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

Hello, and welcome to the National Leasing Alijarah conference call. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome [ Shahan ] to begin the conference. [ Al Shahan ], you may now begin.

Thank you. Hello, everyone. I want to welcome you to NLCS' Third Quarter 2023 Financial Results Conference Call. So on this call from management, we have the CFO, Rami Soussou; and Alaa Shekly, Head of Business Development and Investments. So well, as usual, we will conduct this call with, first, management reviewing the company's results, followed by a Q&A session. I will turn the call over now to Rami. Please go ahead.

Thank you. Thank you all for joining us today on National Leasing Alijarah Holding Q3 results for 2023. Good afternoon, and good morning for those who join us from the other part of the world. Today, as usual, we'll start with discussing the performance of the company, taking you to what has happened in Q3, then moving to the income statement details of the earnings and moving to the financial position and closing it with your Q&A. So I believe there was a copy on our website and was shared as well with you. I will start with Slide 5, which is the Q3 performance. Alijarah was able to make QAR 29.24 million in revenue from core business. Basically, it's coming from Alijarah Academy and Alijarah Property. Alijarah, the net profit of QAR 11.84 million in Q3 2023, and with an earnings per share, QAR 0.024 earnings per share. As we can see, there was an increase in our revenues and core revenues quarter-to-quarter -- year-to-year, sorry. However, there was a drop in our profit from quarter 3 2023 compared to quarter 3 2022. But if we look at quarter-to-quarter, there was an increase, approximately 37% quarter-to-quarter. As well, the earnings per share is reflected with the same figures. Moving forward to the income statement. Our total revenues and income dropped 26%, and this basically relates to the drop in our investment income and the portfolio that we are managing. The market was a tough market this year. The dividends weren't as expected and the market itself was a tough one. Our total expenses, we managed to keep it at the same level, though there was an increase in our revenues, the core revenues. There was an increase in our operating expenses but we managed to lower our G&A on the other hand. Our net operating income, we had QAR 0.86 million compared to QAR 13.26 million. And this jump is due to the investment income and the release of the provisions that took place in quarter 3 of last year. Our net finance income jumped and we had a kick in the net finance income. And that's basically due to the interest rate hike that is happening across the globe, giving us a profit for the period for QAR 11.84 million compared to QAR 16.3 million, a decline by 27.53%. Moving forward to the financial position. Our current asset increased by 12%. On the other hand, there was a small drop in our noncurrent assets, giving our total assets to QAR 707 million compared to QAR 713 million, still at the same level. Our current liabilities increased by 24% from QAR 68 million to QAR 54 million -- QAR 55 million. Our noncurrent liabilities dropped slightly from QAR 5.26 million to QAR 6.3 million. Total liabilities increased QAR 73 million compared to QAR 61 million. Our equity level, we remained almost the same. There was the impact of the fair value related to the investment. It posted down to QAR 634 million compared to QAR 652 million. And for the cash flow, it shows a negative -- or cash used in operating activities, QAR 4.1 million, compared to cash from operating, QAR 28.7 million. Cash flow from investing, QAR 20 million, compared to cash used in investing activities, QAR 229 million. And from financing, we had QAR 3.5 million from financing compared to used in financing, QAR 15.8 million, which What gives us cash at the end of the period, QAR 42 million compared to QAR 32 million towards the end of quarter 3 2022. We can open the ground for questions, and we'll be more than happy, me, Alaa, to answer your questions. Please go ahead.

[Operator Instructions] We have a question from Anastasios from Al Faisal Investment.

Just a question on return. Now we have QAR 11.8 million. So you're annualizing [ 1.7 ], let's say. Then you have equity of QAR 600 million. And then you're in an era where you're already [Technical Difficulty]...

Excuse me, but we cannot hear you. Can you make your voice louder, please?

Can you hear me now?

Loud and clear, thank you. Can you repeat the question, Anastasios?

Sure. So my question has to do with the returns. Basically, now we are 9 months. And you are registering around QAR 12 million net, let's say, QAR 16 million full year and you're employing more than QAR 600 million of equity. In an environment where you have a tremendous tailwind, you are registering very high returns on your cash. So the question is -- this raises a question for both your driving school business and your investments, meaning what would be your objective returns? Because driving school business, reasonably very profitable with very strong returns. And the noncash investments at least should be accretive to your cash. Otherwise, honestly speaking, you may as well get 7% from cash. So the question is, looking '24, what adjustments are you making to ensure that at least you can achieve return in the double digits given the tailwind you have and the interest rate environment we're going through? And would you expect -- from your core business school, what sort of return on equity do you expect on that also?

First of all, thanks a lot for your question. As you might know, currently we're still operating on a very high interest rate environment. This represents many challenges to the investment side as well as an opportunity to deploy our cash. As you might know we have a good portion of our investment portfolio and fixed income regarding to our sukuk and our deposits. We are looking also to increase our sukuk weight in our portfolio during Q4 and Q1 on 2024. We believe, even though that the interest rate level right now is high, but we are almost on the peak of the cycle. We believe that it will start to decline starting of next year. As might you know, many of banks, solid banks are expecting by the middle of next year or third quarter of next year, the interest rates would be -- will start to decline. So cash will not be able to get the same return from fixed income -- or from deposits as it gets right now. So we have to be ready from now to next year to a new environment that would be -- a new environment with lower interest rate. That's why we are trying, first of all, to diversify our investment portfolio by first of all introducing sukuk during to very high yield right now. Second, we might also diversify through equity. We might make a new position of equity during Q4 or Q1 by the next year. As you might notice right now, there are many good opportunities on equity markets as well as the -- we are now also making enhancement or -- and improvement in our real estate side. Currently, we are increasing the number of our stores, which would also increase our return during next year. And we're still looking into both the new businesses or new private equity businesses. We are looking into building a new investment or entering a new investment in some sectors as we have explained in our previous conferences call. We're still studying opportunities in the market. We are still exploring opportunities in the market. And once we find something that's meeting our objectives, that's meeting our investment philosophy, we would be happy to diversify our portfolio. I wish that answers your questions.

Yes, that's very helpful. One final clarification, if I may. So on the -- so generally speaking, from your analysis, it means that you will -- you are trying to raise sukuk and fixed income. And I assume, so the duration will be the bulk of your allocation for '24, right? So we should budget for you something in the high single digit coming out of that.

Can you repeat that again?

So in your allocation, the bulk of your allocation for '24 will be sukuks. So they did sukuks.

Fixed income.

Fixed income, not sukuk. Part of the going into deposits and part -- not as much as going in compared to deposits. There's a portion of funds being invested at sukuk as an asset at a very high yield.

[Operator Instructions] Looks like we don't have any incoming questions anymore. I'd now like to hand back over to the moderator. Thank you.

Okay. If we don't have anymore questions, we can wrap it up. And I'd like to thank NLCS' management for giving us an update, and we'll take this up again next quarter.

Thank you. Thank you all for joining, and looking forward for last -- end of year results.

Thank you very much. This concludes today's conference. You may now all disconnect. Have a wonderful day.

Thank you.