United Development Company Q.P.S.C. (UDCD) Earnings Call Transcript & Summary

Hello, and welcome to the United Development Company Conference Call. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Mr. Roy Thomas to begin the conference. Roy, proceed.

Thanks, Boris. Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to United Development Company's Second Quarter and First Half 2023 Financial Results Conference Call. On this call from United Development Company, we have Maher Omar Naim, the Executive Director for Financial Planning. We will conduct this conference call with management first to reviewing the company's results, followed by Q&A. We'll turn the call now over to Maher Naim. Go ahead, Maher.

Yes. Hello, everybody. I hope everyone as well. Just to give a brief about United Development Company Financial Performance for the First Half of the Year 2023. The company has achieved QAR 881 million in revenue as compared to QAR 855 million of same period last year with an increase of 3%. And the net profit, the gross net profit is QAR 189 million as compared to QAR 173 million with an increase of 9%, while the net profit attributable to the shareholder of the company, the equity holder reached QAR 188 million compared to QAR 168 million with an increase of 12%, and the earnings per share was 0.053 as compared to 0.047. As from the development side, the company is still working on Gewan development, and we are working as planned. We have finished the majority of the projects related to the Pearl Island per say and Gewan Island is the concentration now and the development work are being incurred. It's been, as you guys always know, the challenge of the interest rate increase all over the sectors is a challenge to all companies. So this is evident by showing the increase on our net finance cost compared to the prior period, which is -- we have QAR 73 million net finance costs as compared to QAR 30 million, the finance cost of same period last year, but I'm humbled that the company managed to achieve some good results for the first half, and we will continue our effort for the third quarter for the year 2023, indeed, in addition for fourth quarter of the year 2023. So this is a small overview of the financial performance. Should you have any questions, I'm ready to answer.

[Operator Instructions] Our first question comes from the line of [ Mustafa Ameer ] from Al Rayan Investment.

This is [ Mustafa Ameer ] from Al Rayan Investment. Two questions primarily regarding your other income -- for the second quarter, other income was QAR 213 million. Can we just know what's the constituent of this other income, please?

It is a transaction that we were able to realize, okay, this year, the first half, which has been realized and concluded this is accordingly -- it's again on a particular transaction, and it has been recognized. Thus, it increased the other income.

So it was basically a one-off that came through?

Yes, it is one-off definitely.

Okay, transaction. All right. Secondly, your urban development revenue that's gone down quite a bit in the second quarter. So related to this, with the Gewan Island handover, will we see this trending up late during the year or not anytime soon?

It went down, it was 5.50 as compared to 5.6. It didn't go down a lot, but always, always yes, the motive and the plan is finalized. But there are certain delays by the contractor, which is affecting the revenue recognition accordingly. But these are under control. Yes, the plan is for this to be increased throughout the Q3 and the end of the year.

Is that sort of the time line Q3, Q4, roughly the time line for Gewan Island handover as well or will it be later?

Within that range, yes. Within that range, yes. This is the plan as of now.

[Operator Instructions] Our next question comes from the line of [ Wei Cao ] from QIC.

I just have 2 questions. First is on the fair value loss on investment properties. Do we know what that is about? And the second question is on your debt-to-equity ratio. What is your guidance on that, please.

Well, regarding the fair value loss, this is you know how much is the interest rate has increased. QCB lending rate as of last year was almost -- this is the base rate was 3%, now it is 6.25%. So definitely, this will have an impact on the cost of capital, which will have an impact as well on the valuation. So this is mainly a direct impact on the investment in property, which not UDC, I'm expecting all real estate development company or real estate company to have an impact, unfortunately, towards the year-end, okay, due to the high interest rate, which is affecting, the work and the discount rate and so forth. As for the debt-to-equity, we are fine. If you see the debt-to-equity ratio, it is within acceptable range. And as you know, all our debt -- the majority of our debts are project financing. And each and every project we pay, it is on debt. So it is closely monitored and it's within acceptable range. But the finance cost, yes, has definitely increased. This is beyond UDC control, beyond any other company due to the increase of interest rate, which is affecting all companies here in the State of Qatar.