Kuwait Projects Company Holding K.S.C.P. (KPROJ) Earnings Call Transcript & Summary

Hello and welcome to the KIPCO Q4 2019 Earnings Call. [Operator Instructions] I would now like to hand over to Ahmed Al [indiscernible] to begin. Ahmed, please go ahead.

Thank you. Good afternoon, everyone. This is [ Ahmed Al Chevy from UGMS ]. I'd like to welcome you all to KIPCO's Full Year 2019 Results Conference Call. It's a pleasure to have with us on the call today from KIPCO's management, Mr. Pinak Maitra, new CFO; Mr. Anuj Rohtagi, Vice President, Group Financial Control; and Mr. Moustapha Chami, Vice President, Finance and Account Support. I'd like to hand over the call now to Mr. Pinak Maitra. Thank you.

Thank you, Ahmed. Good afternoon, everyone. We are glad that you all have joined us for the fourth quarter or full year 2019 earnings call. We hope that you and your family are healthy, and you are taking all necessary precautions to stay safe during these testing times. Please note that the presentation we are using is also available on our website along with full year financial statement. As we have done before, we draw your attention to Page 2 of the presentation which reads out a brief disclaimer. Some of the statements that we will be making today and information available in the presentations are forward-looking. Such statements are based on KIPCO's current expectations, predictions and estimates. They are not guarantees of future performance, achievement or results. I will now hand over to Mr. Moustapha to provide you with KIPCO's financial performance update on Page 4 of the presentation.

Thank you, Mr. Pinak. We have reported a net profit of $99 million for full year 2019. This is an increase of 6% compared to last year. This translates into an EPS of $0.101 per share or $0.033 per share, 33% lower than last year's EPS of [ $0.1484 ] per share or $0.049 per share. This decrease was a result of increase in outstanding shares for KIPCO for successful completion of rights issue during the quarter and a onetime increase in interest and other payments on perpetual capital securities issued by a group bank compared to 2018. In the fourth quarter, the 3 months ended December 31, 2019, KIPCO reported net profit of $24 million compared to $26 million reported in the same period of 2018. The group generated revenue of $2.528 billion during 2019, which is marginally below the revenue generated during 2018, almost 1% lower. This is mainly attributable to revision in reporting of the financial statement's closing process at Burgan Bank by virtue of which, they have reported only 11 months results of its subsidiaries instead of 12 months. The result of reduction in interest income versus last year has been partially compensated by increase in revenue from hospitality and real estate sector, along with higher revenue from educational and manufacturing sectors and the share of results of associates, mainly in the industrial sector. Now I will hand over the presentation to Mr. Anuj.

Thank you, Moustapha. The next slide details performance of Burgan Bank Group for 2019. Since Burgan Bank had its Investor Call on 11th March 2020, we will be focusing on some of the key highlights in our presentation. As mentioned by Moustapha, Burgan Bank's results include a 1-month shorter period versus 2018 in terms of recording net income of its subsidiaries. This is a result of change in financial statement closing process at Burgan Bank, whereby they have reported only 11 months of [indiscernible] subsidiaries instead of 12 months in the year 2018. As such, the number should be read within this context when you compare them with same period of 2018. Loan book remained stable at the end of 2019 versus 2018. During 2019, the bank has been targeting growth in Kuwait, while following a cautious approach in its subsidiaries due to prevailing economic and political conditions there. As a result, loan book growth in Kuwait was USD 726 million, that is 7.7%, which was then offset by loan book in Turkey by 11.9%. That is USD 379 million, and Algeria by 9.3%, that is USD 129 million compared to last year. Deposits grew by 5.9% in 2019 versus 2018, almost entirely coming from Kuwait operations, where around USD 1.5 billion deposits were added since December 2018, a 19% growth. The offsetting factor was reduction in deposits in Algeria by contracts USD [ 53 ] million. Operating income in 2019 was USD 819 million, lower by USD [ 56 ] million compared to 2018. Of this decline, approximately USD 37 million is due to the 1-month difference in reporting. Reported net interest margin was 2.4%. Adjusted for 1 month difference, net interest margin would have been 2.6%, in line with last year. Cost of credit improved from 1.4% in 2018 to 1.1% in 2019, driven by both Kuwait and subsidiaries improvement for this [indiscernible] year. As a result of the above mentioned movement, bank report group posted a net income of USD 229 million in 2019 period versus USD 272 million in 2018 period, an increase of 2.5%. NPA ratio reduced to 2.1% ended 2019 as against 2.3% in 2018. Additionally, we continued to have prudent provisioning levels, where around 95% of provisions are in general category. Because of this, coverage ratio was 281% after including these provisions, along with the value of collateral. The bank reported a CET1 ratio of 11.5% and COGS of 16.8% as at December 31, 2019. On Page 6, we have provided details on performance of the regional operations of Burgan Bank. The regional loan book declined due to currency devaluation and our cautious growth strategy in these markets. Overall, share of our regional loan book and customer deposit was 29% of total Burgan Bank loan book and customer deposits. Although results on headline basis are lower in the regional operations compared to 2018 due to the time difference in reporting that we mentioned earlier, however, when we look at important performance indicators, that is net interest margin, cost to income ratio for the majority of our regional operations, at the bottom half of the slide, there's an improvement despite the challenging macroeconomic environment. With respect to our next core entity, that is Gulf Insurance Group, can you please move to Page 7? For the year ended 31st December, 2019, GIG has posted strong results. Gross premium return was at USD 1.296 billion, registering a healthy growth of 17% over USD [ 1.038 ] billion reported last year. The increase is majorly driven by the property and motor businesses. On the bottom left chart, you can see that the combined ratio stands at 95%, which is a 3% improvement over 2018. This improvement is majorly driven by lower claims reported in life, property and Marine and aviation segments, and a strict control in expense ratio across the segment. We can also see on the top chart, net investment income for 2019 has increased by 7% to USD 35 million from USD 32 million last year. GIG reported a net profit of USD 44 million for the year 2019, a 12% improvement, over a profit of USD 39 million in 2018. Additionally, the quality of these earnings has also improved, driven by prudent underwriting and investment approach of the company. On the operational side, the focus remains on digitization of customer journey to provide a seamless user experience while improving upon the cost structure of the company. We believe that in doing this, we will improve customer retention and enhance our cross-selling proposition. I will now hand over to Mr. Moustapha.

Thank you, Anuj. We can move on to Slide 8, which has United Gulf Holding Company. You can see on the top left chart, revenue for 2019 was $224 million, represents a growth of 8% compared to 2018. This is largely on account of consolidation of global investment house global revenue, which was acquired and consolidated from September 2018 onwards, along with increasing share of profit from associates by $10 million. On the top right chart, fee and commercial income grew by 4% during 2019 as compared to 2018. This growth is mainly due to higher income from Camco as a result of consolidation of Global's results in 2019. On bottom left chart, you can see net profit of USD 10 million, which is lower than 2018 net profit, which was at $19 million. The decrease in profit was mainly due to higher interest expense on account of bond issuance for Global's acquisition and increase in G&A expenses related to Global consolidation. During Q4 2019, Camco announced successful completion of its merger with Global. Following which, it also revealed their new identity post-merger [ Kimco ] impact. We expect that synergies -- these synergies will recover this cost of funding the acquisition going forward. UGH is meanwhile evaluating to launch some of its products on a digital platform. We will keep you updated on the development in due course. UGB's total consolidated capital adequacy ratio stood at 19.7% as of December 2019 against the minimum capital adequacy requirement threshold of 12.5%. Moving on to real estate on Page 9. The top left chart shows $378 million of revenue for the year ended 31st December 2019, representing a growth of 13% versus same period of last year. This was a result of growth in contracting and service revenues by 26%. Growth in contracting and services revenue came primarily from URC's contracting arm, UDC. The growth in gross rental income was mainly from. [ Abde Limo ] Jordan, where leasing activities are progressing well, with occupancy standing at around 76% compared to 73% by December 2018. Operating profit grew by 24%, driven by higher revenues and lower property operating costs. Property operating costs have reduced as expense reported in 2018, included one-off personnel expenses from Egypt operations. On the bottom left chart, you will see net loss stood at $24 million during the year ended 31 December 2018, from a loss of $30 million in the same period last year. The reduction of net loss is supported by increase in revenue, as I mentioned earlier, and reduction in valuation loss on investment properties from last year. I will now hand over to Mr. Pinak to cover the remaining pages.

Thank you, Moustapha. Let us now move to Page 11, which is about OSN. During 2019 and quarter 1 2020, OSN has grown stronger, better and bigger, in terms of content and ability to distribute across several countries by virtue of the type of content right it now focuses. The rebranded OSN Streaming [indiscernible] platform, showing Disney+ and other major studio content like Disney, HBO, Universal, National Geography, has received positive response from customers with thousands of customers joining the platform each week. Since the relaunch, OSN has seen a 1,700% increase in downloads of its mobile apps, with no signs of slowing down. Viewership on OSN Streaming is up by 900% since 1st March 2020. This content consumption trend was visible across all genres, with 22% -- 22x the increase in viewing seen in family programming, categories such as kids, animation and adventure. Amidst COVID-19, it is not just OSN Streaming servicing -- streaming receiving more screen time. Total TV consumption across OSN MENA channels also increased by 35%, with new channels -- news channels, specifically seeing a 250% increase in view time. What we have today, in addition to the great content lineup, is stronger operational setup, strengthened management team, leaner operations with reduced cost base and improved technology platform. All this positions us to capture the market opportunity and meet the customer needs within our region. We would also like to mention that during the year 2019 and quarter 1 2020, our ownership in OSN has grown from 60.5% to 87.6%. Moving on to Slide 14. United Industries reported USD 23 million net profit during 2019, which is higher by 35% as compared to 2018. The growth can be attributed to [indiscernible] in its share of income from Kiran Petrochemical Industries Company. Jordan Kuwait Bank has also performed steadily with a net increase in margin of 3.6% during 2019, in line with its performance in 2019. Net profit for the period was USD 42 million, which was 29% lower than the profit last year. Our [indiscernible] for 2018 included one-offs received during the year. If we compare it on a like-for-like basis, profitability remained similar across the 2 periods. These were our highlights for our 2019 [indiscernible]. As we all are aware, 2020 had started on a difficult note globally, and the recent coronavirus pandemic is impacting the whole world. Even though Kuwait government is taking best possible measures to control the spread, exact impact of this event is difficult to predict. Our group companies are in the process to quantify the range of implications, and hopefully, we will have some color in our next earnings call. We hope all of you and your families stay safe during this period. We now hand over to the moderator, Megan, to invite our listeners and to raise any questions they may have.

[Operator Instructions] Our first question today comes from Simran Sandhu of Standard Chartered Bank.

I wanted to ask, please, on the credit ratings. The increase in LTV has clearly been a key driver of the S&P downgrade and they still have the rating on negative outlook as does Moody's. Could you share with us what remedial action is being planned to bring the LTV down, particularly in the event that the OSN sale doesn't materialize? Would you look to sell, for example, any other assets in the portfolio? And/or do you think the shareholder would be willing to make a capital injection to provide relief on the LTV?

Thank you, [ Simran ]. As you know, there is a significant dependency on the evolving COVID-19 situation. And going by the current development, we believe that there should be some more clarity around this and/or [indiscernible] in quarter 4 2020. Now we typically engage very closely with these rating agencies. There are [indiscernible] [ 2 ] strong elements as far as the credit profile of KIPCO is there, such as strong liquidity position. There's no debt maturing for the next 3 years after we pay down the July 2021 that has already been prefunded. As you rightly pointed out, there is a strong shareholder support. We have -- our shareholders have demonstrated that in the past, and there's no reason to believe that, that support is -- has changed. We are strong believers that, that exists. In terms of our operating performance, you have seen in the presentation, Burgan Bank and Gulf Insurance Group particularly have done very well. And there is a good operational turnaround story [indiscernible] as well. So all in all, as management team, we see these are strong positives as far as the underlying business of the KIPCO Group is concerned. Now if you see the market [indiscernible] factors, these were driven by COVID-19. Our LTV ratio increased over the threshold, that's [indiscernible] the rating agencies and coupled with the view of -- basically, the analyst looking at the KIPCO profile with regards to OSN. So that has resulted in the rating action. We respect their view. At the same time, this -- as I already mentioned, the operations [indiscernible] is visible and has been communicated very clearly. We believe once the COVID-19 situation improves and markets are back to normalcy, and that Kuwait, hopefully, will be the part of MSCI somewhere in quarter 4. It would be positive for our LTV ratio. Moreover, as I mentioned before, the shareholders have continuously demonstrated their support. With regard to standing options for OSN, that process continues. We have received interest. It's a very closely held process. So as and when the development happens on that, that is -- we are able to share with you, we'll do so.

Our next question today comes from [ Vik Rendes ] of NBK Capital.

Yes. My question is on the operations of Burgan Bank. We understand that certain proportions -- a certain proportion of loans in Kuwait are under deferment due to the COVID-19 situation. If possible, can you give us an update on what proportion of the loan book is under deferment? That's the first question. The second question is, there was also some confusion about the interest accrual on these deferred loans. We got clarity from other -- from banks and other regions where loans are under deferral. And they clarify to us is that interest can be accrued during the 3 or 6 months of the loan deferral. Has there been any communication from the Central Bank on this? And are you allowed to accrue interest when the loan is under deferment?

Thank you, and thank you for the question. The general position in Kuwait has been that, given the fluidity of the situation, primarily driven by COVID-19, the regulators, Ministry of Commerce, Central Bank and the Capital Market Authority has chosen to basically defer the first quarter results into the second quarter result. So there is a preference that in a fluid situation, there is no point in giving information that is evolving. So that's the broader point of the Kuwaiti regulators related to the other regulators. The -- on the question of the deferment, clearly, the regulators have given guidance to the bank. The banks have those guidance. And it is not only the bank, which takes the position, it's clearly the customer who have a say in this matter. And so it's a question of this interaction, which is quite interesting that we watch, that although there is a possibility from a regulator point of view to support the deferment of the interest for a certain period. Customers are coming back and saying they prefer not to do that. So that is a customer-by-customer story. And what we prefer to do is once Burgan Bank comes out with its view, and it will take some more time, then we'll be able to guide you.

Okay. My last question is, there were also some initiative taken by the government and the Central Bank, in terms of asking banks to provide soft loans, basically to support payment of salaries and rental expenses. Have you seen any uptick in the loan book due to the implementation of the soft loans scheme?

Clearly, as a policy position, you're right that the banks are looking at every request that is being made by customers. It is the job of Burgan Bank and all the banks in Kuwait to be supportive given the unusual nature of COVID-19. The banks continue to do that, but customers are also paying off. So it's a situation where there is no active loan growth. There is a natural paydown of the loan book. And so I don't know whether we can take a position whether there will be an uptick in the loan book or not. Again, that will -- as time passes, we'll have a better picture on that one.

Our next question today comes from Mark Agaiby of BlueBay Asset Management.

Can I just ask quickly on the dividend flow for 2019 or paid in the first half of 2020? Could you let us know what the flow was and how it was split across subsidiaries or portfolio of companies?

Thanks, Mark. So for the year 2020 cash flow received, we have around $42 million from Burgan Bank, $10 million from Gulf Insurance Group so that makes around $52 million. The overall inflow for around [ $90 ] million. So the balance of around $40 million comes from entities such as JKB, UIC, [ KSCC ] and other entities.

Our next question today comes from [ Alex Ayek ] of Waha.

Just want to have a better feel about the liquidity and the LTV. And actually, you used to have some slides, which were very helpful in your presentation somehow. They're not there anymore. So maybe if you can just -- so a question on liquidity, how much cash roughly you have on balance sheet? And what are the next amortization in the next 5 years? And then I can follow-up with a question on the LTV.

Thank you. Anuj is going to give you the details. But what we are trying to do is to get the focus back to the earnings and the KIPCO story. We clearly feel that post the July payment, our next debt will be due in 2023. And so consciously, that is the reason why we wanted the attention back to the equity story, given the MSCI inclusion that may come in November. But Anuj, please go ahead.

Yes. So our last reported LTV was around 38% [ 31 ] March 2020. Our liquidity position is around $1 billion, slightly over $1 billion. Obviously, these numbers are draft because the financials have not yet been reviewed. So that is the data. And in terms -- as Pinak already covered, I think, the policy position. What we do is we always look at the next 12 months maturities. As of now, we are more than covered for the next maturity in July. So thereafter, we have no maturity for the next 3 years.

Sir, just to confirm -- go ahead sir.

Go ahead. No, please.

Basically, I just want to clarify on the liquidity. So you say you have roughly $1 billion at the holdco. You have $500 million bond coming due in July. And I think you have around $850 million amortizations coming in 2023. Is that correct?

That is correct.

So you don't have enough cash to cover the 2023 repayments as of now. Is that something you're thinking to fill the gap for? Or there is like $300 million roughly missing, correct?

So the history [indiscernible] that we prefund our rollovers, and I think that, that has been the pattern since 2007, I think, when we came to the bond market. And if you look at it, one is in March, one is at the end of the year. We do not feel that we should be thinking about what you would describe as having 100% cash coverage. We believe that during this period, there will be significant -- and continued increase, and that's a little bit of a safe statement given what COVID is. But from a purely approach point of view, what KIPCO has directed its portfolio companies to say, manage COVID well and come out of COVID in a stronger way. So if you look at the 3-year period, 2023, which we are talking in 2020, in the middle of pandemic once in 100 years, clearly, we would view that as -- has been somewhat of a narrow view of thinking about it. We feel that the operations will perform. KIPCO will come back to generating cash flow at the holding company level. And therefore, there will be sufficient cap apart from the historical practice that given the quality of our assets, international investors are quite -- have been and will continue to be supportive of buying the KIPCO bond when it's issued before the last next funding date.

Okay. Got it. But there is -- is there a plan to come to the bond market to have more cash on balance sheet in 2020? Or no, you have significant liquidity, you don't really need that, you don't need to fully cover the 2023?

I think it's paying interest. We already have paid bondholders, and we are lucky that -- and we are quite fortunate that we did the rollover in October. So today, the bond market effectively is closed. So we will follow that policy a few months before the maturity, but not in 2020 for sure. We'll continue to be opportunistic, if negative, if come to a point, and there is a very strong appetite, the October bond was driven by investor demand. So we always will respect the investor. But in our plans, there are no plans to issue bonds in 2020 or 2021 at this stage to the international investors.

Perfect. And on the -- so you mentioned around $1 billion of cash, a bit more than $1 billion of cash currently of liquidity, and that's more than enough. And then on the LTV, you mentioned 38%. Is that correct?

Correct.

Was that at the end of March, correct?

Correct.

And how much are you -- how much of OSN stake is that including? Because I saw S&P report, they mentioned that there was like -- you were valuing in that 38% $1.3 billion for OSN stake, is that correct?

Yes. Our historical [indiscernible] [ 2009. ]

Okay. And then just on the inflows, you mentioned you have $90 million of inflow in 2020 on -- at the holdco level. Is that correct?

That is correct.

So that was $90 million in 2020 or in 2019?

2020.

So you expect $90 million in 2020?

Correct.

Okay. Great. And I guess some of that dividend has already been received. No or not yet.

Yes. We have received from Burgan Bank and [indiscernible] roughly $60 million or less, less than $50 million has been received. [indiscernible]

Great. And so on the liquidity, do you still plan -- do you -- are you trying -- are you kind of on an investment mode or you see some interesting opportunities? Or you're trying to safeguard that $1 billion and keep the liquidity around that $1 billion?

KIPCO has always been and will continue to be opportunistic. We view that in 2021, there will be opportunities that are going to come. We believe that our underlying portfolio companies are quite liquid. And therefore, the contribution that has to be made by KIPCO to increase of capital, to manage an acquisition, if there is one, there will be minimal. So to answer your question, there are 2 parts to it. Our underlying portfolio companies are out there looking for opportunities because this is a good time to acquire assets. And the liquidity position and the leverage level of our underlying portfolio companies are quite modest in the sense that there is a low debt. So that's one way to look at it. And therefore, the need for capital increase will be quite low. And if there is one, KIPCO will have the ability to do that, but it's small dollars.

Okay. Got it. So there might be some interesting opportunities, but you don't expect massive investments in 2020. Is it fair as one holder to expect that the cash balance sheet is not likely to decrease much more than around $1 billion? Or otherwise, what would be the minimum cash you think we should expect? Like is it $0.5 billion? No. Actually, after repaying, of course, the bond in July, you will have around $0.5 billion of cash in balance sheet. So the question is like how much do you think like?

This is a question that you are asking, which is a difficult one to answer in this situation with COVID there. Otherwise, we would say that we would continue to maintain [indiscernible]. From a policy point of view, we typically have a significant amount of cash. And the general policy is that we will have enough cash to pay off the first bond that is due for maturity. And so if that is the March bond in 2023, we would try to be around that number. That would be the historical where we have operated, given the fact that it's a very fluid situation where we have to be dynamic to come out stronger out of the COVID. If there is a great opportunity that comes to us at a very cheap price, it would be dropped below $500 million, we would. But clearly, at that time, we'll be telling you what a great asset we bought. So that is a directional view I'm giving, but the general historical practice and the policy position is that we'll keep enough cash to pay up our next bond.

Our next question today comes from Zafar Nazim from JPMorgan.

I basically had a -- I guess a question on OSN. Pinak, you mentioned some pretty solid numbers in terms of the usage, post your relaunch on the OTT side. I was wondering if you can give us some color on the financial impact of the relaunch. I mean how should we think about the financial trajectory post the relaunch for OSN? And I understand that it's -- right now, it's EBITDA negative. But are you still expecting 4Q to be the quarter in which you turn neutral? And how should we think about the financial impact of the OTT launch?

So to break it down into a few points. One, the market opportunity is massive. This is the last big geographic region with more than 350 million people who will get the OTT quality service. So that's point one. With every player, Netflix, Amazon, us and the other regional players, clearly, there is room for all of us to grow. OSN has the content rights from 7 of the 8 Hollywood studios and is building up its original production pipeline. So we expect, given the model that has played out elsewhere in the world, that the top 3 players will win big in this market. So that is one way to think about it. In terms of the financial outcome, we believe that the COVID has been a [indiscernible] event for OSN. And I'm sorry to use the word given so many people have lost there near India once but in the business context, in a very narrow way, I define that. And so we expect the forecast that was given earlier in the year of becoming EBITDA-neutral in fourth quarter of 2020 still to be intact, and we expect 2021 to be a year in which the company will report positive EBITDA. So that is the expectation. We are being [indiscernible]. We don't want to -- after 2 very difficult years, in fact, 2.5, very difficult year to jinx it. But we remain optimistic about what we see as a fairly positive future for OSN.

And Pinak, you mentioned a significant spike in the subscriber count. Are these all paying subscribers that you're talking about? Or is this like a promotion period that's impacted your account?

Unlike many competition, we only report payment subscribers. We don't report on -- so all these assets scattered, we are paying money.

Okay. And just lastly, what's the -- I mean, I guess, right, you've done a lot of cost reduction, rationalization of the operations. So now it's really about revenue, I guess, for the most part, and basically getting subscribers. So is there a subscriber number that we should look at? What addition -- what -- how many additional subscribers do you need now to breakeven? I mean -- and perhaps if you can give us a sense of what's your total subscriber count right now?

So Zafar, I think we have covered this broad question before as well, so I'll answer on those lines, which is OSN distributes to various channels, direct-to-home IPTV, and now OTT is the new segment. All of these have different price points. And right now, we are seeing, as Pinak mentioned, a positive uptake across all segments. So a combination of these will depend in the -- will be the output in terms of the subscriber numbers. So we are not tied to a particular subscriber base. The trajectory that Pinak mentioned for quarter 4 and next year is a realistic assumption based on the run rate that we are seeing right now, the business is performing. There are a lot of things yet to materialize. We are right now -- end of -- or early part of June. So let the journey begin and then continue. And then we'll see, and we'll keep you updated later on. Thank you.

Zafar to put it easy way. Clearly, last 2 years, you have seen the value. And today, the value is higher than what it was there for you to kind of size in your mind, because the business is performing very much. And we couldn't say that the business will be complete across [indiscernible] 2021. So we are clearly giving you a guidance. We are seeing the situation where a strategic option is at place. So we want to hold some of the information as well because that will help various parties in the discussion. And we don't want to complicate it by putting out numbers that can be kind of interpreted in more than one way. So other than that, we were generally been very transparent. We are still giving you directional input. And as you look at the details we have provided, we have given you a fair amount of color.

Our next question today comes from Rajat Bagchi of NBK Capital.

A couple of questions. I actually got a -- not from the call, so I don't know whether this has already been asked or not. One question on OSN. So I saw in the presentation that you expect a financial turnaround by 2020. So are you guiding for a sort of a breakeven by end of this year? And I picked up a number that is [indiscernible] in the [indiscernible] to appear that OSN has reported net profits -- net losses of KD 68 million. Is that the correct number I'm reading? That's the first question. Second one, a quick comment on how the education business is doing. How should we expect it to grow going forward given the current situation?

I think that you are referring to -- can you give us the color on where you're referring that number to? Is it -- from where are you quoting that loss number?

This is Page 88 of the financials where you talk about increasing the stake in OSN from [ 60 ]. Yes, Note [ 21. ] Okay. So you want to actually...

That is the historical losses from August 8, 2018, to the date, which is the date in which -- in March 2020, where -- so that is the total loss that has been incurred by the business.

Okay, okay, okay. And we understand -- could we get a feel as to how losses have -- so you're actually expecting that this should be breaking even by end of 2020?

We are saying that the company would become EBITDA-neutral to positive at the end of fourth quarter 2020. For the year, it will not.

Okay, okay, okay. And in terms of OSN as an entity, how much debt does it have?

We don't want to share that information. It's a private company. And we have shareholders -- other shareholders, so we have to respect their privacy.

Okay. Okay. So any comment on --

[indiscernible] that's all we can say.

On the education business, please, how is that doing in terms of admissions? How do you see the order panning out given what's happening right now in Kuwait?

So generally, all the schools are on online mode. There are very different curriculums that we operate. As you are aware, because you are MBK Kuwait, that we have the -- that to the Indian curriculum, the American curriculum. And so generally, schools are operating in those curriculum. There has been no change because people are where they are. There's no mobility of people. So from an admissions point of view, we have way placed for all our schools, but it is speculation to say what will happen post-COVID. So I think that's the question that, at this stage, we have no basis to answer. But because there has been no movement, effectively, everybody is where they were from March to 2020, where we were running at a waitlist situation and all the classes were full.

Just one more follow-up question on the pricing. So in general, for the education business, be it at the school level or at the higher education level. When these institutions move from a on-campus to a online training mode, does this pricing change or it remains the same?

I believe that these are all very open questions. I think that many stakeholders would get involved in it. Clearly, who will carry the burden, whether it will be the parents, it will be the government of each nation or it will be the schooling systems, are all questions that have not yet been defined. People are focused on saving lives at this stage. So I think that, for once, the economics has to take backstage, and that's the right policy position that most nations are taking. And Kuwait, we are quite grateful that, that is where the focus is. And so as much as you and I have a job to run a business, the general sense is that we can tell you that between 2018 and 2019, revenues are up by 6%. That is something that we can share and which is there in the data that we give. But going forward, it is still too much of a fluid situation, and therefore, we don't want to talk about it. It's speculation.

Our next question today comes from Ahmed Shahin of Emirates Asset Management.

Thank you very much for the presentation. It was really helpful. One question from my side regarding OSN. On Page 10, you alluded to subscriber base of around 1 million, with 150,000 subscribers to OSN streaming app. Now if you are an OSN subscriber, you get these timing up as a complementary. I'm just wondering how many of these 150,000 are actually new joiners to the OSM platform? And what kind of growth trajectory can we expect in the subscriber base?

As I mentioned earlier in the call, the subscriber numbers, we are talking about are for [indiscernible] who are paying for that. So it is not something that we offer to our Platinum customers, who are the top tier customers for the initial year, that they get a bonus because they have been loyal customers to us. So that's how you would read it, and we would continue to report the numbers of reported paying customers. That's the way you want to think about it. So was that your -- did I answer your question?

And I think just to clarify, in addition to what Pinak mentioned on Page 10, we distinguish between the subscribers clearly. So once 150,000 is the paying subscriber base of OTT. And then there is a catch-up with regard to indiscernible]. This is already available...

So just to clarify, 150,000 subscribers, that is -- these are brand-new subscribers that have joined OSN.

On Page 10, if you refer to those numbers, that's what we are referring to. In streaming, every month, they are brand new, right? They have a monthly subscription. So I don't know how I would call them brand new [indiscernible]. Clearly, before the launch, we had a base, and that base [ grew ] dramatically over April and May.

Okay. And has that affected your initial subscriber base? You basically have people migrated from TV subscription on to move to OSN's trailing app? Or is it still fairly balanced between them?

The DTA subscriber base has been more or less stable given the COVID situation, and these are new additions to the base. Clearly, through 2019, we obviously took conscious decisions to move away from certain segments. So it was about getting out of sports, getting out of some regional channels. And so where -- we did that in the first 2 quarters of 2019, and so the subscriber base dropped because we no longer offer those services because the cost of running those services versus the revenue we are getting them. So when we got rid of those services, that was part of the restrengthening of OSN. And all of them are EBITDA positive. So the subscriber base dropped below 1 million, now it's going up above 1 million. And we are now giving a breakup between the core existing base plus the new OSN streaming base.

Our next question comes as a follow-up from Mark.

Just a follow-up, but I just -- a couple of things. So I just wanted to press or ask a bit more directly on a question that's already been asked. But given the sensitivity to the MVL of the rating agencies, and I completely understand that. Hopefully, we expect an increase in the portfolio of value as the market environment improves, et cetera. But is there any -- and I understand the shareholder support. But is there any thoughts behind or opportunity to sell other assets if the part [indiscernible]. So is there any other avenues to generate some cash at the holdco level? And then I guess the other one, and these are both qualitative, and I understand difficult to answer. But the second one is more -- I think historically, the -- with the portfolio companies, it's always been a case of reinjecting capital or respending capital in order to grow those portfolio company businesses rather than upstreaming to the holdco because the cash or the liquidity at the holdco was very comfortable. Is that still the case? So if there's a liquidity at the portfolio of companies, will that more likely be reinjected into those companies? Or are we getting to the point where, if there's excess cash at some of these companies, it can start to be upstreamed, given that you alluded to expecting to be -- to have a coverage ratio of your interest and your SG&A cost above 1 in maybe a few years time?

There's lots of questions in that one question, Mark, but let me try and break it down. So from a rating ratio management point of view, we believe that the rating agencies are not yet clear on their position on how they think about -- through the COVID. So they have now taken the action that let's be prudent and do what we didn't do in 2008, move aggressively to downgrade. Whether it makes sense or not in a sense, they're downgraded. Now the mechanical approach that they have taken. Clearly, their methodology does not take into consideration how they will manage a COVID-like situation. So there is a methodology issue of the rating agencies that, hopefully, they'll calibrate and they will try to start thinking through. So that is to the extent of the rating methodology that is there. And so we believe at KIPCO that it would not be prudent for us to be too obsessed with what is unclear position from the rating agencies. And I'm sure you all have been on multiple calls where you basically get a lot of sunrises in the east story of only 1-way movement, everything going around. And I don't think that anybody knows today whether things are getting better or worse. So the only thing we all know is we don't know. That's point one. The point two is that in terms of thinking about the shareholder support, we are quite privileged to have a very wealthy shareholder, a very committed shareholders. And not only our principal shareholders, but all shareholders who have always come to KIPCO support whenever we have done the rights issue. We don't see anything from the conversations we have with them to suggest that there is any lessening of the support. That's point two. So therefore, it is up to us as the professional management team to go to them at the right time. Now we are quite privileged and blessed or lucky, depending on how -- what you want to choose, that we have 2.5 years to make that call. And therefore, we will make the call at the right time. And therefore, in simple terms, what I'm saying is once there is a clarity around how the rating agencies start thinking about the methodology, when the market starts reacting to the performance of Kuwaiti stock in the Kuwaiti market, those that we believe will become clear in the fourth quarter of this year. And that, at this stage, is a guess, nothing else. It's a directional cost. And as time goes, we all will see what happens. So that is about the question of thinking through the rating agencies. What we want to say is that an investment grade rating is an important governance goal that we have. And we will strive to continue to improve the operating performance of our business, which will be reflected in their share price, and that is the most safe and sound strategy that we'll follow. In terms of the exits, we have sold 32 business in the last 33 years that have the privilege to be with KIPCO. And we'll continue to be opportunistic in terms of exits. At this stage, we believe that there are many options and there are many buyers for the assets at prices that are significantly higher than what we are trading. And we believe that it would not be a prudent thing to sell these assets because there is a reinvestment risk that we have. But we are not married to any assets. We will continue to look at every offer that comes along or every opportunity and evaluate it on the historical basis that, if we receive an offer, which is GCS-plus, we will entertain it seriously. So those are the policy kind of guidance that I can give you. I wish that we could guide you to a more precise thing. But given the fluidity of the situation, we don't believe it's prudent to do so.

We have a follow-up question from [ Alex Ayek ] on the line.

And again, to reiterate, thank you very much for these answers. Very helpful. Even for that, sometimes qualitative, still very helpful. Just quick follow-up questions. OSN, you increased your stake earlier this year. I think, was it like you had a call to increase that? I think you invested like an extra $200 million. Is there a risk that you have another call like that this year?

So we have disclosed the basis of our increase in our financial statements. We will request you to refer to that now.

My question is, is there...

Going forward?

Yes.

In terms of the capital requirement, we don't believe that the quantum of requirement is anywhere close to what has been historical level because the business continues to perform better and the need for cash obviously therefore, decreases.

Okay. Sir, my question was more like you had to increase your stake. Is there a chance that -- is there like legally some a situation where you will have to increase your stake again till having 100% of it? Or no, you don't have such a risk?

So we are at 88%. I mean there is only 88% and 100%. There is a 12% gap. And so it is what it is. If there is a capital call, both shareholders have the ability to subscribe to the capital call from the company, if cash is required by the company. And then we subscribe, which our partners subscribe, they subscribe. So we get 88% of whatever is the right call. If our partner doesn't subscribe to that extent, they dilute, but we cannot speak for our partners, but that's the mechanics if that is what you're trying to understand.

Yes. Exactly. So okay, what you're saying is ultimately, it's only 12% less. And that will be maybe like roughly $100 million, not much more than that.

I don't want to get into the numbers because we have a partner to respect. And so from a business point of view, that's the number that we think is on the higher side. But for modeling purposes, you can consider it.

Super. And just to clarify. The debt at the holding level, so you have around $1 billion of cash, and the debt, you have around $2.6 billion of debt at the holding level. Is that correct?

Correct. Yes.

We have no further questions on the line so I'll hand back for any final remarks.

Thank you, everybody, for this engagement. We really appreciate it, and we remain always available. I'm not able to extend the usual invitation that I do to please come to Kuwait because that's not a option for many of us. But in closing, please stay safe, and let's be on guard for the last 6 months or so. Thank you, everybody. Good afternoon.

This concludes today's call. Thank you for joining. You may now disconnect your lines. Have a lovely day.