“National Investments”… Outstanding, Exceptional Profitability and Sustainable Growth
● Achieved significant net profit growth of KD 24.4M and earnings per share (EPS) equivalent to Fils 31.
● Total managed assets are KD 1.09B by an increase of 8.3%. The company provides its clients with higher-than-average turnover.
● Shareholders’ equity in the company rose to KD 216.8M.
Analysts’ conference for the financial year ended 2021 was held by National Investments Company on Wednesday, 6 April 2022, with the presence of Mr. Girish Nair, Chief Executive Officer – For Financial Affairs, Mr. Bashar Khan, Senior Vice-President of Banking Investment Sector, and Mr. Al-Muthanna Al-Maktoum, Deputy Chief Executive Officer For Wealth Management Sector, who started with a brief presentation on the company and an overview of the positive financial results for the year 2021, which demonstrated that the National Investments Company has experienced a year of outstanding performance and strong operational achievements that enhanced its financial standing and had a positive impact on maintaining a strong financial position, high-quality assets and its ability to achieve sustainable growth, thanks to the success of the company’s strategy and the experience of the working group.
A detailed explanation of the company’s financial position was reviewed by Mr. Girish Nair, NIC’s Chief Executive Officer For Financial Affairs, as NIC has succeeded in achieving significant net profit growth of KD 24.4M and earnings per share equal to 31 Fils under the income statement, indicating that the company was able to earn a profit of KD 25.6M as other comprehensive income through shareholders’ equity. Also, the total comprehensive income for the year 2021 was KD 50 million. During the comparative period of 2020, the company has reported a loss of KD 2.7 million income statement, a loss per share of 3 fils, and a gain of KD 3.75 million through other comprehensive income. The total comprehensive income was KD 1.1.
He indicated that the return on average equity and return on average assets was 12.5% and 10.7% respectively during 2021, stating that the leverage ratio was 68.7% during this period.
Mr. Nair stated that the total shareholders’ equity of the parent company increased in 2021 to KD 290.6 million and KD 216.8 million compared to KD 221.4 million and KD 175 million respectively for the ended 2020.
Further, he clarified that NIC achieved an escalating growth of its performance during 2021 after Covid-19 related-difficulties and setbacks since 2020, when the company was able to generate a net profit of KD 2.04 million through income statement during the 4th quarter of 2021. During this period, the total comprehensive income was KD 6.74 million.
Earnings per share during the current year reached 31 fils, and in line with our commitment to deliver consistent and superior returns to our shareholders, the Board of Directors have recommended a dividend of 45 fils per share for the fiscal year ended on 31 December 2021 out of retained earnings and a partly out of the voluntary reserves. This recommendation is subject to the approval of the General Assembly and other regulatory authorities. Therefore, the NIC’s dividends in 2021 will be the highest during the last fifteen years, as NIC has a strong and stable history of dividend payments during previous years. National Investments Company has paid dividends ranging from 5 fils per share in 2016 to proposed 45 fils per share for 2021. Dividend yields have also increased over the previous five years from 5.3% in 2016 to proposed 20.5% in 2021, which is higher than the average of broad market average and specifically the financial sector.
On the other hand, Mr. Girish Nair said that the total assets owned by the company witnessed a growth rate of 31.2% during 2021, amounting to KD 290.6 million, compared to assets amounting to KD 221.4 million for the end of the year 2020, mainly due to the appreciation in the value of investments at fair value through profit or loss (FVTPL) and financial assets at fair value through the other comprehensive income (FVOCI), as well as this growth is partly due to the increase in leveraged assets.
The total assets under management (AUM) also rose to be KD 1.09 billion on 31 December 2021, compared to assets amounting to KD 1 billion during the same period of the last year, namely an increase of 8.3%. Thus, the company seeks to offer a variety of portfolio management solutions and services, in addition to providing higher risk-adjusted returns to our clients’ portfolios and fund unit holders.
Mr. Girish Nair discussed the presentation and analyzed key elements of NIC’s performance, stating that the total income of 2021 amounted to KD 39.8 million, compared to an income of KD 9 million during the same comparative period of the last year 2020, namely an increase of 342%.
He clarified that the main factors that contributed to the recovery of the total income of National Investments Company during 2021 were the profits of investments at fair value through profit or loss (FVTPL), which amounted to KD 23 million, in addition to the increase in the value of kuwaiti investments priced at fair value through other comprehensive income (FVOCI) of KD 23 million.
Mr. Girish Nair mentioned that the value of total expenses during 2021 includes impairments and provisions by an amount of KD 11.1 million, compared to KD 11.2 million for the year 2020. The administrative expenses for the year 2021 amounted to KD 9.7M, which is 44% higher than in the year 2020, corresponding to the increase in operations and total income during the year 2021. This increase was offset by a decrease in impairment losses and other allocation from KD 3.9 million in 2020 to only KD 0.5 million in 2021.
Furthermore, Mr. Girish Nair clarified that during the previous year ended on 31 December 2021, the income generated from management fees, brokerage and consulting was grown by 47.5% amounting to KD 9.1 million by the end of the year, compared to KD 6.2 million during the same period of the year 2020. The main reason for this growth was the brokerage revenues from Broker Financial Business Company, by an increase of 59%, and an increase in the fees for funds management and client portfolios by 76%.
Main Sectors Performance
On the other hand, Mr. Girish Nair has reviewed the prominent events during the year 2021 for some NIC’s main sectors. He stated that MENA Securities sector has availed from some investment opportunities, by tactically directing clients’ funds and portfolios towards qualified sectors and companies, which contributed to achieve a positive profit for the financial year of 2021 for investment funds and the company’s proprietary portfolio as well as for its clients.
He stated that MENA Securities sector has developed detailed plans to availed from all new tools authorized by Boursa Kuwait. The company provided market maker service to Gulf Cables Co., Electronic Industries Co., Boursa Kuwait, and Asia Investment Company. Also, he stated that the sector continues to enhance its comprehensive databases and internal analytical systems to provide strategic insights and timely recommendations on all aspects of local and regional markets.
In addition, Girish Nair has addressed the performance of NIC’s banking investment sector, as he said that advisory services department has, during the last period, successfully completed the listing Al-Safat Investment Co. in Boursa Kuwait, and securing the financing for a leading physical and health fitness company. Currently, the company is implementing transactions to purchase a leading logistic company, one of major companies in Kuwait. The purchase and distribution of technical healthcare products as well as several debt financing transactions have been completed.
Furthermore, acquisition financing for the purchase transaction and securing the financing of the project were obtained. NIC also works on two major operations prior to the public underwriting which are expected to be completed in the current year.
On the management of alternative investments, Mr. Girish stated that the company reached the final stages of investing in a leading regional platform for capitals specialized in delivering consumer orders.
He added that the company has invested in several direct venture capital opportunities in a global fintech leader, also investing in a leading food technology company, and in a leading regional e-commerce platform, emphasizing that the company continues to explore new investments and direct investment opportunities.
Moreover, Mr. Girish explained that the real estate investment sector of the National Investments Company is working to increase the rate of improvement and development of all real estate assets in the portfolios to increase revenues and value of the real estate, restructuring the sector and setting policies and procedures to achieve customer satisfaction. The sector was able to achieve full occupancy rates in the National Park through launching strong marketing campaigns, and a new campaign was launched to develop and improve all assets in the real estate portfolio to increase revenues and property values, and the company managed to achieve collection rates of 96% during the year 2021 compared to 72.7% for the same period in the year 2020. This was supported by the recovery of most companies as a result of cancellation procedures related to the coronavirus pandemic.
Mr. Bashar Khan, Senior Vice-President of Banking Investment Sector at National Investments Company, said that the company, is based on 4 main strategic elements that it takes to develop business and enhance its competitive position: Building managed assets, which is working on 3 main initiatives where work is being done to develop products In an organized manner, with a focus on investment capital and international real estate products, and for this, the company is building a strong offering team by adding an elite group of qualified bankers to support growth, in addition to that a solid reputation is being built to bring joint investment opportunities to the company’s investors, including Boursa Kuwait, Kuwait Foundry Company, (Vinco) company, and FedEx company in Italy, and Kitzingen.
Mr. Bashar Khan addressed the second element of National Investments Co.’s strategy, as he said that it focuses on enabling technology and competencies, as the company works to focus its efforts in digital flexibility and invest in digitizing operations and developing work environments, and in line with that, “National Investments” launched new digital channels for clients such as trading. Online, client platform and WhatsApp application for Customer relationship management, and also to harness operational efficiencies through outsourcing and work with participating consultants to benefit from their capabilities, knowledge and experience.
He said that the third element of the strategy revolves around strengthening governance, which is one of the strategic reasons that contributed to the promotion of the National Investments Company to the position of the first market in Boursa Kuwait, which shows our commitment to increasing transparency and governance, in addition to updating our risk management framework to include quantitative and qualitative measures in line with the best international practices. Finally, the fourth element, which is to build and develop investment banking leadership in the middle market sector in investment banking services with a focus on medium-sized clients, as the company had the ability to attract new major clients and complete outstanding transactions, building specialized teams in capital markets, mergers, acquisitions, and venture capital that have been identified as key growth areas.
On the other hand, Mr. Bashar Khan has presented many cases that are clear examples of the company’s ability to seize and implement opportunities in the market, including Boursa Kuwait, which was the idea of investing in a strategically important asset with strong, frequent and sustainable cash flows due to its market leadership position in February 2019, a controlling share in Boursa Kuwait was acquired. The company’s direct share was 14.4% since the acquisition. Boursa Kuwait has undergone an underwriting and listing process, and today the market price has been double the purchase cost to date, investment has achieved a multiplier gross profit of 9.24 times based on current market values.
He explained that the second case that took place regarding the Kuwaiti Foundry Company, where the purpose of the investment was the acquisition of the original pricing, which has an intrinsic value much greater than the prevailing market value, as 20% was acquired in January 2019, and the necessary work was done to achieve the value, and most of the company’s shares was recovered in this transaction with a total dividend yield of 1.38 times based on market capitalization.
He added: Another noteworthy example is Tesco Vinco’s deal. The investment was aimed at providing attractive cash profits to the company’s investors by obtaining rental properties by qualified and well-credited tenants, the deal achieved steady profits with an increase in the annual distribution rate from 9% to 10% for 2021, and the rate of exiting investment at the end of 2021 reached an internal profit rate of 16.2% by 1.46 times.
He said that another successful investment was the FedEx project. (FedEx) is based in Italy, where the National Investment Company invested with a leading developer in a logistics warehouse project in Italy. One of the leading developers developed the project, and a contract was signed to rent it to FedEx for 15 years. The project is expected to yield an 8% cash profit and a 9% net internal profit over 18 months.
He stated that in the year 2021, a secondary investment was successfully exited to develop a logistics center in Kitzingen, Germany, with an internal rate of profit of 12.3%.
Moreover, he stated that the private offering process and the inclusion of Safat Investment Company, which was carried out in October 2021, was a successful step and provided an excellent performance after the listing, as the aim of the operation was to provide support to the customer in the implementation of the private underwriting and meet the requirements of listing on the main market on Boursa Kuwait.
At the conclusion of the conference, the National Investments Company stressed its constant communication with its clients and shareholders that they should be kept abreast of developments in the company through the quarterly analysts’ conference.