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

Hello, and welcome to Barwa Real Estate conference call. Please note that this call is being recorded. [Operator Instructions] Thank you. Now I would like to hand the call over to Bobby, you may begin.

Thank you, operator. Hi, hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Barwa Real Estate Company's fourth quarter and year-end results conference call. So on this call, from Barwa, we have Tamer Elsayed, who is the group CFO; Tariq Al Jaber, who is the Business Development Director; Abdulla Al-Kaabi, who is the Director, Development; Mohamad Daakour, who is the Budget and Planning Controller; and Abdulla Khalfan, who is the Financial Controller. So as usual, we will conduct this conference with the management first reviewing the company's results, followed by a Q&A session. I would now like to turn the call over to Tamer. Tamer, please go ahead.

Thank you, Bobby. [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 Year-Ended 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 new information, future events or otherwise. Barwa Real Estate declared the 2024 financial statements on February 10, 2025, and the investor presentation is available on Barwa Real Estate's 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 December 31, 2024, we have operating units of 14,220 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 about 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 financial year 2024. To begin with, our total operating revenues stood at QAR 1.826 billion as against QAR 1.795 billion for the financial year 2023. Our total operating profit came in at QAR 1.251 billion against QAR 1.246 billion in the financial year 2023. Our profit attributable to the equity holders of the parent for the year 2024 stood at QAR 1.236 billion as against QAR 1.229 billion in the financial year 2023. On the balance sheet side, our financial position has been improved compared to 2023 with a net debt balance of QAR 10.3 billion and net debt to equity at 0.46. We have adequate liquidity and balance sheet strength to pursue our growth agenda. 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.

Okay. This is Bobby again. Yes. We can start Q&A, please. Thank you.

[Operator Instructions] And your first question comes from the line of Wei Chow with Al Rayan Investment.

I've got three questions. Firstly, you have these impairment losses of QAR 17 million in the financial statements. Now until the first 9 months, this was actually a positive number. So what changed in the fourth quarter that the impairment losses went from QAR 131 million positive to a negative of QAR 17 million? That's my first question. My second question is on the fair value gains. Which properties were responsible for the gains recorded? If you could give us some insights as to why probably -- sorry, if you give us some insight into what was the rationale for these gains and gains on investment property and which properties? The third question is, have you received all the cash from the sale of the Lusail land bank?

Regarding the impairment losses, in the fourth quarter, we have a project which has some contracts with the government and it's under rent review. So according to that, we have taken provisions against it. And regarding the second question, for the fair value gain, we have the two factors who increased the value gain. The first one is the discount rate decreased. And the second factor is we have high occupancy rates in Al Wakrah project, Al Waseef and Argentinian neighborhood. And regarding the third question regarding the Lusail Gold cash, yes, we have received the whole amount. Thank you.

I've just got two follow-ups. Firstly, now that the cash has been received, do you plan on paying down your debt? Or you want to invest this cash in deposits, et cetera, for -- to make like finance income? That's the first question. Second is the impairment you talked about is because of some project. Could you give us some more insight? Is this like the school project? Or what project is it? And is this -- and this is the entire impairment amount or we can expect more impairments?

For the first question about using the cash, from day 1, when we announced the sale of the land, it was disclosed that all the cash will -- or all the sale price will be used to settle debt. Now we have only the last installment, which will be used to settle debt. But now we are in negotiation with the banks to see the early repayment or to pay on the maturity dates for the installments. This is now under discussion with the bank. But until then, for sure, the cash in our bank, and we will use it in our benefit to get any deposits or whatever. But this is -- ultimately, it will be used to settle debt, for sure. The second question, it's -- we are talking about one of our projects, not the school, but it's one of our project leased to corporate. Now there is a rent review. And for sure, we are assessing the decrease or the reduction will happen in the rent. But for now, let's not disclose this, which may affect our negotiation with the lessee. Thank you.

Your next question comes from the line of Seki Mutukwa with Ashmore.

Hopefully you can hear me. I was going to ask, in terms of the rental income, what is your base case for rental income growth in 2025 versus 2024? And any sort of drivers? Understandably, you may not give an exact number, but just whether we're talking single-digit growth and what is driving that, whether it's an increase in rates or it's more about occupancy and new completions. And then the second question, please, is just what kind of visibility do you have in terms of the consultancy revenue? To try and understand that whether you sort of have some equivalent of long-standing contracts rolling off so you have very good visibility, or it's more ad hoc.

Regarding the future rentals, so I will -- the way I'll respond is that the early 2025, we see the Qatar market, the indicators looks quite optimistic and there is a sense of anticipation for growth. Regarding the rental growth, our main focus, as always, that Barwa followed is to maintain a good occupancy, which you could see it in our portfolio across all the sectors. So we continue to see the market condition. It is still early times for us. But based on the indication, if you really see in the last few quarters, the market growth has stabilized and there is a sense of some positive kind of indicators coming out from the market. And we expect that this will continue. And we will achieve -- we'll be able to achieve the occupancy, which is going to be the major kind of indicator for us in order to enhance the revenue. Regarding your second question about the consultancy, it is mostly regarded with our companies that we have with like Waseef, like QPM. So these are the companies that I consider -- and a cooling plant. Yes, we have a cooling plant. So these are the companies that -- but the income is going to be same. Like I don't see any big change in the numbers going forward on it. Thank you.

Your next question comes from the line of Wei Chow with Al Rayan Investment.

Just another question on the occupancy. Could you tell us what is the occupancy for Salwa project and Al Wakrah project, Argentine and Madinatna?

So the Madinatna, the current occupancy is around -- between 60% to 63%. Argentina labor camp is around 61% to 62%. And the one, the Mukaynis, I believe you're referring to, it was around 30%, 31%. Thank you.

Your next question comes from the line of Seki Mutukwa with Ashmore.

Sorry, back again. Just on Slide 21, I believe, of your deck, there is a drop in EBITDA between 2024 and 2023. Could you just remind me of what drove perhaps an abnormally high EBITDA in '23 to result in that?

The decrease you are talking about, it's only the finance cost impact which is the -- before the finance cost impact, yes. So -- and we have also the -- last year we had a gain on sale, which is Lusail Golf. So this number already removed from our EBITDA this year. This is the main. But if you are talking about after interest, the enhancement happened because of the finance cost -- savings and finance costs.

Okay. And can you remind me how big was that gain last year, sorry, from the Lusail Golf?

Yes. It was QAR 490 million.

[Operator Instructions] There are no further questions. I will now turn the call back over to Bobby for any remarks.

Okay. Thank you, operator. If there are no further questions, we can end the call for today. I want to thank Tamer and the rest of the team for taking the time to answer our questions, and we will pick this up again next quarter. Thanks, everyone.

Thank you. Good day. Thank you.

That concludes today's conference call. Thank you all for joining. You may now disconnect.