KUWAIT: The National Investments Company held a financial analysts conference for its Q3 2022 results on Thursday, November 17, 2022. The conference witnessed the positive participation of Girish Nair, NIC’s Chief Financial Officer, Bashar Khan, Senior Vice President of Investment Banking Sector, and Al Muthana Al Maktoum, Executive Vice President – Wealth Management Sector, who presented a brief about the company and shed light on the positive financial results achieved in Q3 2022, which reflect the company’s outstanding performance and solid operational achievements that led into maintaining and strengthening its financial position, high-quality assets and its ability to achieve sustained growth. This is all due to the effective strategy and its competent, experienced team.
Nair presented a detailed report about the company’s financial position and the outstanding performance achieved up until September 30, 2022; the company announced a net profit of KD 8.8 million (11 fils per share), and other comprehensive income of KD 5.8 million through shareholders’ equity, translated into a total comprehensive income of KD 14.6 million for the third quarter, compared to KD 22.4 million generated during the same period last year (28.1 fils per share), other comprehensive income of KD 20.9 million and total overall income of KD 43.3 million.
Nair added that the return on average equity and average assets reached 4.3 percent and 3.5 percent respectively during the third quarter of 2022, while the leverage ratio was only 25.5 percent as of September 30, 2022, and the company’s quick liquidity ratio was 41.2 percent. Total assets and shareholders’ equity belonging to the parent company increased to KD 258.6 million and KD 195.2 million respectively in the third quarter of this year, compared to KD 278.2 million and KD 207.4 million at the end of the first nine months of 2021.
Nair indicated a decrease of KD 3.2 million in net profit through the income statement and a reduction of KD 2.5 million in other comprehensive income through shareholders’ equity in the third quarter of 2022. Thus, the total complete loss reached KD 5.7 million during the same period of this year due to the performance fluctuations witnessed by the markets due to macroeconomic developments and the tightening of monetary policy measures adopted by various central banks, as the Kuwait General Index recorded a decline of 4 percent during the third quarter.
The company’s total income for the third quarter of 2022 amounted to KD 17.2 million, mainly due to dividends, which amounted to KD 8.1 million, and management, brokerage, and advisory fees, which amounted to KD 8.3 million. In addition to that, the main contributor to other comprehensive income is to increase the value of investments priced at fair value through other total income, which amounted to KD 5.3 million.
Expenses and provisions amounted to KD 7.1 million in the third quarter of 2022, compared to KD 6.3 million for the same period of 2021. Administrative costs amounted to KD 7 million for the first nine months of this year compared to the same period in 2021, reaching KD 5.4 million. This increase was mainly due to the merger of the new subsidiary and increased operations. The financing costs for the current nine months amounted to KD 0.8 million, higher than the corresponding KD 0.4 million last year. This increase was offset by decreased value losses and other provisions from KD 0.2 million in 2021 to almost zero for 2022.
Income from management, brokerage, and advisory fees grew by 41 percent to reach KD 8.3 million during the third quarter of this year, compared to KD 5.9 million for the same period of 2021. The growth was through brokerage income from one of our subsidiaries, Al-Waseet Financial Business Company, which grew by 29 percent, management fees from funds and portfolios, which grew by 10 percent, and consulting fees and other income, which grew by 482 percent.
Total assets owned by investments decreased by 7.6 percent during the first nine months of 2022, reaching KD 269 million, compared to KD 291 million as of the end of 2021, mainly due to dividends for 2021. Meanwhile, assets under management have increased by 7.3 percent to reach KD 1.17 billion as of September 30, 2022, compared to KD 1.09 billion by the end of 2021.
Nair added that despite market volatility, MENA’s Priced Investment Sector had achieved positive returns, Mawarid has recorded 4.6 percent returns, Al Mada 3.42 percent, Al Wataniya Fund 1.94 percent, Zajil Services, and Telecommunication Fund 1.45 percent and Darij Investment Fund -0.1 percent. As for the portfolios, they achieved returns of 5-4 percent. Market Maker service has been expanded by adding a new company, bringing the total number of companies to 10. Market Maker’s transactions reached KD 9.8 million during the third quarter of this year, with the market maker’s trading value representing 10 percent of clients’ trading volume.
Nair said that National Investments Company continues to provide its advisory services, which included increasing the capital of the National Consumer Holding Company and Alrai Media Group during the third quarter of this year. NIC played investment advisor for the merger between Boubyan Petrochemical Company (KSCP) and Educational Holding Group (KSCPC), as well as the investment advisor for the merger between Safat Investment Company (KSCP) and Capcorp Investment Company (KSCC). A new IPO and listing agreement was signed, and the advisory team has completed the final stages of negotiations on the IPO and listing authorization for a Kuwait-based company, as well as a sale and acquisition authorization for the Kuwait Oil and Gas Company, in addition to the preparation of several offers across few local sectors.
The Alternative Investments Department also completed a deal with Amazon’s logistics warehouse project in Germany. This real estate fund focuses on retail services assets in the United States of America. It is in the final stages of evaluating financing several other projects, namely a financial technology company based in Egypt, an Amazon logistics warehouse project in Germany, a multi-family housing project in the US, and several other financial investments, in addition to working on improving existing investments and exits.
Nair explained that the real estate investment sector continued to expand its customer base by attracting new real estate portfolios and renewing many managed real estate portfolios while achieving total occupancy rates in Al Wataniya Resort and other properties through a comprehensive marketing campaign. In addition to working on launching the electronic real estate system to raise the level of customer satisfaction, achieving an 85 percent rental collection rate, and improving occupancy rates by 89.5 percent in the third quarter of 2022 compared to 86.2 percent, this is in addition to kicking off Al Wataniya Resort’s development project.
Bashar Khan, Senior Vice President of the Investment Banking Sector, said that the company’s strategy focuses on four components: Building managed assets through working on critical initiatives and leading towards product development in a structured manner with a focus on venture capital and international real estate products. The second component is enabling technology and efficiencies. Therefore we continue to invest and transform our operations and evolve our digital channels, such as the online trading service ‘NICTRADE,’ and establish a client-focused platform.
The third component is strengthening governance; hence we continue to improve risk management to include quantitative and qualitative metrics in line with global best practices. Finally, the fourth component is leading the middle investment banking market to strengthen the company’s position and continue to build its capabilities with a focus on medium-sized clients. Also, our team plays a vital role in executing pioneering projects in Kuwait and building specialized teams in Capital Markets (ECM), Debt Capital Markets (DCM), and Venture Capital (VC) to enhance the company’s capabilities further.
Studies and Opportunity Acquisition
Khan referred to some studies that indicate the company’s ability to identify and utilize investment opportunities in the market. In February 2019, NIC acquired a controlling stake in Boursa Kuwait, and its direct investments have amounted to 14.4 percent since the acquisition. Boursa Kuwait has also undergone an IPO and listing process, and today’s market price has reached many times the cost of the purchase, achieving a total multiplier return of 11.08 times (based on market values).
Additionally, the Kuwait Foundry Company’s investment study has focused on the acquisition of an asset with a discounted price and an intrinsic value much greater than the prevailing market value; the investment also provided a specific path to fair value, acquiring a 20 percent stake in January 2019, and taking measures to achieve fair value, most of the equity in the transaction was restored. The total multiplier return on a market capitalization basis was 1.27 times.
This is plus the investment in the logistics warehouse project in Italy leased to FedEx. The contract was signed for 15 years, expected to achieve an annual cash return of 8 percent and a net internal rate of return of 9 percent over 18 months. Finally, the investment in Pipe Technology, a fintech company that provides solutions to its clients with unremitting sources of income, by obtaining the necessary capital without reducing their ownership while accepting new capital entry into their companies or forcing them to get external loans.
Khan referred to the standards set by the company, which positively impacted the IPO of Ali Alghanim Sons Automotive Company, leading to positive and effective results for the company. Concluding the conference, NIC confirmed being in constant contact with its shareholders and customers, keeping them informed of all the developments through the quarterly analyst conference.