Alijarah Holding (Q.P.S.C.) (NLCS) Earnings Call Transcript & Summary

Hello and welcome to the National Leasing Company, Alijarah Holding Fourth Quarter 2022 Financial Results Conference Call. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Roy Thomas to begin the conference. Roy, over to you.

Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to National Leasing Company, Alijarah Holdings Fourth Quarter 2022 financial results conference call. On this call from Alijarah Holding, we have Rami Soussou, the Chief Financial Officer and IR Officer; and Alaa Tahsin Al Shekly, the Head of Business Development and Investment. We will conduct this conference call with management first reviewing the company's results followed by Q&A. I will turn the call now over to Rami. Go ahead, Rami.

Hi, and good afternoon, ladies and gentlemen. Thank you for joining Alijarah Holding Q4 conference, annual conference call. Today, as you mentioned, we have with us on the line, Alaa Al Shekly. He's the Head of Business and Investment in our company and he'll be handling the Investor Relations as well going forward. Before we start discussing the financial highlights of the company, I would like to turn the conference to Alaa, let him introduce himself and let him give us some brief about our strategy going forward 2023 and for the next 5 years. Alaa, please go ahead.

[Foreign Language]. Good afternoon. Thank you for being here, and thank you for the invitation. Thank you, Rami, for sharing this with us. First of all, during the second half of the last year, Alijarah Holding has performed an internal assessment in order to come up with the strategy plan for the next 3 to 5 years. And according to the new strategic launch is the new vision of the company, focusing mainly on 2, 3 main segments. The first segment is acquisitions of companies. The company's segment is including the driving school, the upcoming acquisitions on the future, the planned acquisitions on the futures on predetermined sectors. The second sector is the real estate sector. Alijarah is planning to increase the number of properties on its current plans. It is planning to increase the real estate portfolio on the next coming years. The next or the third sector is the financial installment or financial investment. This is including the investment in the financial markets, including via stocks, bonds and bank deposits. So mainly Alijarah Holdings now is more focusing on the investment activities, more focusing on acquiring new businesses and entering new businesses using the acquisition tool. We are focusing more on the next years on some sectors, including oil and gas services, educational sectors, and medical sector. We are aiming to have some talks on this sector either by financial markets or direct acquisitions. During the last year, we already have set in our strategic plan, our investment criteria, our investment conditions, target sector. We are looking for the next year for our investment opportunities to implement our business to implement our strategic objectives. We are watching closely the financial and economical situation of worldwide and in the GCC and in Qatar, in order to have the best opportunities to invest in the next few years. As you might notice, the accumulated losses has been decreased to around 30% this year. One of the main objectives for the next -- for the coming years is to eliminate these losses by increasing our profit. One of our objectives is to increasing the current operating profit by increasing the investment and the improvement on the driving school, and current our existing real estate sector. Thank you so much, and I will move on to my colleague.

Thank you, Alaa, for this brief about Alijarah and how we will be looking for the future in the upcoming 5 years. Now let's brief you about Alijarah performance in 2022 compared to last year of 2021. We all know that 2021 was a tough year on Alijarah where we reported a loss of QAR 14 million compared to reported net profit for the 2022 QAR 19 million, which is approximately an increase more than 228% in net profit, as well as our earnings per share have increased compared to a loss per share of last year. Our earnings per share reached 0.039 as compared to a loss per share of QAR 0.03 loss per share. Again, revenue from core business has -- there was an increase on that from it was QAR 29.26 million comparing to approximately QAR 33 million in 2022. Our total revenues and income compared to 2021 reached QAR 73 million compared to QAR 31 million. Our net operating income for the year 2022 reached to show a positive QAR 12 million compared to a loss net operating loss of QAR 23 million. And thank -- the net finance income increased from QAR 4 million to QAR 7 million, and that was the impact of the increase in the profit rate during the year to give us a total net profit of QAR 19 million compared to a total net loss for the last year QAR 14 million. Going into our financial position, our total assets dropped from QAR 738 million to QAR 730.5 million. This drop was mainly due to the decline in fair value, especially in the investments and investment property. Again, our total liability as well increased because mainly, we have completed everything towards the Lusail project that attention has been released, and some -- the provisions for the current year was acceptable compared to last year. Again, our total equity dropped and the reason for the drop is basically our OCI investments. Our OCI investments and the fair value reserve, that's lying down the equity. As for our cash flow for the year, we had a net cash flow used in operating activities compared to a net cash flow used in operating activity of last year. Net cash flow used in investing activity was we used our deposits and had them with a longer maturity period, not more than 3 months. That's why it's showing the investing activity at QAR 239 million used in investing. In addition to the investments that we have done during the year for buying and selling stock that was part of the generation of income in 2022. And lastly, the net cash flow used in financing activity, QAR 19 million compared to QAR 35 million, and this is mainly due to the repayment of available Wakalah that we used to have in the previous year. We settled this in 2022. Our net decrease in cash and cash equivalent is QAR 226 million compared to QAR 39 million, and again, this was related mainly to the deposits and the change in return of deposits. To give us a cash at the end of the period QAR 23 million compared to QAR 249 million. We have details of the financial statements for the 3 years showing in our slides for -- and on the financial position. As you are all aware, the Board have met last Wednesday and approved our financial statement and he announced a 3% cash dividends to be distributed to the shareholders in the upcoming AGM. This is it for now. We are now open for questions. You can ask me or Alaa the questions you want, and we'll be more than happy to answer. Thank you.

[Operator Instructions] Your first question comes from the line of [ Zohaib Wahej ] of Al Rayan Investment.

This is [indiscernible] from Al Rayan Investment. I got a couple of questions. Firstly, you had mentioned that there will be the new strategy going forward is -- it seems like you're going to be concentrating on the same business lines and you're not going to be adding new business line. So what kind of return metrics or KPIs do you look at when you invest in certain or you're thinking of investing in a certain business, be it the driving schools or the properties, what kind of returns or KPIs or something that you target? Second question is on the -- you mentioned that the OCI changes in the OCI related to investments led to the decline in equity. So could you give us some idea of what kind of investments are these? Where are these? What was the return on these investments? That would be great.

Thanks for your question. Alaa will answer part one, and I will be answering part two of your question. Alaa, please.

Yes. In regard to -- new business is aligned to our company, actually, we are planning to -- we have an intention to go to a new business line. But not directly. We would not -- we are not aiming to do the operations by ourselves, but our aim is to invest either on financial -- on a listed company, or a company with an existing record. So we are going to expand our portfolio either by acquisitions, okay, or either by having several stops of that listed company. So mainly, we are looking for a financial KPIs, including the valuation of the company. We are looking for the expected retail, for the expecting IRR. We're always putting that, let's say, the shares investment return or risk of free return as a benchmark for our expected return, or for our targeted return. So for some investments, we are targeting double of the risk-free return. For some investments, we are targeting 1.5 of the risk free return. So the dividend on which -- on the business line and the dividend on the business are still part in the financial conditions and on the valuation of that business. I hope that answered your question.

And again, I'll add one point. We are not changing the strategy. As Alaa mentioned, as you previously know, we were into operation, and now we're just moving into more into investing and activating the holding role as an investment company. Going to question 2, which is the OCI, basically, our OCI investments, which are investment security measured through OCI rather than profit and loss are those investments in the stock market Qatar Exchange Stock market. We're holding those investments as a long-term investment, collecting dividends out of them. And we're waiting for the dividends to be distributed in the upcoming AGM. I hopefully we answered both of your questions. If you need further clarification, please let us know. Thank you.

Just 2 follow-ups on that. Firstly, you mentioned that you'll be targeting risk free twice, sometimes twice the risk free return, sometimes 1.5x. What is the risk free return that you have in your mind currently? Secondly, I didn't -- you mentioned on the investment side. So what kind of return were generated during the year on the portfolio?

I got your question. What I already mentioned when we won't like to enter any new business, any type of investments, we will convert the expected return of that business to the risk-free return. Risk-free return including 2 things: the deposits and the sukuk or bonds. So for deposits, currently the return of the dividend is 5%, sometimes 5.5%. The yield for some sukuk sometimes currently to reach the maturity is 5%. So for some businesses, we are looking for double risk or double -- we are looking for risk here that is double the risk-free return of such investments. For some businesses, we are looking for 1.5x return compared to the risk free return. So if the deposit is 5% -- 5% return, okay, then we will look for, for example, 10% return in order to compensate for the risk. For some type of businesses, we are looking for the companies, I mean, especially for the companies who are looking for not less than twice return compared to the risk free return. For some other businesses, like real estate, we are looking for 1.5x to double also the targeting return of the -- the target return of the risk free return. Hoping that answers your questions.

For the second part, our return on the OCI approximately is an average between 5% to 6%.

[Operator Instructions] And there are no further questions at this time. So I'd like to hand back to Roy Thomas. Thank you.

Yes. There are no further questions. We would like to thank Alijarah Holdings management for the results update and answering all the queries. And look forward to speaking to you all for the first quarter 2023 results. Thank you.

Thank you. Thank you, and hoping to have better results even from the first quarter of 2023. As well, we will update you the results in due course. Thanks so much for everyone participating, and thanks, Roy.

That does conclude our conference for today. Thank you for participating. You may now all disconnect.