National Investments Co holds analyst conference call on financial results for first nine months of 2021
• Remarkable growth in net profit of KD 22.4 million and EPS of 28.1 fils
• Total AUM of KD 1.13 billion; an increase of 12.3 percent and above-average returns to NIC clients
• Increase in shareholders' equity to KD 207. 4 million and assets to KD 278.2 million
• Total comprehensive income of KD 43.3 million for the first nine months 2021
KUWAIT: On November 11, 2021, National Investments Company (NIC) held its analyst conference call for the first nine months of 2021 financial results. Girish Nair; CFO, Sohail Ladha; EVP, Investment Banking and Almuthana Al-Maktoum; EVP, Wealth Management participated in the call. Almuthana initiated the call by giving a briefing about NIC and an overview of the positive results in the first nine months of 2021. During this period, NIC maintained its strong financial position, high quality assets and its ability to achieve sustainable growth, thanks to the success of its strategy and the experience of the company's team.
Girish Nair made a detailed presentation of the company's financial position, as the company succeeded in achieving a remarkable growth in net profit of KD 22.4 million and earnings per share of 28.1 fils through the income statement, and a profit of KD 20.9 million as other comprehensive income through shareholders' equity. The total comprehensive income for the first nine months of 2021 was KD 43.3 million.
During the first nine months of 2021 compared to the same period of 2020, NIC successfully achieved exceptional performance, registering a loss of KD 7.9 million through the income statement with 9.9 fils loss per share, and the total comprehensive loss for the first nine months of 2020 was KD 6.8 million.
Girish added that NIC's Return on Average Equity (ROE) and Return on Average Assets (ROA) for the first nine months of 2021 was 11.7 percent and 10 percent respectively. The leverage ratio for the first nine months of 2021 was 0.23:1. The total assets of NIC increased 30 percent to KD 278.2 million compared to KD 213.3 million for the same period of 2020.
The assets
Girish explained that NIC's total proprietary assets have registered a growth of 25.7 percent during the first nine months of 2021 to KD 278 million compared to KD 221 million at the end of 2020, mainly on account of appreciation in value of FVTPL and financial assets at fair value through other comprehensive income (FVOCI), and partly to the increase in leveraged assets.
He added that the shareholders' equity attributable to the parent company increased to KD 207.4 million for the first nine months of 2021 compared to KD 167.1 million as of September 30, 2020.
Girish said that NIC achieved an upward growth trajectory for the nine months YTD 2021. In Q3 2021, NIC reported a net profit of KD 7.3 million through the income statement, and KD 20.3 million of total comprehensive income.
The performance
Analyzing the main drivers of the company's performance, Girish said that the total income amounted to KD 32.2 million for the first nine months of 2021, compared to an income of KD 1.1 million during the same period of 2020.
He explained that the major contributors to the recovery of NIC's total income for the first nine months of 2021 was the gain from financial assets at fair value through profit or loss (FVTPL) of KD 21.3 million in addition to the increase in value of Kuwaiti quoted investments at fair value through other comprehensive income (FVOCI) of KD 17.9 million.
He added that the administrative expenses of KD 5.4 million for the first nine months of 2021 were slightly higher compared to the same period of 2020, due to the increase in the subsidiaries' operating expenses as a result of the increase in operations.
Girish also outlined that during the first nine months ended September 30, 2021, the Management, Brokerage and Advisory fee income recorded a growth of 46.5 percent to reach KD 5.88 million compared to KD 4.02 million in the same period of 2020. The main driver for this growth was increased brokerage revenue from a subsidiary company; Al-Waseet Financial Business. Funds and client portfolio management fees also increased by 45.2 percent.
Assets under management
Girish pointed out that NIC's Assets Under Management (AUM) in a fiduciary capacity on September 30, 2021, was KD 1.13 billion as compared with KD 1.01 billion for the same period of 2020, an increase of 12.3 percent. that was attributable to the Company's constant endeavor to provide above average returns to portfolio clients together with capital preservation.
Major sectors
Reviewing the key highlights of NIC's major sectors during 2021, Girish said that MENA Securities Sector successfully capitalized on some investment opportunities by shifting the tactical allocation of the company's funds and client portfolios towards sectors poised for recovery, which contributed to a positive return in the first nine months of 2021 for the company's investment funds.
He added that the sector developed detailed plans to utilize and benefit from all the new authorized instruments. The company successfully launched the "Market Maker" where the share of Boursa Kuwait Co, was chosen to be the first practice of this service, with the Gulf Cable Co following suit. More companies are expected to be added in the near future.
Girish stated that MENA Securities Sector maintains improving its comprehensive databases and internal analytical systems to provide strategic insights and timely recommendations on all aspects of local and regional markets.
Regarding the performance of IBS sector, Girish said that the IBS advisory team successfully completed the listing of Al-Safat Investment Company and supported a leading fitness and lifestyle business in securing debt. The team is currently in the process of implementing of a buy-side transaction for a leading logistics company, one of Kuwait's largest multi-sector businesses. It is also working on acquiring and arranging financing for this transaction, in addition to two flagship pre-IPO mandates, with expected completion in 2022 and 2023.
Meanwhile, he said that the Alternatives Department has successfully completed an investment in a student housing project in Orlando, Florida, USA. Currently, NIC is in final stages of due diligence to invest in a leading regional VC platform specializing in delivery.
Girish added that NIC has invested in many direct venture capital opportunities that focused on a leading international fin-tech firm, a pioneer food-tech company as well as a leading regional e-commerce platform. He stressed that NIC maintains exploring new investments and direct investment opportunities.
Girish also pointed out that the real estate investment sector at NIC is working on developing and improving all the real estate assets in portfolios to increase revenue and property values, restructure the sector and develop policies and procedures to achieve customer satisfaction. The sector also managed to achieve full occupancy rates in Al-Wataniya Resort through a strong marketing campaign. It also launched a new campaign to improve the assets of real estate portfolios and increase revenues and property values. NIC managed to keep fair occupancy rates during 2021 despite the pandemic repercussions.
Growing business
Sohail Ladha, Executive Vice President - Investment Banking at National Investments Company, said that the four basic strategic elements NIC is employing to grow its business and strengthen its competitive position are: building AUM according to three initiatives that revolve around developing products with focus on venture capital and international real estate products. In this regard, NIC is building a strong placement team by hiring highly capable private bankers to support growth, build a solid reputation and bring co-investment opportunities to the company's investors such as Boursa Kuwait, Kuwait Foundry, VINCO and FedEx.
"The second element of NIC strategy is focusing on enabling technology and competencies. The company is working to focus its efforts on digital flexibility and invest in digitizing operations and developing work environments. In line with this element, NIC launched new digital channels for clients such as (NICTrade) digital platform for trading, Client Portal platform and WhatsApp CRM," Ladha said.
The third element, he added, is enhancing governance, which is a key strategic reason for the NIC upgrade to Premier Market status on Boursa Kuwait. This shows the company's commitment for increased transparency and governance as well as to upgrading its risk-management framework to include quantitative and qualitative measures in line with global best practices.
Finally, the fourth element focuses on mid-market leadership in investment banking and on mid-sized clients. 2020 provided an excellent platform, where NIC had several flagship transactions and built specialist teams in Equity Capital Markets (ECM), Mergers and Acquisitions (M&A) and Venture Capital (VC), which have been identified as key growth areas.
Capturing opportunities
Ladha also presented case studies, which serve as examples of the company's ability to identify and execute unique opportunities in the market, including Boursa Kuwait. The investment thesis here was to acquire a strategically important asset with strong, recurring and sustainable cash flows due to its market leadership position and improving prospects. A consortium was formed to acquire a controlling stake of Boursa Kuwait in February 2019. NIC direct stake was 14.4 percent. Since acquisition, Boursa Kuwait has undergone through an IPO and listing process. The market price today is several multiples of our acquisition cost. To date, the investment has generated a total return multiple of 8.44 times (based on market values).
Ladha pointed out that the investment thesis of Kuwait Foundry, which is the second case study, was the acquisition of a mispriced asset with intrinsic value significantly greater than the prevailing market value. Towards this, NIC acquired a 20 percent stake in January 2019 and was taking measures to realize value. So far, NIC already recaptured most of its equity in the transaction and the total return multiple based on market values is 1.42 times.
Another noteworthy example, Ladha said, was Vinco Tesco transaction where the objective was to deliver attractive cash yields to our investors by acquiring real estate properties tenanted by credit-worthy tenants. The transaction delivered consistent dividends, while appreciating in value.
He also highlighted that NIC invested with a leading developer in logistics warehouses project in Italy. The project was developed by leading developer and leased to FedEx for 15 years. It is expected to generate annual cash yield of 8 percent and a net IRR of 9 percent over an 18-month term.
He pointed out the successful placement and listing of Al-Safat Investment Co in October 2021, saying that it achieved excellent performance after listing. The objective of the transaction was to support the client in the private placement and ensure that the company meets the criteria for listing on the Main Market of Boursa Kuwait.
At the conclusion of the conference call, National Investments Company affirmed that it would be in constant contact with its shareholders and clients to keep them updated on the developments in the company through the quarterly analyst conference.