Mazaya Real Estate Development Q.P.S.C. (MRDS) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. This is [indiscernible] from QNB Financial Services. I would like to welcome everyone to Mazaya Real Estate Development's 2019 Financial Results Conference Call. On this call from Mazaya, we have Joseph Al Hamod, who is the Senior Finance and Admin Manager; and we have Mohammed Al Qadi, who is Communications and IR manager. We will conduct this conference call, first would be comments on the presentation followed by Q&A. I will now hand the call over to Mr. Hamod to get us started. Joseph, please go ahead.

Thank you, [ Achmad ]. Good evening, gentlemen. As you're aware, today, we're running into the presentation for the year ended 2019. We will take you over along with the results for the company and a brief about the projects, where do we stand on each of them. As you're fully aware, that should follow with a Q&A. So just take note of your questions, and definitely at the end, we'll be able to take all your questions on board. First, to start with just on January 22, the Board had met at Mazaya and have looked at the financial statements, out of which mainly we had a discussion related to the implementation of the IFRS 16 which came into effect in 2020, and we adopted to have an early adoption that comes in 2019. This had a major effect on the financials as you have seen into the -- mainly, it comes to the P&L, out of which the effect from this project had to restate 2018 numbers. The previous year, I mean, last year, it was announced at a net profit of QAR 16.5 million -- are comparing to a restated which you're seeing today in the financial statements for 2018 as QAR 364 -- QAR 374 million. This number is coming from mainly a gain from the re-recognition of the asset, which is shown, although in the financial statements that you have or even in the presentation that you have in your hands of QAR 362 million coming only from the derecognition of this asset. This is a continuation of the treatment that had took place earlier this year, and we have discussed the same into Q3 call. Now we'll take you through this year's results, as you're fully aware, our major project, Sidra, had been handed over, tenants moved in, and we have booked the revenue from the asset coming from a different other assets such as Tala, the rental coming from this and the normal operating expenses having an income from the operation that is QAR 92.5 million. This is topped with a change in the fair value of our assets, which was minimal for this year as a QAR 9 million along with the other G&A and finance cost of QAR 19 million and QAR 48 million. This has resulted in a net profit attributable to the shareholders reaching to QAR 32.5 million. Along with this, you would see an EPS of QAR 0.03 comparing to last year that was QAR 0.016 and restated 2018 that was QAR 0.32. This has lead also with us to changes in the balance sheet definitely, as the total assets had been increased by around QAR 50 million -- QAR 51 million in total as an increase in the total assets, where we can see that is -- and another movement material that you would be looking at, we have the finance lease receivable, which is related to our Sidra project, have been booked at QAR 1.1 billion. This is related to the -- this is the main related to the IFRS 16 restatement that took place. Along with this, we can see a normal movement into the other liability and others, out of which I would just inform you the total liability of the company has been already looked at in late December, and we are into the final stages now to finalize the rescheduling of the total debt of the company. Now what we have successfully -- the Board had successfully approved the terms and obtained a competitive terms for restructuring the debt on a long-term tenant with a way even cheaper cost than the cost that has to be previously at Mazaya. So accordingly, this would be reflected into a more easier cash flow to the company, out of which both all the payments with the company can still hold enough cash flow -- free cash for their future investments and expansions and definitely for any future payments that may be required. Now we'll walk through -- this is mainly for our income statement and balance sheet, which is straight. There is not much of movements taking place. We'll walk you through our projects, which is well known, the Sidra. For those who is newly joining Mazaya, Sidra is a project that is built on a BOT land owned by Qatar Foundation for 21 years, just been delivered earlier this year -- earlier '19, I mean, in April. It has been leased to Qatar Foundation for the same period. The Sidra gives a stable income for the company for a long-term contract. And that's one of the key projects or major projects you can see assets on our balance sheet. Other than Sidra, you can see that we have the Tala Residence. Tala Residence is an asset owned by Mazaya -- fully owned by Mazaya that has been leased to Qatar Foundation for a 10 plus 5 years of long-term needs, out of which we can say 7 years have already been lapped since that started into 2012. Even Tala would have a decent cash flow coming to the company and the returns from Tala was pretty good on the upper hand of the tenants and above. The other project we have is the Marina Mall. The Marina Mall, recently, there is some adjustments taking place into the concept. The final concept yet to be approved by all the authorities required. A pre-approval was obtained. And the Board is following up to obtain the new concept at which definitely, it has to be feasible for the investors and will be announced in due course along with that. There is a new project that Mazaya have been -- has been looking at currently, which is a PPP project along with Ashghal. The public authority work had announced, as you may be aware, recently, a couple of projects into the PPP structure. One of them that, if you're fully aware is the school, the other is the switch pipe and others. Mazaya was interested and had already bid for the project that was announced by Ashghal for the car park. The project is building, managing, financing, operating and putting back the car park for Central Doha and West Bay. We're talking about 12,000 parks within the Doha. And that's a project that Mazaya is bidding for along with the specified consultants that have been identified. Currently, as we speak, we have been prequalified. The bid has been running currently to be submitted and the project should start -- as for park should start later by this year, delivery should be within 2 years, earlier 2022. This project not only a project with car park, it has a guaranteed return from the government, I mean, i.e., from Ashghal. So there is a minimum return that has been announced that Ashghal would be able to guarantee for the investment, which is a return Mazaya is looking for a long-term contracts with a guaranteed return to their shareholders. Another one is the merger that you've been aware for Mazaya for almost quite some time. We've been discussing a possible merger with Al Bandary real estate. Just to further clarify, we're looking about a merger along with the income-generating assets from Al Bandary, only we're not looking for a full merger -- full-fledged merger with Al Bandary. Al Bandary is diversified. They have their investment -- their contracting arm, they have their investment properties, and they have their support services. We're looking about the income-generating assets only. Now -- also earlier this year, which was announced, Al Bandary had put an offer to Mazaya based on the valuation and studies that they have run. And Mazaya has received such in return, the Board is looking on getting back to Al Bandary. And definitely, if the project is -- if the proposal is accepted by the Board, needs to be put up with a recommendation to the general assembly and proceed with the requirements of the authority approvals in order to proceed. This is mainly for the projects for Mazaya. We have discussed about the income statement and the others. And last, but not least, Mazaya had called for the general family, which we would like to see you all there. And just to remind, it will be on February 16. And to look over a couple of points, which is the normal agenda items out of which this year, we would be having an election for the new Board. The third -- the last point that was decided in our Board last week. Mazaya is considering to buy part of the treasury shares, out of which we had announced that the company is looking to buy up to not more than 7.5 million shares of our shares due to the belief that the share is undervalued in the market. And unfortunately, that's not only Mazaya, but we believe more about Mazaya share is undervalued in the market, and we need to have a position that could support the shareholders with putting back these shares at the profit to the market once it -- once the share price will recover. So this is, in a nutshell, brief about everyone. I do believe that you have the presentation in front of you and maybe the financials. I'll be more than happy to take any questions. Please go ahead.

[Operator Instructions]

Operator, now we are waiting for the questions.

We will take the first question from Anastasios Dalgiannakis from Faisal Investment.

Two questions, if I may. The first question is the outlook for rental income for 2020. So the rental yield at the moment of the income-generating assets on the balance sheet looks low. And I want to understand whether you expect improvement of rental income in 2020? And a follow-up question, if I may, on Al Bandary. You said you are going to acquire the income-generating assets only. What yield are these income-generating assets achieving, if you can disclose?

Thank you. As for the view on the rental income, as you're fully aware, the income that has been presented in the income statement is coming mainly from 2 projects at Mazaya. Being a developer, we do not have -- there is the development phase, so there is no view on a big improvement within the year 2020. It would be more or less remains the same because the other projects that we do have would require some development phase, in that, we will not be booking any rental income accordingly. And that goes in line with the other question which you have raised is the Al Bandary transaction. Al Bandary transaction, as said, is an income generating. If this transaction goes through and get the approval, definitely, the rental income is expected to, if I may say, more than or almost 1:1 could be the income. And you will be -- you'll see a change into this. On the same question, the part that comes to the yield. Currently, the Board is still discussing the yield expected on the transaction by itself. And yet, once it got approved, it will be announced. And definitely, you would see it on the prospectus that we need to put for the shareholders and to the general assembly. For the time being, the yield is not yet finalized, and we're not in a position to disclose such information.

[Operator Instructions] And there appear to be no further questions at this time. So I'd like to hand it back over to the speakers. Please go ahead.

Okay, gentlemen. So I would assume not much of questions we have received today. Hopefully, that we have answered all your queries. We are always available on our IR contact number for the company. You can just call 40121212, our office number. Just request to contact the Investor Relations department or even myself and you have the names along in your hands. Thank you for this evening, and we wish you a good day ahead.

Thank you. This concludes today's call. Thank you for your participation, ladies and gentlemen, and you may now disconnect.