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

Hello, and welcome to the Barwa Real Estate Group Conference Call. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Mr. [indiscernible] to begin the conference. [indiscernible], over to you.

Thank you, Bhavesh. Good morning to you all. I want to welcome you to Barwa Real Estate's 1Q 2024 Earnings Conference Call. On this call from management team, we have Tamer Elsayed, the Group Chief Financial Officer; Tariq Al Jaber, the Investment Management Director; Abdulla AlKaabi, the Direct Development; Abdulla Khalfan, Financial Controller; and Mohamad Daakour, Budget and Planning Controller. As usual, we will conduct this call with first management reviewing the company's results, followed by a Q&A session. I'll now turn over the call to Tamer, the Group CFO, to begin. Please go ahead, sir.

Thank you. [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 Q1 2024 Post-Results Conference Call. I'm 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 more -- of new information, future events or otherwise. Barwa Real Estate declared the Q1 2024 financial statements on 30th April 2024. And please let me start by giving you a brief introduction on 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 5.5 million square meters built-up area in operation, which consist of residential projects, labor rooms, warehouses, retail showrooms and offices. As of 31st of March 2024, we have operating units of 14,069 residential units and around 55,000 labor rooms in addition to commercial offices, hospitality and other operating portfolio components, which are detailed in our Investor Relations presentation. Approximately 77% of our total operating revenue and about 86% of our operating profits are generated through these assets. Furthermore, Barwa has a land bank approximately 2 million square meters, of which 1.9 million square meters within Qatar. Of this, we own approximately 900,000 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 Q1 2024. To begin with, our total operating revenue stood at QAR 418 (sic) [ 481 ] million as against QAR 433 (sic) [ 533 ] million for Q1 2023. Our total operating profit came in at QAR 333 million against QAR 392 million in Q1 2023. Our profit attributable to the equity holders of the parent for Q1 2024 stood at QAR 238 million as against QAR 235 million in Q1 2023. On the balance sheet side, our financial position has been improved compared to 2023 with a net debt balance of QAR 11.7 billion and net debt-to-equity at 0.54. We have adequate liquidity and balance sheet strength to pursue our growth agenda. Also, we keep working on refinancing part of our facilities to enhance our liquidity ratios and the cash flow projections. With this, we can start with 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.

[Operator Instructions] Our first question comes from the line of Seki Mutukwa from Ashmore.

Hope you can hear me. Three questions, please, for me and then I may jump back in the queue. The first one is if you could just talk about rental income in terms of what drove that year-on-year decline. If I'm reading that correctly, whether it's occupancy or actual rental rates or perhaps something to do with mix? Second question is on the rental expense. Sort of that also seems to have increased year-on-year. Perhaps just a better understanding of what's driving that? And then the third question is just about the sort of fair value loss as well as the share of results from associates. Those 2 negatives, just what's driving those, please?

Regarding the rental income, the reduction is mainly due to the [ Wakra ] projects. Last year, they were rented to the Supreme Committee. And this year, it's rented in the market, and the, let's say, the occupancy rates are reaching almost around 50%, and it's not fully occupied. Plus also, there are some occupancy rate reductions in the [ Barahat Labor Camp ] since last year.

And I guess [indiscernible].

And regarding the rental expenses, last year, when the projects were rented to the Supreme Committee, there were no expenses. But due to them being rented in the market, there are some -- there are rental expenses or operating expenses. And regarding the third question, I believe you were asking about the fair value loss.

Yes, please. Just to sort of understand what's -- whether there was sort of a revision on denominator, i.e. cost of borrow which caused that? Or is there something else driving? I know it's only a small number.

Actually, it's just a regular amortization on the right-of-use projects. And usually, we do valuation at half year and year-end. So first quarter and third quarter, we don't do any valuation. And I believe you also had the fourth question?

Sorry, it was linked. Yes, just in terms of the loss from associates, just maybe a bit of an understanding of what that is?

This is impairment that we have just recorded for a company that is under liquidation.

Our next question comes from the line of Zohaib Pervez from Al Rayan Investment.

I missed most of the call. So if I'm asking the question again, I apologize in advance. Could you tell us what is these advances for projects? The advances for projects have gone up in the first quarter. So which projects are these -- for which you have increased the advances, who provided the advances? About QAR 300 million, I think. Second question is regarding the impairment reversals. These reversals are against one -- what are these reversals against? Could you give us that? Third question is about your -- could you give us more color on your occupancy levels for your residential units and the labor rooms?

Regarding the advances, they are related to [ Wakra ] projects, Madinatna and Barahat Al Janoub, mainly. And regarding the reversal, these are areas that we have collected from an [ anchor ] tenant.

On the occupancies, most of the residential occupancy is 90% to 95%, except for Madinatna, which is at 52%, and the Argentine neighborhood, around [ 37% ].

What are -- so what the developments are being done at the Wakra project, for which you provided advances?

We have 2 projects, which my colleague just referred to, which in Madinatna and Argentinian neighborhood. Both projects are almost done. The advance is now under settlement with the contractor, and it's only a matter of paperwork, but the work is already almost done.

So this will lead to some -- I mean, you will have to make these -- these advances have to be paid or they have been paid?

No, no. So let me say it, it's paid, but just to wait for to recap -- to be recovered on the papers. And just to sign IPCs and whatever to be recovered on the paper. But the work has already done, the advance payment paid before and the -- just we are recurring based on the IPC, the progress reports. It's a matter of working of paper documentation.

Our next question comes from the line of Mark [indiscernible] from TFI.

I noticed that you have a significant rise in income from consultancy and other services. Is that a one-off thing? Or should we expect that to continue for the rest of the year? And could you just outline the source of it, please?

Okay. So the increase is mainly from adjustment and [ accounting ] treatment as -- might not just not happen again.

Sorry, it's an adjustment in the account accounting treatment in general or on one particular project? Or -- could you elaborate?

It's one particular project.

And is that likely to continue?

No. It's just a [ one-off ].

Our next question comes from the line of Seki Mutukwa from Ashmore.

I was just hoping to hear your sort of views on the residential sort of rental rates, how that market is looking? Whether you're seeing increasing rental rates or competition from perhaps new developments putting pressure on those rates? Any color, please?

The overall, the residential portfolio that Barwa consists of, we are seeing a good occupancy of 90% to 95% across all asset class -- all residential units. So the rental level for this year is quite, I would say, stable, the overall strategy that we are not increasing it. And our main focus is to manage the occupancy level for this year. So we are not -- neither we are kind of increasing it or there is no demand pressure that we are having it on our portfolio as of now.

Any chance you can comment about the overall market at all? Like -- so obviously, you've talked about your portfolio, but are you doing -- struggling?