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

Good afternoon, everyone, and welcome to KIPCO's Q1 2024 Earnings Conference Call. This is Ahmed El-Shazly from EFG Hermes and it's a pleasure to have with us on the call today from KIPCO's Management: Mr. Sunny Bhatia, Group CFO; Mr. Moustapha Chami, Deputy Group CFO; and Mr. Eman Al Awadhi, Group SVP, Corporate Communications and IR. I will now hand the call over to Eman to start with the presentation. Thank you.

Thank you, Ahmed. Good afternoon, everyone. We welcome you to our earnings call for the first quarter ended 31st of March 2024. Please note that today's presentation is also available on our website along with the financial statements for the year -- for the quarter. Moving on to the presentation. Please refer to the brief disclaimer on Slide 2. Some of the statements we'll be making today and information available in the presentation can be forward-looking. Such statements are based on KIPCO's current expectations, predictions and estimates and are subject to risks and uncertainties which may adversely or otherwise affect the future outcome. They are not a guarantee of future performance, achievement or results. I will now hand over to Mr. Sunny to take you through some of the highlights for the period.

Thank you, Eman, and good afternoon, everyone. The past few months have been eventful for KIPCO. As you know, in January 2024, we announced the monetization of the second, third and fourth and final annual receivable installment associated with the sale of KIPCO Group's 46.32% equity stake in Gulf Insurance Group. The installment segregated to USD 495 million, which resulted in a liquidity increase of around $426 million. The monetization was reflected in this quarter's financial information. This quarter, we also repaid the remaining balance of USD 195 million of the USD 525 million syndicated credit facility. With this earlier or prepayment, this facility now stands fully settled and closed. In February 2024, we announced that our subsidiary, Jordan Kuwait Bank, had embarked on a technical, financial and legal due diligence to assess the concept of a merger with Jordan-based Bank al Etihad. Now these diligences are in progress and we will be disclosing any material developments on this matter as and when they unfold. Last month, we also announced a successful completion of the merger of OSN streaming business, OSN+, with Anghami, whereby OSN Group acquired a controlling stake of 55.45% in Anghami. This transaction involved a cash investment of USD 38 million and also contribution of OSN brand and its business. Moving on to Slide 5, where we cover KIPCO's consolidated financial performance for Q1 2024. We are pleased to report that KIPCO posted a net profit of USD 19 million, representing a net increase of 14% over the Q1 2023. This is primarily due to an overall performance -- better performance across our foreign banking operations as well as businesses in foodstuff, logistics and oil feed services. KIPCO posted a total revenue of USD 1.14 billion in Q1 2024, which represents an increase of 14% compared to USD 1 billion reported in Q1 2023. This net increase is mainly attributable to the increased income from banking operations as well as increase in the revenue from sectors like industrial and logistics. KIPCO's total asset at the consolidated level stood at USD 40.7 billion at the end of Q1 2024, which is a 1.5% increase over USD 40.1 billion reported at the year-end 2023. Now moving on to Slide 6. Interest income from banking operations increased by 26.9% to reach USD 539.3 million, compared to USD 425 million for the same period last year. Net fee and commission income increased by 28% to reach USD 89.2 million. Meanwhile, income from media and digital satellite income witnessed a 14% decrease to USD 50.1 million compared to USD 63.9 million for Q1 2023. While hospitality and real estate income saw a drop of 15% in Q1 2024 to USD 62.4 million. Meanwhile, income from energy sector saw a 7% drop to USD 32.1 million, while the industrial and logistics sector registered a 5% increase in income to USD 230.4 million. Total expenses increased to USD 1 billion in Q1 2024 versus USD 0.9 billion for the corresponding period in 2023, due to -- primarily due to higher interest expense by USD 129 million. Furthermore, the group's interim condensed consolidated financial information includes the effect of hyperinflation in accordance with IAS 29, financial reporting in hyperinflationary economies stemming from Turkish operations. As a result, the group recorded a net monetary loss of USD 22.4 million during Q1 2024 due to Burgan Bank's operations in Turkey. For further details, please refer to Note 3 from the published interim condensed consolidated financial information. I will now hand over to Mr. Chami to provide further details on the financial performance of the group.

Thank you, Sunny, and good afternoon, everyone. Let us move to Slide 8, where we cover key performance highlights of our banking operations. We start with Burgan Bank Group's results for Q1 2024. I would like to note that Burgan Bank held its earnings call earlier today and you can refer to the transcript for more details. Operating income for Q1 2024 came to $174.2 million, up by 7.3% from the $162.3 million reported in Q1 2023. Net income increased 34% to $33 million versus $24.6 million for Q1 2023. Burgan Bank's loan book went up by 2% to $14.1 billion, while deposits increased 13.5% to $16.5 billion in Q1 2024 when compared to year-end 2023. The bank reported a strong liquidity coverage ratio of 207% and a net stable funding ratio of 120% in comparison to 159% and 111%, respectively, reported for the same period in 2023. Provision coverage ratio remained strong at 170%, while the NPL ratio slightly increased to 2.6% for the quarter compared to 1.8% for Q1 2023. The bank reported a CET1 ratio of 13.2% and a CAR of 19.5% for Q1 2024, well above regulatory requirements of 10.5% and 14%, respectively. As you know, Burgan Bank obtained CMA approval in January to issue KWD 154 million equivalent to $500 million perpetual Tier 1 capital bonds in accordance with Basel III regulations. The Central Bank of Kuwait gave its approval in April and placement was completed last week for KWD 150 million, equivalent to $488 million. The proceeds will enforce the additional Tier 1 capital for the purpose of supporting the bank's capital adequacy ratio under the Basel III framework and for general corporate purposes. Last week, Burgan Bank received the Central Bank's approval to redeem its outstanding $500 million perpetual Tier 1 capital securities issued in July 2019. We moved on to Slide 9 to cover JKB's performance for Q1 2024. JKB net profit for Q1 2024 came to $43.2 million, 33.3% up from the $32.4 million reported for Q1 2023. Total income grew 41.4% to reach $122.2 million versus $86.4 million in Q1 2023. In Q1 2024, JKB's loan book dropped 3% to $2.7 billion versus $2.8 billion at the end of 2023. Deposits dropped by a slight 1% to $5.2 billion from year-end 2023. It's also worth highlighting that JKB continues to conduct a technical, financial and legal due diligence on a possible merger with the Jordan-based Bank al Etihad. On Slide 10, we can see the performance of SADAFCO. The foodstuff company reported a 7.4% increase in revenue for Q1 2024 at $191.4 million compared to $178.2 million for the same period of the previous year. Operating profit was up 33% for the period, registering $32.3 million compared to $24.3 million for the corresponding period in the previous financial year. SADAFCO posted a 40% increase in net profit to $33.7 million compared to $24.1 million in Q1 2023, primarily driven by increased sales and improved gross margin. SADAFCO's financial cash position remains strong with $203 million cash and bank deposits balance. The company has now changed its fiscal year from March end to December end. SADAFCO continues to dominate the market in its 3 main product lines, UHT milk, tomato paste and ice cream, with plans to invest in sales and distribution channels to further drive growth and expand market presence. The profitability of SADAFCO's Poland operation continues to improve compared to last year with a return to normal B2B margins. SADAFCO has distributed a dividend of SAR 6 per share for the first 6 months of the short full year of 9 months. This week, the AGM approved the distribution of an additional SAR 6 per share for 2023. This is the highest dividend distribution ever in a single year at SAR 12 per share. United Gulf Holding, UGH, is featured on Slide 11. UGH incurred a loss of $8.7 million in Q1 2024 compared to a net loss of $16.2 million in Q1 2023. Total revenue increased 46% to $57 million in Q1 2024 compared to $39 million for the same period last year. AUM grew 11% to $15.8 billion in Q1 2024 compared to $14.2 billion at the end of 2023. On Slide 12, we have the results of United Real Estate Company, URC. Across its key income streams of the business, the company reported a 6.3% increase in rental and hospitality income, offset by a 34% decline in the contracting and services revenue resulting in a 14.6% decrease in revenue for Q1 2024 at $65.1 million. Operating income dropped 7.4% to reach $17.6 million versus $19 million in Q1 2023. URC's net profit posted an increase of 1% for Q1 2024 at $6.7 million versus $6.6 million for the same period in 2023. It's worthy to note that last month, URC's [indiscernible] development, Marina World, received a 1-year extension from Kuwait Authority for partnership projects. The extension ends on August -- on 24, August 2025 and the rental income for this period would thus be reflected in the financial statements of the company. Moving on to Slide 13, starting with our logistics and power rental business, JTC, reported a total revenue of $22.8 million for Q1 2024, 5.3% lower than the $24.1 million reported for Q1 2024 (sic) [ 2023 ]. The drop is attributed to the port division. Gross profit for Q1 2024 decreased by 1% to reach $8 million versus $8.1 million for Q1 2023. Net profit for Q1 2024 amounting to $6 million, 18% higher than the reported $5.1 million last year. Moving to National Petroleum Services company, NAPESCO, our oil field services provider, NAPESCO's revenue for Q1 2024 dropped 3% to reach $32 million versus $33 million in Q1 2023. NAPESCO posted a net profit of $7.8 million for Q1 2024, 8% up from $7.2 million for the corresponding period the previous year. This was supported by operational efficiencies. Moving on to the health sector with Advanced Technology Company, ATC witnessed a 3% decrease in revenue to reach $133.2 million compared to $137.2 million in Q1 2023. ATC achieved a net profit of $0.2 million in Q1 2024, compared to $19.1 million in Q1 2023. Finally, Slide 14 shows the recent business update on OSN. On April 2, OSN successfully closed the merger between Anghami and OSN+. The deal involving an injection of $38 million has created a media tech company with AI at its core. The MENA streaming powerhouse now has 120 million users, more than 2.5 million subscribers and $100 million of combined revenue. OSN continues to negotiate its content and studio deals with the aim of optimizing cost. It constantly works to enhance the dishless OSNtv box experience. The plug-in box reflects OSN's strategy towards streaming TV with a linear environment. I will now hand over the call to Ahmed to invite our listeners to raise any questions they may have.

Thank you for the presentation. [Operator Instructions] So we have our first question from Zafar Nazim. [Technical Difficulty] We can take a couple of questions from the chat while Zafar comes back. So we have a question from Rajat Bagchi: Could you please provide some insights on when minority shareholders will be paid as part of GIG stake sale and what is the tentative time line to delist GIG?

Thank you, Rajat, for that question. Now as far as the group's holding in GIG was concerned, 69% of that holding was with the parent and the remaining 31% was with the various subsidiaries. So what we have done is that in totality, whatever proceeds were received, they were prorated to the ownership. So which means that the direct inflow at the parent level was 69% of the proceeds. As we had discussed and disclosed earlier, there was a down payment out of $860 million. This is again 100% of the proceeds, 69% of which belong to the parent. So $200 million minus the dividend, so we received $177 million, pre December -- 31st December 2023. Then in the January, we monetized the second, third and fourth installment, which aggregated to $495 million and we received the proceeds of around $426 million, the difference representing actually the discount or the interest expense for the period. And there would be some other expenses. So net-net, we expect the proceeds to be -- netted proceeds to be around $410 million after for the second, third and fourth installment. The first installment, which is the gross amount of $165 million, which is due in December this year has not been discounted. So therefore, these proceeds will flow into the company's cash flows in December 2024. Thank you, Rajat. I hope that answers your question.

Thank you very much. I think Zafar is back.

Yes, I hope you can hear me now.

Yes, we can hear you.

So I had a -- thanks for the call and for the information. I had a couple of questions. One was on dividends. Can you please confirm how much dividend did you receive in the first quarter of the year?

Around $30 million in the first quarter.

Sorry, can you repeat that?

Around $30 million of dividends in the first quarter.

Okay, and...

Because as you know, most of our core companies will start distributing from Q2 and Q3 as they have announced recently in their AGM.

And based upon the announcements they've made, what do you expect this year's dividend flow to be in aggregate?

Well, we have to wait until the quarters -- in other words, we are refraining from giving any forward-looking formation.

All right. And then just on the debt side, I know that you've repaid the syndicated facility, but the debt balance has not really gone down by much. It's gone down by $30 million, $31 million, the loans payable. And I was wondering, is there any reason that you paid down the debt and then you reborrowed -- your cash balance was reasonable. So A, if you can just walk us through why you reborrowed. And second, the loans payable that you have at the parent company level, can you tell us what the average rate of interest is on that? And also the longer maturity loan, how -- what is the average maturity as well? There's a portion which is due within 1 year and there's a portion which is due after 1 year. So what is the maturity of the portion which is due after 1 year?

Thank you, Zafar, for your queries. So answering your first question, on a gross basis, you can see that the debt at the parent level declined by KWD 9.5 million, around $30-plus million, as you said. And why did we, whence we repaid the syndicated facility, which was an expensive facility, closing the $525 million facility by pre paying $195 million, then why did we borrow more? Actually, it was nothing. It was just a drawdown from the relationship banks in Kuwait. And this is part of our capital structure, whereby we want to diversify our funding relationships. And we have -- these are kind of revolving facilities, which we have from our local banks, and they are drawn as and when required. And these -- they are actually the revolvers. So many of them are actually revolvers. So it is primarily for the sake of establishing the track record with the local Kuwaiti banks, which we have done. And then most important thing, as you would notice, that our overall level of cash balance has increased by KWD 66 million compared to 31st of December to 31st of March, primarily driven by the increased liquidity from the monetization of the GIG proceeds at the parent company level. Coming to your important question on the debt profile, at the parent level, the less than 1-year facilities are actually 120 -- I think it's better if I speak all the numbers in dollars for your convenience, so first 1 year is $411 million, the gross amount. Primarily, it includes the KD bond, due on 28th of December, equivalent to $216 million, in Kuwait dinars terms, KWD 66 million. And then there are the relationship banks' bilateral loan of $195 million. So all in all, less than 1 year, we are talking about $411 million of facilities, which are fully covered by the cash balance, what we have. Then in the 1- to 3-year bucket, which includes actually the first and the second EMTN, 26th of October 2026 and then February 2027, $0.5 billion, $0.5 billion EMTNs. So that comes in the 1- to 3-year bucket. Yes, it's 1- to 3-year bucket, but as you can see, the EMTNs are actually due in 2026 October and then 2027 February. Then all the rest of the facilities equivalent to KWD 339 million or $1.1 billion are actually greater than 3 years.

Thank you. We'll take our next question from Rajat Bagchi.

Actually, I'll go back to my first question, which is to understand when minority shareholders get paid. So what I meant is the non-KIPCO entity shareholders. So there were shareholders other than KIPCO entities in the market for GIG. When do they get paid out of this deal? And what's the plan for delisting GIG? Can you just comment on that?

No. I think that is -- Rajat, that is a question for the -- that is a question for GIG. Now let me clarify here from a -- KIPCO was a shareholder of -- KIPCO Group was a shareholder of 46.32% equity in GIG, which we have sold. So KIPCO, 69% of 46.32% and KIPCO's subsidiaries, the remaining 31% of 46.32%. Now the question you are actually raising is from the point of view of the GIG minority shareholders who may have undergone the benefit of the MTO done by the acquirer of our 46.32% stake. That is a question for GIG investors call. So probably you can raise it directly with the Investor Relations team of GIG, because this is a matter for GIG, which is a separate legal entity. And after the exit, we own no equity in GIG and we do not have GIG as our associate anymore. So just to reclarify, probably you should raise your query to the Investor Relations teams of GIG, because that's an appropriate question to be addressed with them.

All right. We'll take our next question. Okay. So we'll go back to the questions we received from the chat. Also from Rajat: So what drove the net profit growth for JKB, can you please comment on the NIMs?

So the main profit stream of JKB was its underlying subsidiary, Bank of Baghdad, that has growth and net profit of more than 200%, reaching $58.1 million for the quarter. That was the major part of JKB's growth in profitability.

Another question from the chat from Rajat: What was the reason for the sharp decline in net profit for ATC and what is KIPCO's effective ownership of ATC?

So the main decline in ATC profitability was mainly 2-folds. One because of the new consolidation of its hospital, which is still in the beginning stages and it concurs a lot of expenses like depreciation and also their operating profit is not -- not picking up yet, so those losses were not reflected previously. And now because of the consolidation and the acquisition of that hospital, you have those losses. In addition to an increase in the provisions of ATC versus a reversal in the last quarter -- in the quarter of last year 2023.

All right. Thank you. We have a question from [ Jelani Malodiva ]: How do you expect the loss at media and satellite to trend after the Anghami deal in April? Should we expect a significant improvement?

So the Anghami just closed on 30 April and I guess that the first milestone has been achieved, which is the seamless migration to the Anghami platform. So today, we have the videos for OSN+ being uploaded and being offered to the public through the Anghami platform and that was a successful first milestone. Cost synergies have already been implemented and are ongoing. There will be also some more cross-sell revenues as well, which will yet to come. Also, using the experience of Anghami for the diversified products as well, especially in terms of advertisement. All of these will have a certain positive impact on OSN and on the new sales of OSN and Anghami. That will be shown -- will be reflected in their financials, hopefully, and the quarters to come.

We have another question on Anghami from [ Amanda Vandem ]: What is the expected date of integration with Anghami and what is the expected injection?

So we have already disclosed that the injection has been made, which is $38 million, against the stake of a controlling stake of 55.45% from us and Anghami Inc. which is listed on NASDAQ. As I said earlier, that the migration has been done. The media now is being migrated, OSN+ media has been migrated on Anghami platform. So that's from an integration or migration of systems point of view. There will be definitely some more enhancement in the months to come, but the migration has already taken place.

Okay. We'll take our next question from [ Abhishek Shukla ]. [Technical Difficulty]

I'll send it on the chat.

We can hear you now.

Okay. Sure. Now my first question was on this OSN+ only. So should we expect -- when probably this business can break even? Or how should we look into this business now?

Thanks, [ Abhishek ], for your question. We do not provide the forward-looking guidance. But we have -- my colleague has given you, and we have publicly disclosed all the key drivers of bringing this business to stabilization and the rationale of the transaction. So OSN plus Anghami transaction has the revenue synergy because we are talking about addition of more than 1.9 million fee-paying subscribers to the business and in addition to the potential for the cross-sell and advertisement business as my colleague hinted, because there are -- on the platform, there are about 120 million, not the fee-paying, but some kind of engaged customers on the platform. Second is the cost synergy because the 2 businesses, the integration, actually, we are pleased to notify that both the teams have managed to in fact achieve the integration way ahead of the planned time by more than a month. So once they integrate and as they have integrated, there are significant cost synergies. And we are taking this opportunity to not only rationalize the cost, but also take the best of the -- the best of the resources and the best of the technical solutions and the platform. So all of these 2 factors put together would put OSN on an accelerated path to stabilization. And as you can see from the segment -- reported segment section, you can get some indication how the required cash injection into the media segment of our business has been reducing year-on-year. And as we proceed further by reaping the benefits of this integration in our subsequent quarterly financials, you should be in a position to see a greater impact of these.

Okay. Okay, sure. My second question is, overall, like on the debt side of the business -- as we saw, like you sold your insurance business, some inflows have come, you have repaid it. And then again, you have taken some debt again with the banks. And similarly, like some of the other businesses, as you have highlighted in your presentation, you're looking to merge, say, in Jordan. So how should we think about it in terms of overall like from the debt perspective, are you looking to reduce your leverage? Or what is the level of the leverage that you're looking for? And so if you can comment on that.

Yes. Actually, our leverage has got 2 dimensions. The -- when we look at the loan-to-value, one is the gross or the absolute leverage. And the second one is the value of the underlying portfolio. So we are working on both sides of the equation. Now maybe I'll first remain on the leverage side of it or the liability side of it. From the past actions, you would have noticed that what we have been doing is extending the maturities. So whether it was refinancing of the liability management of 2023 November bond, 2024 November bond, by issuance of KWD 165 million of bonds in late December, early January, with KWD 60 million of new money; or whether it was issuance of Sukuk, 103 million, the proceeds of which were primarily used to repay the syndicated facility. And now the GIG proceeds, you would see that there is an increase in the cash, but at the same time, maybe the liabilities have reduced, but not to that level. What we have also -- what we have used the partially the proceeds to -- whatever are the KIPCO proceeds, like $165 million, which is the installment #1 or the year 1 installment, we have already earmarked from -- in our cash planning for capital assigned for actually 2024 December bond of 66 million, which is coming due. So this -- the use of proceeds are general corporate purposes but the liability reduction is an important dimension of it, recapitalizing our subsidiaries for value enhancement is the second dimension of it. Like OSN, you would have heard my colleagues saying that we have injected $38 million of cash to, again, with the intention of stabilizing the business. Then the GIG proceeds, only 69% of the proceeds belong to the parent, the rest of the proceeds or 31% of the proceeds actually are attributable to our subsidiaries. And they have also done the strengthening of their capital structure or they have made investments in their growth businesses. As far as we are concerned, I think the second side is equally important, which is the asset side of it. We have taken a series of initiatives to improve the value of our portfolio, whether it is change in the management team, whether it is undergoing the transformative mergers or M&A transactions or whether it is to change the engagement model with our subsidiaries whereby we wanted to drive their performance in a much closer manner then we had done it in past. Now as far as the merger or the intended merger, which currently is in the process of due diligence between Jordan Kuwait Bank and Bank al Etihad, if the due diligence proves that this is a transaction worth going and -- so if the other party also believe the same, then as a concept, the merger of JKB with al Etihad, Bank al Etihad, would create actually the second-largest bank in Jordan. So it is about value enhancement. So of course the KIPCO's 51% ownership would get diluted as a result of the merger if this was to go through, but the intended rationale of that is to enhance the positioning of this investment. And in fact, it improves the liquidity, it enhances the value proposition of our investment holding and that is the original intent. But as we said earlier, this is something which is subject to financial, legal and other strategic due diligence, which both the respective banks are undergoing at the moment. So currently, there are no decisions. It's very much diligence itself is a work in progress. And if there are developments of material nature, definitely, in accordance with our disclosure and transparency guidelines, we would make the appropriate disclosures.

I think that's pretty good. Just as you were mentioning that probably you want to reduce your leverage or the liability side, but do you have any number or you have shared any number, say, in terms of any ratio like loan-to-value or anything which we should just keep in mind?

Yes. Although we do not give any guidance on the loan-to-value ratio, but our target would be to keep this ratio below 50%. And you would have noticed that our rating agency's expectation for our current trading level, given that it should be below 45%, or in one of the rating agencies, on and around 40%. Our rating reports, which are in the public domain, do provide some guidance on the expected loan-to-value ratios of this. As far as company is concerned, we remain committed to work by making the LTV as low as possible by working on both sides, deleveraging, but at the same time, improving the value, investment portfolio.

We'll take our next question from Rakesh Tripathi.

A couple of questions from my side. Yes. Okay. First one was if you could confirm whether -- I believe there was a $15 million kind of cash infusion that was supposed to happen in the combined OSN Anghami entity, OSN+. So has that infusion happened already? Or is that planned for this quarter? And secondly, if you could give us a sense of other say, budgeted cash infusions in other operating entities for this year, for 2024. That's one. Second one is if you could follow up on the LTV, if you could just confirm whether the LTV number, I believe it was 40% to 45% range, at the end of last year, is it still in the same range? And if that's the case, is maintaining under 50% levels a fair target? I believe when the GIG stake sale was announced, at that time, there were talks of bringing this ratio much closer to 35% kind of levels. So has that target been -- has that internal objective been modified now? Are you seeing any opportunities to deploy cash elsewhere, which is why you might -- which might be driving the decision to keep the LTV higher for longer?

Actually, you have asked several questions, so let me try to summarize them by not repeating what was discussed earlier. Now as far as the injections in our various companies are concerned, generally, you would have noticed that, first of all, we do not give any forward guidance on a specific number of the future. But generally, you would have noticed that in every subsidiary, which is -- which could have a potential capital call, we have been taking concrete actions to reduce it. Some examples are the transaction with Burgan Bank acquisition of a stake of 52% of Burgan Bank Turkey, which released their CET1 by around 200 basis points. The second transaction which we have discussed is Anghami and OSN+, which is expected to be bringing forward the EBITDA stabilization of the OSN business much closer than if the OSN was not or before OSN was actually stand-alone. So that is the second concrete step on stabilizing the business. So we expect that as far as the capital call or the need for the capital injection by our companies is concerned, it should be lower than what it was in the previous periods, but we would not be in a position to share the specific guidance on this. Now coming back to the LTV. Generally, being as far as the GIG deleveraging is concerned -- sorry, the deleveraging as a result of the proceeds of the GIG is concerned, we are on the track. And you would have noticed that it has added to the cash and we have repaid our most expensive debt. But at the same time, the overall leverage has been reduced and some part of the GIG proceeds, which are not [indiscernible] with us, which is $165 million, are clearly earmarked for settlement of the bond which is due in 2024 this year, so December end. Now coming back to your question on the LTV of 35% versus 50%, I do not do not recollect and to best of my knowledge and belief, the company never made a representation that we would be reducing our LTV to 35%. That is something which would have been the expectation of a rating agency, but we have not made any specific expression or statement that our target LTV is going to be lower than or around 35%. For a company like us, which is at the stage of enhancing the value of its various businesses and strengthening the asset or the portfolio value, 50 or below 50 is something which appears reasonable to us. And we continue to look for the opportunities in the health care, the opportunities in the education, recapitalize the companies to take them to the growth phase whenever needed, ensure that their capital structures not only meet the minimum regulatory capital requirement, but also have sufficient buffer and headroom to grow and strengthen and improve their positioning. But having said that, you would have noticed that our aim or our attempt is always through M&A, requiring the minimal capital injection from our end and the track record. For example, the transaction of -- the recent transaction in November 2022, the merger between QPIC and KIPCO was a completely equity-financed transaction and there was no cash injection into that. Similarly, the JKB and al Etihad transaction -- not the transaction, sorry, the merger -- proposed merger, which is subject to various levels of due diligence and no decisions have yet been made, but it is also expected to be a transaction which will not require any capital injection from KIPCO's level. I hope that broadly answers your question without giving any specific number or guidance. But I've given you enough qualitative information so that you can make your own assessments -- informed assessments in this account.

Yes, yes, it does. If you could just also confirm where the current LTV would be, the way rating agencies look at it, those calculations. Is that number still closer to the 2023 year-end kind of levels or below that?

Yes. So actually, the LTV, as you would have noticed in our financial information, we do not disclose the LTV. But the rating agencies as and when they do their update, each rating agency would have their own methodology and there would be minor differences in their approach to compute. And currently, we are rated by Fitch and Moody's. So each of them, they do provide their assessments on the LTV as and when they provide their updates.

We will get our next question from [ Dimitri ].

Okay. Can you hear me? Apologies for the question. I think I would just like to confirm like numbers when it comes to liquidity, basically for -- during the quarter. So basically, you mentioned that net proceeds to KIPCO from the monetization of their GIG was around $295 million. So it was net to KIPCO, assuming 69% ownership. I think you also mentioned like $38 million in dividends received during the quarter. I think like you previously also mentioned that you expect some proceeds from the sale of UOP to NAPESCO. I think the proceeds were expected of around 15 million. I'm just curious if you also received these proceeds during Q1 2024. So if you could like kind of quickly confirm like my understanding of the key inflows into the parent level during Q1 would be great.

So the first 2 items, you are correct. With regards to the UOP deal and the inflows of the UOP deal, that was recognized in last quarter of last year.

And so basically, $295 million and plus dividends, as you mentioned, like around $30 million.

$295 million of GIG from -- at the parent level, the GIG monetization proceeds, and around $30 million, $31 million of dividends.

Got it. And basically, I think you had like usual outflows during the quarter, like coupon interest expenses, G&A and et cetera. Were there any other like material items like outflows, like any acquisitions and et cetera?

We have given a lot of information during the call. So you can add to that one, the OSN and Anghami injection of $38 million as well. And the loan balance at the parent level as well as EMTN, the KD bonds and Sukuk is also disclosed in our financial statement, which will help you compute the interest on that. And there would be like the previous and normal, the G&A and normal other interest income, interest expense, which are minor as well for the KIPCO. So that will have to make up the math to reach the movement of cash.

Understood. Understood. And just one quick question. I think you discussed in detail your like view when it comes to like deleveraging kind of and et cetera. But when it comes to cash position, right, like, for example, this quarter, the cash position was kind of just below USD 600 million. Of course, like it will go down as like we see like outflows and et cetera. Do you see like any minimum comfortable level of cash position at the parent KIPCO level, so for example, like comfortable, not below like USD 200 million, USD 250 million, something quite exists in absolute amount. So just to understand if you have any kind of KPIs when it comes to liquidity position at the parent level and absolute level? So that's my final question.

See, as a matter of principle, we want to cover the less than 1 year of dues as a matter of conservatism. So usually, we find that we have at least 6 months of our OpEx and including the interest expense and around the next -- the maturities for the next 12 months.

Thank you, [ Dimitri ]. We've got a few questions from the Q&A box. Okay. Can you please clarify again the amount of the down payment actually received from GIG and the date of the coming installments?

I think, Ahmed, we have covered GIG in all respects throughout this call, including providing granular details of the gross amount, each installment, monetization, the first down payment and the remaining installment and the use of proceeds. So I presume that should get covered in that.

Okay. So we can move on to the next question: Any plan to sell any subsidiary in the coming year or 2?

See, at any point of time, as an investment holding company, we are always -- our investment teams are always looking at new investment opportunities. And at the same time, potential exits. The potential exits can happen as a result of the fact that we have achieved our objectives of the financial value creation, or we want to rebalance our portfolio. We want to change the top-down allocation to the sectors. So there are various reasons why we may be looking at new investments or divestments. And on some occasions, the investments or divestments can be related with an individual subsidiary's own objectives associated with either their capital structure or in their value -- shareholders' value enhancement journey. But we, as said earlier, we cannot specifically discuss and declare what are the specific transactions we are looking at. But at any point of time, we are always engaged on both sides of it, the investments as well as divestments.

All right. We have another question from Zafar: Can you please let us know how much cash did you inject in total in all your operating subsidiaries in 1Q 2024?

I mean you -- we do not specifically discuss these numbers because these would be proprietary. But actually, if you look at our cash flows as disclosed in our financial information, you can gather some information from the investing activity side of it.

Okay. Another question from Zafar: What is the average cost of borrowing from your relationship banks in Kuwait? I'm referring to the KWD 232 million borrowing reflected under Footnote 5, loans payable by parent company.

See, in case of the DCM transactions, we aren't specifically disclosing. But when it comes to the bilateral banks, it would not be appropriate to disclose because we deal with multiple bilateral banks and it would be -- from a competition point of view, it won't be appropriate to disclose our spread. But generally, we -- the market is liquid and the banks in the country fully understand our strengths and the credit perspective. And usually, we borrow at a very competitive rate. Because in our strategic activities, it's not just Kuwait, we also have relations with the regional banks, as would you may have seen when we did the syndicated facility, we had 3 international banks, we had several major UAE banks on our list. So it is fairly competitive, and we take the full advantage of our competitive positioning while negotiating the bilateral pricing with our banks.

Okay. Another question from [ Amanda Vandem ]: Will there be no additional injection in [ Anghami ] in 2024?

I think we had discussed in detail the potential -- we had given guidance on how we are working to reduce the capital needs of our companies through various strategic and tactical things. But in specific, we do not give a forward guidance on the amount of the cash to be injected in our subsidiaries.

Okay. Our next question: Can you please provide the details of the USD 31 million dividend? It seems that 20 million or 21 million came from SADAFCO, where did the remaining 10 million come from?

It is from EQUATE. And actually, if you -- yes, it is from EQUATE, yes.

We have one last question from [ Amanda ] as well: Do you plan to issue bonds in 2025?

2025, actually, you would have noticed that our EMTN is due -- first EMTN is due in 2026 October. So as part of the liability management, we would like to do an early start. And although we have no specific decisions or plans as yet on the 2025 issuance, but depending on the market condition and how proactive -- how good or proactively we can do on liability management, we make a decision at that point of time and we'll be making the required disclosures as and when the right opportunity enrollment comes.

Okay. I believe we have no further questions in the queue. So this should end our call for today. I'd like to hand the call back to management for any closing remarks.

Thank you, Ahmed. Thank you, everyone, for joining us. We look forward to seeing you in the next quarter. Have a great evening.

Thank you, everyone. Goodbye.