Barwa Real Estate Company Q.P.S.C. (BRES) Earnings Call Transcript & Summary

Good day, and welcome to the Barwa Real Estate Conference Call. [Operator Instructions] I'd now like to welcome Shahan Keushgerian to begin the conference. Shahan, over to you.

Thank you, Paul. Hello, everyone. I want to welcome you to Barwa Real Estate's Third Quarter 2022 Financial Results Conference Call. On this call from the company's management, we have Tamer Elsayed, Group CFO; Tariq Al Jaber, Investment Management Director; Abdulla Hiji, Development Manager; Abdulla Khalfan, Financial Controller; and finally, Mohamed Dakur, Budget and Planning Controller. So we will conduct this conference call with first management reviewing the company's results followed by a Q&A session. I will now turn the call over to Tamer. Please go ahead.

Thank you, Shahan. [Foreign Language] Welcome, everybody. On behalf of myself and all other speakers today, we wish you all a very warm welcome to Barwa Real Estate Q3 2022 post results conference call. I am Tamer Elsayed, the Group Chief Financial Officer of Barwa Real Estate. At the beginning, I would like to thank QNB Financial Services to host this call on behalf of Barwa Real Estate. Please note that except for the historical facts, statements made by the management may contain a projection or other forward-looking statements regarding future events or future financial performance of Barwa Real Estate. These forward-looking statements are not guarantees or promises of future performance. Barwa undertakes no obligation to update or revise any forward-looking statements contained herein, whether as a result of new information, future events or otherwise. Barwa Real Estate declared the Q3 2022 financial statements on 25th of October 2022 and the investor relation -- and the investor presentation is available on Qatar Stock Exchange website as well as on Barwa Real Estate website in the Investor Relations section. Please let me start by giving you a brief introduction of Barwa Real Estate. We are one of the leading real estate developers in Qatar with expertise in developing, leasing and managing real estate assets. In total, we have about 3.6 million square meters built-up area under operation, which consists of residential projects, labor rooms, warehouses, retail showrooms and offices. As of September 30, 2022, we have operating units of 7,289 units, residential units and around 38,000 labor rooms. In addition 2 commercial offices, hospitality and other operating portfolio components, which are detailed in our investor relations presentation. Approximately 84% of our total operating revenues and about 94% of our operating profits are generating through these assets. Furthermore, Barwa has a land bank approximately 5.5 million square meters, of which 5.4 million square meters within Qatar. Of this, we own approximately 4.4 million square meters while the rest is leased. Looking forward, Barwa plans to selectively monetize this land bank by selling or developing properties based on the prevailing market demand. Now I would like to highlight some key points on the performance of the company for the Q3 2022. To begin with, our total operating revenues stood at QAR 1,420 million, against QAR 1,612 million for Q3 2021. Our total operating profit came in at QAR 917 million against QAR 1,020 million in Q3 2021. Our profit after tax for Q3 2022 stood at QAR 753 million against QAR 742 million in Q3 2021. On the balance sheet side, our financial position remains strong with net debt balance of QAR 15.6 billion and net debt to equity at 0.74. We have adequate liquidity and balance sheet strength to pursue our growth agenda. Also, we will keep working on refinancing part of our facilities to enhance our liquidity ratios and cash flow projections. With this, we can start the question-and-answer session. Again, thank you for joining the call, and we will be happy to answer any questions that you may have. I now hand over to the moderator at QNB Financial Services to field any questions. Thank you.

Paul, we can go to Q&A session now.

[Operator Instructions] Your first question comes from the line of [ Abdullah Amin from UNB ].

I appreciate this thing. I just want to ask a few questions. First of all, if you look at the balance sheet and then consider for the 9 months, you see an expense -- interest expense going by, just let me tell you the number. So the interest expense went up from QAR 212 million last year to QAR 279 million, as well as your borrowing has increased from [Audio Gap] plan to repay some of the loans so that the finance cost comes down going forward so that the more -- the revenues flow to the bottom line and increase the dividend as such? Or is it because of the expansion you need to keep on borrowing for some time? Like is there any repayment plan, which is more aggressive than the -- because I see on the presentation that you have QAR 1.4 billion repayment into 2023. It's around QAR 1.4 billion, QAR 1.8 billion, increases in 2025 to QAR 2.5 billion. Do we expect that you will pay because of interest rates are going up, amount more than QAR 1.48 billion, so that you can lower the finance cost?

For sure, it's all about our liquidity position. Our liquidity position is -- consists of cash, trading investments, trading properties. So we have a portfolio of liquidity assets, which we are now assessing which option will be more suitable for us. And for sure, if we have liquidity enough to early repay facilities, for sure, we will do that. But it's all about our negotiation with the banks. Honestly, most of the banks be accepted to reduce the current rates for the finance costs. And with each increase in the LIBOR and the [ QMR ] in, we are approaching the banks until now, they are responding positively. So for sure, we -- everybody is expecting another meeting this month in November. And based on that, we will see how we will react with the banks. But so far, things are positive in our discussion with the banks.