a strategic rebranding exercise back in 2007. In 2015, government, in a bid to boost employment and infrastructure development, presented attractive incentives for companies to develop Smart Cities in line with the 2030 Smart Mauritius vision. In line with this vision, Medine is developing the first Smart City of the west coast centered around the theme of education. The Medine Education Village has so far managed to attract world-class leading tertiary institutions such as ESSEC Business School and L’école Supérieure d’Architectures de Nantes amongst others.
In 2016, PAD disposed of its entire investment in New Mauritius Hotels at a rate consistent with PAD’s forward-looking valuation of the company, which happened to be at a significant premium to the market value of the shares.
The island’s capital Port Louis has over the years faced increased stress as its infrastructure has failed to cope with the pressures of rapid urbanisation. Indeed, overcrowding, poor traffic flow, poverty patches have become the norm. PAD has been deeply involved in a regeneration program to bring new life into the capital. Recent artistic events such as Porlwi by Light has shown us that there is a deep seeded love for the old town and with the initiatives being currently worked on, we intend to re-ignite this old flame.
One of the key investments of Promotion and Development is Mauritius Freeport Development. Built under a 60 year BOT with government, this investment was always to be one characterised by 20 years of pain followed by 40 years of gain. Indeed, the early years were trying times, but PAD is now reaping the fruits of its diligence and patience as the activities of the port emulate the GDP growth of the island.
The sugar-cane industry in Mauritius and around the world has faced major challenges over the last decade. A such, Medine underwent a strategic rebranding exercise back in 2007. In 2015, government, in a bid to boost employment and infrastructure development, presented attractive incentives for companies to develop Smart Cities in line with the 2030 Smart Mauritius vision. In line with this vision, Medine is developing the first Smart City of the west coast centered around the theme of education. The Medine Education Village has so far managed to attract world-class leading tertiary institutions such as ESSEC Business School and L’école Supérieure d’Architectures de Nantes amongst others.
In 2016, PAD disposed of its entire investment in New Mauritius Hotels at a rate consistent with PAD’s forward-looking valuation of the company, which happened to be at a significant premium to the market value of the shares.
The island’s capital Port Louis has over the years faced increased stress as its infrastructure has failed to cope with the pressures of rapid urbanisation. Indeed, overcrowding, poor traffic flow, poverty patches have become the norm. PAD has been deeply involved in a regeneration program to bring new life into the capital. Recent artistic events such as Porlwi by Light has shown us that there is a deep seeded love for the old town and with the initiatives being currently worked on, we intend to re-ignite this old flame.