Mekdam Holding Group - Q.P.S.C. (MKDM) Earnings Call Transcript & Summary

Hello, everyone, and welcome to Mekdam Conference Call. Please note that this call is being recorded. I'd now like to hand over the call to Roy Thomas, our moderator for today. Roy, you may now begin.

Thanks, Ellie. Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Mekdam Holding Group's Fourth Quarter and Year end 2024 Financial Results Conference Call. On this call from Mekdam Holding Group, we have Ehab Naser, the Group CEO; Bara Sami, the Group GM; and Banan Serhan, the Group CFO. We will conduct this conference call with management first reviewing the company's results, followed by a Q&A. I will turn the call now over to Ehab Naser. Go ahead, Ehab.

Okay. Thank you. Thank you, Roy, and thank you, everybody, for joining our conference call. To begin, I would like to provide a brief overview of Mekdam Holding Group performance for year 2024. The group achieved a notable growth in business volume with revenue reaching QAR 559 million, up from QAR 526 million in the previous year, representing an increase of 6.3%. The growth was primarily driven by the comprehensive maintenance services for gas recycling stations, which contributed significantly to revenue levels. Net profit attributable to shareholders stood at QAR 38.9 million for 2024 compared to QAR 36.3 million in 2023, reflecting a growth of 7.3%. In 2024, Mekdam Holding Group successfully signed new contracts totaling QAR 861 million. The total value of ongoing contracts reached approximately QAR 2.6 billion, with remaining value of work under these contracts estimated at QAR 1.5 billion. Additionally, the proposals currently under negotiation with the clients amount to approximately QAR 3 billion, with anticipated award rates ranging between 20% to 30% based on the historical trends. The group also achieved a customer retention rate of approximately 90%, providing a robust foundation for future revenue and profit forecast. As for the Mekdam Holding Group financial position, the group maintained strong liquidity at December 31, 2024, with current assets ratio of 77.2%. The current ratio stood at solid 2.3x. The group also made a significant -- reducing its reliance on the bank financing. Bank financing decreased by 46.3% from QAR 64 million as of December 31, 2023, to QAR 34 million as of December 31, 2024. This improvement was driven by the enhanced operating cash flow, enabling the group to fund its activities through internal resources. Notably, the bank financing obtained by the group is allocated to projects completed upon delivery to clients with most facility provided by Islamic Bank, reflecting the group adherence to Sharia compliance and practice. Lastly, the Board of Directors has recommended to the general assembly the distribution of dividends to the shareholders in form of bonus shares. Shareholders will receive 5 bonus shares for every 20 shares held, equivalent to approximately 18.5%. Thank you. And we are leaving the floor for Q&A.

[Operator Instructions] As of right now, we don't have any raised hands. I'd now like to hand over to Roy Thomas for further remarks.

Okay. Yes, if there are no questions from outside, I'd like to ask a few questions to you all.

Yes, Roy.

Yes. One of the questions -- first is regarding your contracts. Congrats on signing QAR 861 million worth of contracts in 2024. Is there some sort of a target that you'll have for 2025 for the contracts that you're aiming to sign for 2025?

Yes. Thank you. Thank you for your questions. As we mentioned earlier, we mentioned we have approximately QAR 3 billion proposals and offers under negotiation with the customers. And the historical success rate, it ranges from 20% to 30%. So if we took this 20%, multiply it by the QAR 3 billion, so we are expecting, minimum, QAR 600 million. And if we use the 30%, we are expecting QAR 900 million. This is based on what is being submitted and under negotiation as of 31 December 2024. Keeping in mind, during 2025, we will also submit another offer. So we are expecting, yes, let's say, QAR 900 million, QAR 1 billion to be booked in 2025.

Okay, excellent. All right. Okay. Another quick question. In 2023, the government contracts as a percentage of total revenue reached around 60%. In 2024, do you all have a rough estimate on what is the percentage of government contracts?

Yes, it's almost around this percentage.

Same percentage. Okay, 60%.

Yes, yes. And we are -- this is one of our strategic targets because working with the government, it gives you stability in your business, especially stability in your cash flow.

Okay. All right. Yes, okay. And one...

Because we are -- if you allow me, because at Mekdam, we are a little bit risk averse against the credit risk. We are a little bit sensitive. We are always trying to get our money on time. Because delaying your cash flow, it has negative consequences on the business. For that reason, we are preferring to have a significant portion of our business with the government, where your cash inflow is firmed and you can expect your money when you can get it.

Great. Excellent. And one more quick question. Can you explain briefly, the coming LNG expansion for Qatar is a huge expansion from 77 million to 142 million tonnes. Can you tell how will Mekdam benefit from this huge expansion of Qatar's LNG capacity?

Okay. If you don't mind, I will give it to my colleague, Mr. Bara Sami, the group GM.

Yes. So regarding your question, Mekdam is participating in the expansion projects for both NFE, NFS and NFW through all our subsidiaries, whether through the infrastructure -- IT infrastructure, through our subsidiary, Mekdam Technology, to deliver passive and active networks and automation solutions; or through our oil and gas engineering subsidiary to deliver automation and integration platforms for oil and gas solutions; or through our consultancy. We have direct -- either direct contracts with the client or through master system integrators that operates from the United States who have been awarded under the EPC contractors significant packages for the technology solutions. So we claim to be one of the very early integrators to be awarded IT and integration scope for the North Field Expansion. And it is definitely represented by significant scope in our pipeline for 2025, because energy is a major focus for us due to its stability and long-term commitments from the government.

Great. Excellent. So if that's the case, can you just -- I mean, again, just a rough estimate. In your QAR 3 billion worth of bids right now currently that you've given, is there a percentage that goes to this LNG expansion? Is it a substantial amount in that overall bid?

Yes, more than QAR 1 billion would be related to energy and expansion projects from the QAR 3 billion, yes. That does not include the new tenders that will be announced in 2025.

Okay. All right. And just a quick thing, just last one from my side. You mentioned regarding 2024 and your -- one of your major revenue increase was from gas recycling stations. Can you give a little more details on that, just to understand what that exactly means?

Yes. Well, it's related to the maintenance shutdown projects. It's basically maintenance services offered for the refineries and oil and gas stations, where it will be shut down for a certain period and a periodic maintenance, a deep maintenance, will be performed for the mechanical, electrical and automation platforms and systems there. And it is a very niche, specialized services that requires very specialized engineering resources, which we are offering for the defined period of time allowed by the client. And this is directly related to the production of the oil and gas.

And if it will please you, allow me to add something here. Getting shutdown business from QatarEnergy, we will consider it as an appreciation for Mekdam. Because such kind of job, it cannot be given to any company because you have a certain period of time to execute the maintenance for the production line. And any delay in executing the job, it will cause a huge damage for the country. So QatarEnergy, when they are awarding such contracts to a company, they make sure that, that company is capable to deliver this job within the specified time frame.

All right. Okay. Excellent. So Ellie, is there any other questions from anybody else?

As of right now, we don't have any pending questions.

Okay. All right. If there are no further questions, I would like to thank Mekdam Holding Group's management for the results update and answering all the queries. And we look forward to speaking to you all for the first quarter 2025 financial results conference call.

[Foreign Language] And we hope that 2025, it will be a better year for Mekdam and for everybody. And thank you for your continued support and confidence in Mekdam Holding Group. Thank you.

Thank you for attending today's call. You may now disconnect. Have a wonderful day.