Estithmar Holding Q.P.S.C. (IGRD) Earnings Call Transcript & Summary

Good afternoon, everyone. This is Zeina Fares from EFG Hermes Research, and I'd like to welcome you all to Estithmar Holdings First Quarter 2025 Results Conference Call. With us on the line today is Mr. Juan Leon, Group CEO; Mr. Walid Shalan, Group CFO; and Mr. Marwan Dimas, Group Chief Sales and Marketing Officer. Without further delay, I'd like to hand over the call to management.

Hello, everyone. First of all, apologies for the late login because all of us suddenly have the same technical problems. with the password. So apologies for that. And as you know, we're always committed with time. And unfortunately, this is a technical problem that we cannot control, so we apologize to that. Starting from what's happening in this quarter, I would like to start the presentation. First of all, the same, we are into 4 clusters, same clusters, we are into Apex healthcare, services, ventures and contracting and industries. We have a very good quarter for us this quarter. I think it's one of the best quarters ever from the [ reverse ] acquisition happened. So we have the same Board members. Recently, Mr. Juan Leon, he has joined us as Group CEO. He is well educated in Harvard and other French universities, and he's working in IT, construction and healthcare before. So he has a proper, let's call, experience related to our company. Unfortunately, he is supposed to join, but he still have a technical problem. I'm the first one who solved it. So once he will be joining, for sure, actually, I will take a pause and I introduce the CEO for you [ gentlemen ]. Same geographical platform, we are working on 8 countries, which is Qatar and Southern countries. Nothing new in this quarter from countries-wise, we are working same in Iraq, KSA, Jordan, Libya, Algeria, Kazakhstan and Qatar for multi clusters work. And from ESG, as you know, we are enhancing our ESG. We are one of the most rated ESG companies actually in the country so far. From the financial point of view, we have 64% hike in the revenue compared with the quarter 1 2024, majorly due to new contracts signed for healthcare and the acceleration of the projects in contracting in KSA. Alhamdulillah, we start delivering a lot of the projects in KSA for PIF like the airport for Red Sea and the Yacht Club for AMALA. And in Qatar as well, we delivered a lot of the projects recently. So that's why the revenue increased significantly. From a gross profit, it increased 113% to QAR 416 million, but this increase is due to the proportionate cost of healthcare, which means healthcare, majority of the cost classified as an indirect cost. That's why you will find the gross profit hike very significantly. However, the EBITDA, it will be -- normalized the significant growth. We reached QAR 273 million EBITDA and QAR 170 million net profit, majorly 50% to 51% increase compared with last quarter. I think this is one of the highest growth percentage in the market. Compared with the market, I think 50%, I think it is the biggest or the highest growth in the market this year -- this quarter, sorry. In balance sheet, we are growing our assets because of Rixos Baghdad and Rosewood Maldives. Our assets, even the short-term assets, it is increasing as well because of the billing in contracting and industries and the new contracts in healthcare. Our short-term debt is decreasing significantly because we settle a lot of AP balances and bank short-term debt. That's why our debt-to-equity decreased. And our current ratio increased from 1.22 to 1.33, which is more than the market benchmark. From a growth strategy, we keep focusing in the same strategy to have approximately 4 multiples in EBITDA between 2023 and 2027 and more balanced mix between the clusters within the time. So we are -- if you notice, the healthcare 2023 was 9%, it becomes 34% -- is expected in 2027 to be 34%. Ventures expected to be 32%. It wasn't -- existed at only 5% in 2023. So we are more balanced multiple by 4 EBITDA, thus we are actually multiple by 4 value as well. From operational highlights in health care, we have like 100% increase in visiting -- international visiting physicians. We have increased in patient satisfaction and community engagement. And in KMC, we ramped up to 15,000 patients in 3 months. We just started -- this is not yet matured, it's under maturity. We opened, as you know, a new hospital as an O&M operating model in Misrata, in Libya. It's 120-bed hospital for 5 years O&M contract. All the risks are mitigated. The contract is in U.S. dollar. The LC is opened by the government, and everything is properly managed. From Haqa, as you know, Haqa is the Algerian, Qatari, German hospital. We already started the construction. The expected time for completion is by end of 2026. It's a 300-bed hospital with an offtake agreement of $2.1 billion for 10 years in Algeria. And services, we complete our services for services, services in Iraq and Libya and Jordan, in the airport of Jordan. And we took some [ NAS ] ground in Saudi Arabia as well. In ventures, the continuous growth of Al Maha, Winter Wonderland and -- even Al Maha restaurants, we had Berenjak, Park Chinois and Bar Du Port. Now it will -- Bar Du Port will open this Saturday. In the same -- in hotel of Maysan and Katara Hills, we continue the derisked operating model by renting it for an operator with a minimum floor of lease. For Rixos Baghdad, we will start the off-plan sales in May 2025, which is supposed to be in some days because we reached [ 125% ] percentage of completion. So as we can [indiscernible] start the off-plan sales. The project is supposed to start by end of 2026. It's 302 key of hotel, 159 key of residential and 9 villas. We are expecting $251 million sales of the apartments between -- by Q1 2026, supposed to be completed fully. We are expecting 60% in 2025 and 40% in 2026. Finally is contracting and industries. As what I said, we handed over a lot of projects like airport of Red Sea, Yacht Club of Sindala and other projects. And then that's it from my side.

Thank uou so much for the presentation. now we will open up the floor for questions. [Operator Instructions] We have our first question from Ahmed Farooq.

I can't hear, Zeina.

Ahmed, please go ahead. Okay, we'll circle back. we have a question from Ashish. Ashish, we can't hear you.

Gentlemen, can you please send you question by typing it? Because I feel that there is problem in the link maybe then.

Okay, Ahmed and Ashish, can you please type you question in the Q&A box? We have a question from [ Sid ].

Hello. Did you hear my questions?

Yes, finally, we can actually hear you.

I'm sorry for that. I'm impressed by your results in this first quarter. And as you mentioned in your presentation, you attribute most of it to the achievement and the growth in healthcare sector. I actually wonder, how you guys achieved 100% increase in number of visits, given the tough competition in healthcare sector in Qatar? Can you shed some light on that?

Sure, sure. Is this is the only question or you actually have more question, please?

This is only question for now.

Okay. So [ Ahmed ], as you know, we signed a contract with [ Hamad ] HMC and [ MOPH ] with -- transferred the queue from [ Hamad ] Healthcare to TVH, The View Hospital. That's why it is significantly increased by 100%. And by the way, the 100%, what we are seeing is the international doctors visits, as per the presentation. However, we increased it from 52% occupancy to -- or utility or occupancy to 75% due to these 2 contracts signed early this year, it will be giving us approximately revenue of 60 million per month. It's on offtake basis, by the way.

Okay. That's good. That's great. And when you guys [ got ] the revenue from contracts from clients, is that based on percentage of completion or what approach you guys...

Which one, I'm sorry, basically for healthcare or for contracting?

For contracting.

For contracting, IFRS 15. It's a pure [ import ] methodology of percentage of completion.

Percentage of completion. And this is 20%, I would say so?

What's your project, 20%? Because it's a project-by-project percentage of completion. Some of the projects reach very high percentage of completion. Some of them we just took so it will be [ 5 bit ] low because we just get granted the project.

Yes. The reason I'm asking the question is that if you guys [ popped ] the revenues at a low percentage from completion or high percentage of completion, this would mean that the future revenue from the same projects will be [indiscernible]. Is that true?

Regardless, so I'll tell you actually how we look to it. We have a lot of projects in our pool, correct? And we are expecting additional QAR 1.2 billion projects in the next month. So all the projects, the percentage of completion is high. However, the revenue, let's call it pool, it will be like contribution from the older projects, which is high POC, and the new projects. So whatever project will finish, there's the new projects coming. So we are the preferred contractor for PIH as a specialized contractor, and we always have a project from them. And currently, we are finalizing QAR 1.2 billion additional next month. So actually you will find it always growing compared with the previous years.

It is great. And just I'll take you back to healthcare structure. At what cost you guys increasing the revenue from healthcare sector? I mean, by attracting a new visitor, if that comes at higher cost or lower cost? Meaning, is that increasing your profit margin...

The margin is competitive within the market. It is between -- as per the market, let's call it, the cash profit percentage is around 28%. So the market rate is 25%. We are doing within the market range. However, these 2 new projects are offtake. So if you look to the healthcare from risk point of view, if you may, you will find that only KMC, Korean Medical Center, is the free market. TVH have an offtake now. Iraq have an offtake, [ EWS ] have an offtake, Libya have an offtake, and Algeria have an offtake. So it is -- we can have better margins compared with the market. However, when we need to compare with the market, which is TVH and KMC, we are doing the same benchmark. But in general, we are higher because we have offtake agreements.

Okay. Of course, of course. So you're saying that most of the growth in the healthcare sector will be coming from international market, not Qatar market?

No. I'm saying that this growth of this month of this quarter came from two reasons, from the HMC contract of TVH, Qatar market and the new projects from outside, which is Iraq 2 projects and Libya 1 project. So mix.

So they start contributing to the...

Yes.

We have a question coming in through the Q&A box from [indiscernible] from Al Rayan Investment. Could you please give us some guidance for revenue and net profit for the full year of 2025 and talk about contract loss in the first quarter?

Okay. So let's start one by one. So we are expecting 869 million net profit by end of the year compared with 422 million net profit of last year. So we are expecting this year 106% growth. If we need to think about it what rest we have for it, I can tell you this is the most secured years maybe ever in Estithmar because all of this growth is based on signed contracts and offtake agreements in healthcare and signed contracts with services and contracting. And even the new contract that I just spoke to Mr. Ahmed about it, which is 1.2 billion, it's in the final stage of signature. So it is fully derisked. From loss-making contracts, we don't have loss-making contracts. We have currently unmatured investments, which is KMC. KMC is doing a loss-making. But why they are doing a loss-making? Because it just started in October 2024. So it's not yet fully mature. So there is no -- we don't take actually contracting -- contracts with a loss, never. Because as you know, it's a very cyclical market. So if we take a loss now, we cannot compensate it within 2 or 3 projects ahead. So we'll never take it. And we have proper team to make a value engineering and control the cost at completion for all the projects.

Okay. Thank you. We have a question coming in from Ashish. The hospital new contracts that you mentioned, can you please confirm, firstly, if it pertains to outside of Qatar, if it started in 1Q '25, the duration of the contracts? And the growth in the hospital segment, will it continue at the same run rate for the full year of 2025?

Yes, very good question, Ashish, by the way. So starting with the first one -- excuse me, sorry I forgot. So starting for the first one, the first question from that, how much is the growth of -- when it was the growth of those healthcare projects? Let's start for the first one. And let's start from Iraq. Iraq started in Q4 2024, okay? And the terms for it is 2 plus 1, so 3 years. Libya started on 17th February 2025. The period is 5 years. The new contract inside Qatar, it started just in February 2025 and the duration is 1 year. So is the growth will continue by end of 2025? The answer is yes, but it will be the same steep Y-o-Y, year-on-year growth from '25 to '26, of course, no. Because 2024, then we have a lot of projects in 2025. So we have a steep growth. Then in 2026, it will be additional growth, but it will not be the same steep percent.

We have another question from Mabel. Congrats on the good quarterly numbers. The pace of revenue and profit growth during the quarter is slightly slower than guidance. Is there a change in outlook? Or is this seasonality in the normal course of operations?

Again, please repeat. Slower.

Sure. The pace of revenue and profit growth during this quarter is slightly slower than the guidance. Is there a change...

What do you mean by the guidance, I don't...

I think she's talking about the guidance for 2025.

No, we are -- the pace is faster.

The pace is faster. Okay. And her second question is, what is the updated backlog in the contracting sector?

If you mean actually backlog without the new project, we have approximately QAR 3.8 billion. We are not a general contractor, we are a specialized contractor. QAR 3.8 billion considered huge. And we have more QAR 1.2 billion and QAR 400 million. So actually, the total backlog plus the new expected in the next 2 months is SAR 5.4 billion because majority of these are in Saudi. So its sent to QAR. So QAR 5.4 [ billion ].

Okay. We have a question from [ Fib ]. What is the breakdown of revenue and profit within the healthcare sector? And what is the expectation for the rest of the year?

Okay. So let's start where are we today from the distribution. As what we said -- by the way, I can answer the revenue, what revenue is not the catalyst for. Let's speak about profitability, if you don't mind, for the [indiscernible]. The profitability, let's start from KMC, is a loss-making because it's not yet matured. For TVH, it's having QAR 123 million profit -- net profit, I'm saying. For Iraq, both of them as what I said, it has approximately QAR 59 million profit. Libya, it is approximately QAR 20 million because it just started. MMC, as always, it's approximately QAR 80 million profit. So if you think about it, the distribution for sure, Qatar will be more because Algerian hospital not yet started in Algeria, which will be the biggest chunk. But from stability, all of them are stabilized, all of them are appropriately managed. However, KMC is not yet mature. When you look from it by end of the year, we are expecting that the contribution of healthcare will be around 35% of the 869. So we are expecting about 1/3 of QAR 300 million plus. So this is a growth compared with last year with approximately 300%. So I think if we need to look to net profit, I'm looking to revenue because revenue is not expressing anything because KMC has a revenue, but it's loss making.

[ Fib ] has a follow-up question. Can you disaggregate CapEx requirements between brownfield and greenfield investments?

We don't have any new investment plans in 2025. We have the same investment that we are doing now. We have Rixos Baghdad. Rixos Baghdad is $429 million. Currently, we are at 25% percentage of completion. Second one, Rosewood, we are expecting $674 million. We are currently at 19% percentage of completion. Algeria, we are expecting $287 million. We have 60% share of it because we have a partner of 40%. Where are we now? We are only 2 percentage completed because we just started. So this is no more brownfield, nothing. We are not intending to have additional investments in 2025 unless everything is stabilized.

Perfect. We have a question from [ Shamir ]. Can you update us on the deal of issuance of shares for the acquisition of The View hospital? Is it [indiscernible] on hold?

It's not on hold. It's in discussion with the [ QFM ].

Okay. We have a question from [indiscernible].

I would like to ask how you are facing the problems issue and contracting section, especially we always -- we all know that the market is facing a hard time right now. So I will be -- I will appreciate if you give me some feeds about how it works.

So Amar, as you know, Qatar World Cup, the contracting sector and Qatar have a recession for everyone. So what we did that we were actually one of the first contractors in Qatari market going to Saudi market. So we start in Saudi market in 2022. And we took direct awards from PIF, a lot of projects because we are -- in Saudi market, they don't have sufficient, let's call it, specialized contractors. And the operating model in Saudi is different than the operating model of Qatar. The operating model of Qatar that the developer gives the contractor and the contractor gives to the subcontractor. In Saudi, the developer gives the contractor and the subcontractor okay? So that's why we are connected with the PIF. This is one benefit. Second benefit, we have a lot of development. As I said, Rixos Baghdad, Rosewood Maldives, we have [indiscernible] in Algeria. So we are following the footprint of our development clusters. So we have built a proper ecosystem to go globally with our development. At the same time, we were the first people that started as a Qatari company in the Saudi market when the -- I believe that some of you are coming from contracting background. So we started when the margin was very high. Now the competition, it's become more and the margin become lower. But we started when the margin was huge.

Okay. But for Baghdad, sir, is the political issues causing you any delays or problems in that market?

I'll tell you actually our contract, how it built in our -- with government, NIC, National Investment Commission, of Baghdad. First of all, we have secured repatriation, number one, by the Central Bank, signed between us and Central Bank. Our availability of U.S. dollar of dividend repatriation is properly signed from day 1. Our contractors are coming from Qatar. So we don't depend on the, let's call it...

Local...

I think you are coming from contract, you understand the problem with Iraqi [indiscernible]. So based on that, we mitigate our operational risk and totally, we mitigate our financial risk in both in Rixos Baghdad and anything in Bagdad related to us from day 1.

Okay. Thank you for sharing this, and my greeting to all of you and especially Mr. Marwan Dimas. And it was nice hearing you and taking this feedback.

So I think we have a follow-up question from Ahmed [ Faroor ].

Hello?

Yes, we can hear you.

Yes, sorry. Ahmed, I'm sorry to ask that question. But if you can give me some ideas about the [ cash ] patient or the categories of patients that you guys receive? I've seen your hospital, and I've seen the new rating 5-star hospital. So I would assume you guys are more specialized in category A patients in mostly [ categories ], am I right?

We don't look to it. Of course, it's the luxury hospital in Qatar, but we don't look to it actually from luxurious point of view, more than we look to it from service quality. We are -- we believe that we are the highest service quality as well in Qatar of our hospitals. It's actually what we believe. And this is our mandate eventually. So your question actually, Ahmed, is from what perspective, from results of this...

The type of patients, like what kind of...

Type of patients is everywhere because eventually, they are coming through the insurance deals. I have deals with all insurance companies. So all employees can come within the coverage in the insurance. I'm not depending on the cash patients to -- even if I make it very luxury, I'm not targeting the luxury people because eventually, it will never work with the $2.06 billion -- QAR 2 billion investment. So we are dealing with all of the market with all of the, let's call it, financial background because we are -- majority of them, they are coming from insurance companies.

If I may ask, how much is coming from insurance compared to cash patients?

80-20.

80 from insurance, 20 cash. And that is also applicable to the referral from Hamad Hospital or no?

Hamad Hospital is an offtake agreement. So it's nothing to do -- they will not pay. This agreement is between us and Hamed. So Hamad will pay for us as per the contract. So we will not take money from them.

Money from who then?

From the [ Hamad ] to be, that is from patients.

I'll take what Hamad [indiscernible].

Yes, its an offtake agreement.

I'm asking the offtake agreement is to refer the Qatari patients or other than Qataris?

Both. We are receiving from both Qatari and non-Qatari.

Yes. But you are a little bit right, Ahmed. The surge in number of Qataris has increased a bit when Hamad started -- when the Hamad deal started. But it's also well diversified in specialties. So we have our specialties at 6.5% to 5%, all of them, which is a good balancing between our specialty. Of course, general surgery is slightly higher. And from a nationality standpoint, we have most of the nationalities. From a category standpoint, we have 40% -- we have 34% from corporate and 44% from insurance and then self-pay and then VIP customers and then insurance.

Okay. You also said that the occupancy rate has dramatically increased in your hospital. I would -- just correct me if I'm wrong. You said it's 75%. Is that...

Hospitals do not work in occupancy rate, Ahmed. They work in utilization of services. And...

The inpatient category, the inpatient. I mean the outpatient -- you have patients which you might convert them to inpatient if it's required. So when you say 75%, that includes inpatient?

Yes, this mix -- the one that 75% we said is a mixed one, the mix between inpatient and outpatient. This is the blended percentage. It's not only inpatient.

So how much is your conversion ratio from outpatient to inpatient?

4% in line with the industry.

[Operator Instructions] It seems we have no further questions. So I'll hand back the call to management for any closing remarks.

So thank you, everyone, for always the continuous support and belief in Estithmar. We would like to thank you for your trust. And as you start seeing, the future is becoming more bright, more and more bright starting from this quarter. And we promised the investors with significant growth rates that rarely seen in the market. Thank you for everybody.

Thank you. Thank you to management for the presentation. Thank you for everyone who joined today. This concludes the call. You may now disconnect.