National Investments Company holds Analyst Conference Call for Q1 2021 Financial Results

• Robust Growth in the First Quarter of 2021

• A net profits of KWD 3.8 million and an EPS of 4.75 fils through the income statement

• A gain of KWD 3.1 million as other comprehensive income through shareholders’ equity

• Total comprehensive income of KWD 6.9 million

• A hike in the total assets and shareholders’ equity attributable to the parent company to KWD 228.6 million and KWD 181.9 million respectively

• Total income for Q1 2021 of KWD 7.1 million as compared to a negative income of KWD 10.5 million during the comparative period.

• Achievement of a positive return in Q1 2021 for NIC investment funds and clients

On Monday, May 17, 2021, National Investments Company (NIC) held its Q1 2021 Analyst Conference Call following its upgrade to the Premier Market. Mr. Girish Nair, CFO, Mr. Sohail Ladha, EVP, Investment Banking, and Mr. Almuthana Al Maktoum, EVP, Wealth Management participated in the call. Mr. Almuthana began the call by giving a briefing about the Company and an overview of the positive results in the first quarter of this year, despite the economic conditions that the country is still experiencing which reflects the success of the Company’s strategy and the experience of its Executive Team.

Financial Position

Mr. Girish Nair made a detailed presentation of the Company’s financial position, as the Company succeeded in achieving a high performance on the back of the hike of Kuwait All Share Index at 4.1% during the first three months of 2021.

As regard to the Company’s earnings for the first quarter of 2021, NIC reported a net profit of KWD 3.8 million, and 4.7 fils earning per share through the income statement, and a gain of KWD 3.1 million as other comprehensive income through shareholders’ equity. The total comprehensive income for the period was KWD 6.9 million.

During the comparative period of 2020, the Company reported a loss of KWD 10.9 million through the income statement with 13.7 fils loss per share, and a gain of KWD 2.1 million through other comprehensive income. The total comprehensive loss for Q1 of 2020 was KWD 8.8 million.

Mr. Girish added that NIC’s Return on Average Equity (ROE) and Return on Average Assets (ROA) for the first quarter of 2021was 2.1% each. The leverage ratio at the end of Q1 2021was 0.15:1, and the Company’s quick ratio was 26.4%. The total assets and shareholders’ equity attributable to the parent company increased to KWD 228.6 million and KWD 181.9 million, respectively, as compared to KWD 218.3 million and KWD 172.2 million as on March 31, 2020.

National Investments Company holds Analyst Conference Call
for Q1 2021 Financial Results

Robust Growth in the First Quarter of 2021

Performance of Income and Expenses

Mr. Girish pointed out that the total income for the first quarter of 2021 was KWD 7.1 million as compared to a negative income of KWD 10.5 million during the comparative period. The first quarter of 2020 witnessed the full brunt of Covid-19 with all major market indices and crude oil prices plummeting. The Kuwait All share index in particular recorded a decline of 23.24 % during Q1 2020.

Mr. Girish said that a major contributor to NIC’s robust total income for Q1 2021 was the gain on investments at fair value through profit or loss (FVTPL) of KWD 6.04 million. Similarly, a major contributor to the other comprehensive income during Q1 2021 was the increase in value of Kuwaiti quoted investments at fair value through other comprehensive income (FVOCI). The Administrative expenses of KWD 1.8 million for the first quarter of 2021 are also in line with that for the first quarter 2020.

Mr. Girish also outlined that during the current period of 3 months ending 31 March 2021, the Management, Brokerage and Advisory fee income recorded a growth of 12% from KWD 1.32 million during Q1 2020 to KWD 1.48 million during the current quarter. The main driver for this growth was increased brokerage revenue. Moreover, NIC’s  total proprietary assets have witnessed a growth of 3.3% during Q1 2021, from KWD 221.3 million at the end of 2020 to KWD 228.6 million at 31 March 2021, mainly on account of additional investments and valuation gains on investments at fair value through profit or loss portfolio and investments at fair value through other comprehensive income.

The Company’s assets under management (AUM) in a fiduciary capacity as on 31^st March 2021 outperformed achieving an increase of 4.5% as compared to the end of 2020, as it was attributable to the Company’s constant endeavor to provide above average returns to portfolio clients together with capital preservation.

Key Highlights

Mr. Girish said that MENA Quoted Sector successfully capitalized on some 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 Q1 2021 for the company’s investment funds and clients.

The Sector developed detailed plans to utilize and benefit from all the new authorized instruments such as netting, margin and market Making. The Company is currently in the final stages of launching the Market Maker service with the aim to add new sources of income.

Mr. Girish also said that NIC continues to provide its advisory services, which included the completion of certain flagship deals. The Advisory Team provided a leading performance, including acting as a sale advisory for the sale of a leading foods company, executed the Mandatory Tender Offer for Kuwait Syrian Holding, supported transaction execution for the sale of a minority stake in a food distribution business, started with a strong pipeline of mandates, including 2 IPO mandates, a number of M&A buy-side mandates, sell-side mandates, restructuring and general advisory mandates. Alternative Investments  Department also completed commitment to two new investments during the first quarter, targeting double digit annualized returns, including a high-performing hedge fund, and a direct venture capital investment opportunity. It also signed a term sheet for an investment in a built-to-suit warehousing project in Italy for a client.  Currently the team is evaluating the exit of certain existing investments.

Mr. Girish also pointed out that despite the challenges that are still casting their shadow over the scene, the Real Estate Investment Sector at the NIC added one new property to its real estate management portfolio, and continues to increase the collection rate and revenues of the real estate managed portfolio. Currently, it focuses increasing its marketing efforts by preparing and developing Al-Wataniya Resort in Khairan to meet the increasing demand for spending holidays in chalets during this period.

Deliberate Plans

Mr. Sohail Ladha, Executive Vice President – Investment Banking at National Investments Company, said that the basic elements of the Company’s strategy and the key initiatives it is taking to grow its business and strengthen its competitive position are: building AUM which is working to lead and develop real estate products with an initial focus on Venture Capital (VC), for example, Boursa Kuwait, Kuwait Foundry and VINCO, in addition to focusing efforts on digital resilience and continue to invest and digitally transform business processes and develop collaborative work environments. An important element of this is business continuity initiatives, utilizing the best available technologies, and also enhancing governance, which is a key strategic reason for the completion of the upgrade to Premier Market status on Boursa Kuwait, showing our commitment for increased transparency and governance. In addition, we have upgraded our risk-management framework to include quantitative and qualitative measures in line with global best practices. Finally: Mid-market leadership in Investment Banking. In order to strengthen our position. NIC has been building its capabilities and developing its track record by executing mandates with the highest quality, focusing on mid-sized clients.  2020 provided us an excellent platform, where we had several flagship transactions. We are also building specialist teams in Equity Capital Markets (ECM), Mergers and Acquisitions (M&A) and Venture Capital (VC), which we have identified as key growth areas.

Case Studies and Capturing Opportunities

Mr. 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. We formed a consortium to acquire a controlling stake of Boursa Kuwait in February 2019. Our direct stake was 14.4%. Since its acquisition, Boursa Kuwait has undergone 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 5.13 times (based on market values).

Mr. Ladha pointed out that the investment thesis of Kuwait Foundry, which is the second case study, was the acquisition of a mispriced asset with an intrinsic value significantly greater than the prevailing market value. The investment offered an identifiable path to the realization of true value. Towards this, we acquired a 21% stake in January 2019 and have been taking measures to realize value. So far, we have recaptured most of our equity in the transaction already and the total return multiple based on market values is 1.19 times.

The objective of the VINCO Tesco transaction was to deliver attractive cash yields to our investors by acquiring real estate properties tenanted by credit-worthy tenants. The transaction has delivered consistent dividends while appreciating in value.

At the conclusion of the conference call, the National Investments Company affirmed that it will be in constant contact with its shareholders and clients to keep them updated on the developments in the Company through the quarterly Analyst Conference.