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

Hello, everyone, and welcome to Barwa Real Estate Conference Call. Please note that this call is being recorded. I'd now like to hand over to our moderator for today, Roy Thomas. You may now begin the conference.

Thank you, Ellie. Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Barwa Real Estate Company's Third Quarter and 9 Months 2024 Financial Results Conference Call. On this call from Barwa Real Estate Company, we have Tamer El-Sayed, the Group Chief Financial Officer; Tariq Al Jaber, Business Development Director; Abdulla Al-Kaabi, the Director of Development; Mohamad Daakour, Budget and Planning Controller; and Abdulla Khalfan, the Financial Controller. 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 Tamer El-Sayed. Go ahead, Tamer.

Thank you so much. [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 2024 Post Results Conference Call. I am Tamer El-Sayed, the Group Chief Financial Officer of Barwa Real Estate. At the beginning, I would like to thank QNB Financial Services who hosted 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 2024 financial statements on October 17, 2024, and the investor presentation is available on Barwa Real Estate website in the Investor Relations section. 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 consists of residential projects, labor rooms, warehouses, retail showrooms and offices. As of 30 September 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 79% of our total operating revenue and thereabouts 92% 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 Q3 2024. To begin with, our total operating revenue stood at QAR 1.370 billion as against QAR 1.353 billion for Q3 2023. Our total operating profit came in at QAR 936 million against QAR 940 million in Q3 2023. Our profit attributable to the equity holders of the parent for Q3 2024 stood at QAR 784 million as against QAR 779 million in Q3 2023. On the balance sheet side, our financial position has been improved compared to 2023 with a net debt balance of QAR 10.1 billion and net debt to equity at 0.46. 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 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 is from Zohaib Pervez from Al Rayan Investment.

I've got two questions. One, recently, you have launched your project, Barwa Hills. Could you tell us what was the uptake or the off-plan sales you recorded until now, during Cityscape and until now? I think 57 units were being offered and 11 retail units, so just an update on how much of that was sold and preferably if you can say what is the price. The second is the 2 projects, the Barwa Cooling projects that you have won. Could you tell us the margins, the net margins, on these contracts?

Thank you for your questions. For the first question, the new project or the new phase of the Barwa Hills is 57 units. In the Cityscape, we offered only 25 units for reservations, not as a sale. It's only for reservation. And all of them already reserved. For the second question, my colleague will answer you.

For cooling for both contracts, we are talking about average of profit margin of 40%.

Sounds good. So my follow-up is on Barwa Hills. What do you mean by they were offered for reservation?

We opened the Cityscape only an expression of interest, if you wanted to reserve a unit, not as an actual sale, it's a reservation only. This is common in such case.

And when will it be actually offered for sale?

We expect by first quarter 2025.

Next question comes from [ Ashish Agarwal from TFI ].

I believe there was this oversupply situation in the residential real estate. And I wanted to know like what is the update on that scenario, right? Is there still an oversupply? Or do you see that waning off? That's my first question. Second question is, I'm referring to your financials for the first half and FY '23 because that includes the breakup. And in your finance income, there is this component other finance income. And the first half other finance income was of QAR 32 million whereas in FY '23, it was QAR 24.4 million. So I wanted to understand the nature of the inclusions of this other finance income because my understanding is that this is different from the interest earned on fixed deposits. So if you can help me understand that. That's my second question. And I have a third question, which is, I saw in your current financials that you have shifted your last installment to short-term fixed deposits. And based on the calls that I've heard previously, I believe you had planned to utilize them to repay the debt. So will you be using these short-term deposits to repay your debt or you have changed your mind? That's my third question.

Yes. So addressing your first question regarding the real estate market in the residential segment and whether we are struggling with the oversupply in the market, as it stands, we've always held a long-term view of the real estate market, so that's why we've maintained a highly competitive pricing. So in terms of our occupancy rates, we haven't suffered much in comparison to the rest of the market. And we've been holding quite strongly in terms of occupancy rates in the residential segment.

Regarding the second question for the finance income, in June, the other refers mainly for the revenues regarding the school project, PPP school.

Okay. Do you mean to say that the revenue from the school projects is accounted in other finance income? Is that what you're saying?

The revenue from schools, part of it will be allocated to service revenue and the remaining part for the finance income.

Okay. Part of the income from the schools is allocated to service and part is allocated to other finance income?

Yes.

Yes. For the third question, about the last installment received from the Lusail Golf, yes, it's placed now as bank deposits, and it will be used to settle the facilities on the rollover date or in the related maturity dates for each loan.

Okay. Can you throw some light as to when the rollover date is? Is it like the next quarter, like fourth quarter, should we expect?

We cannot confirm now because we're working on different facilities to be refinanced. So this will be based on the new refinance arrangements. Based on that, we will settle the debt, but we are still working on that. We have different facilities. We are working now on refinancing.

Next question comes from [ David McKeel from CBFS ].

Well, actually, my question is related with your fourth quarter normal results, which you had in last year, 2023. There were certain sale of properties. So could we look forward to that again in fourth quarter, first? Secondly, I mean, you mentioned about your finance facilities, which you are arranging with other facilities. So I just wanted to have an idea, roughly ballpark, say, around 100 basis point rate cut which took place, and say, the floating which you have got, what could be the likely savings which you'll be looking at on your interest cost?

Regarding 2023 Q4 sales of properties recorded, it was related mainly to Dara A projects, which was sold a couple of years back. So it was like we were in the last installments received, and that was the sales recorded. For this year, it will be subject to the market conditions. If we can find good opportunities for whatever projects at the time, it will be discussed and we take the proper action.

Yes. For the second question about the interest rates or whatever, I would like to keep this for the fourth quarter until we finalize our refinance arrangements with the banks because this may affect our negotiations with the banks.

Okay. And one of your presentation slides actually had mentioned about a decline in your rentals because of additional new malls from the existing malls. So can we know how much has been the decline normally per square meter? I mean, can we get some idea about how has been the decline this year?

Can you repeat the question again, decline in what?

In one of your slides, you mentioned about your new malls getting added in Qatar, leading to lower rentals for the existing malls. So how much that is getting affected on your rental income side? Can we have an idea on that?

No, it's probably negligible. I'm not sure what you're referring to because we only have a couple of malls in secondary cities in Doha, in Qatar, in Mesaieed, and in Al Khor and Dukhan. So I don't think there is any effect or impact on that side.

Your next question comes from [ Ali Mohamed from Dar Al Baraka Bank ].

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[Foreign Language]

Your next question comes from [ Mark Krambisch from TFI ].

My first question is if you could give us an update on Madinat Al Mawater. And if there's any phases more to hand over this financial year? And if so, will that mean any fair value gains? And my second question is on the investment property valuations in general of your existing portfolio, do you feel like there could be any meaningful changes in the valuations or assumptions and the range in which your properties are valued, which might occur in Q4?

Regarding your first question regarding Mawater City, Al Mawater City, we have 4 phases. We have developed Phase 1, 2, and the 3 now is ongoing and expect it to be completed by the end of this year. And regarding the Phase 4, it depends on the market situation. If there is a need to develop the Phase 4, we'll develop the Phase 4. Regarding the second question, my colleague will answer your question.