The National Investments Company held the Financial Analysts Conference for its Q4 2023 results on Sunday, 10 March 2024. Mr. Girish Nair, NIC’s Chief Financial Officer, Mr. Bashar Khan, Senior Vice President of the investment Banking Sector, and Mr. Al Muthana Al Maktoum, Executive Vice President of the wealth Management Sector, hosted the conference. They presented a brief about the company, emphasizing the positive financial results achieved in Q4 2023. This success is not just a result of the company’s prudent strategy but also a testament to its team’s unwavering dedication and exceptional expertise. The team has consistently demonstrated its ability to consolidate a sustainable approach and deliver outstanding performance and operational achievements, significantly strengthening the company’s financial position and maintaining a portfolio of high-quality assets.
NIC’s Financial Performance
Mr. Girish Nair provided a comprehensive overview of NIC’s financial position during the conference. The key figures he highlighted were the company’s total income for 2023, which was KD 13.8 million, and the net profit of KD 4.1 million. These figures translate to a return per share of 5.2 fils, underscoring the company’s steady financial performance and reassuring the audience about NIC’s stability. In comparison, in 2022, the company’s total income was KD 19.9 million, with a net profit of KD 8.7 million and earnings per share of 11 fils, further highlighting the company’s consistent financial stability.
He pointed out that the return on average shareholders’ equity and return on average assets for 2023 amounted to 2.2% and 1.7%, respectively, and the leverage ratio reached 30.3% as of 31 December 2023.
Mr. Nair added that the net book value per share amounted to 217 fils, and the assets under management amounted to KD 1.05 billion as of 31 December 2023. In comparison, in the same period in 2022, the net book value amounted to 249 fils per share, and the assets under management amounted to KD 1.12 billion. This detailed comparison further illustrates the company’s consistent financial stability, providing the audience with a comprehensive understanding of NIC’s financial performance.
On the other hand, Mr. Nair pointed out that the consolidated net profit of national investments and total income for the twelve months ended December 31, 2023, decreased by 51% and 31%, respectively, and the reason for the decrease is due to losses from financial assets at fair value through profit or loss, and a reduction in dividend income, compared to the corresponding period in 2022. This performance reflects the changes witnessed in the past few quarters in the financial markets, not only due to macroeconomic developments and the tightening of monetary policy measures adopted by various central banks but also due to geopolitical factors, as the S & P Kuwait Index recorded a decline of 9.1% during 2023, compared to an increase of 5.35% during the comparative period of 2022.
Mr. Nair explained that the fees for management, incentives, brokerage, consulting, and services during 2023 amounted to KD 9.3 million compared to KD 10.9 million for 2022. The decrease was mainly due to lower brokerage income from the subsidiary due to lower trading volumes on Boursa Kuwait.
Administrative expenses decreased to KD 8.8 million in 2023, compared to KD 9.4 million in 2022. Financing costs increased to KD 1.8 million for 2023, compared to KD 1.2 million for 2022. This increase was due to higher discount rates from the Central Bank of Kuwait and new loans.
The main contributor to the other comprehensive loss of KD 7.3 million for 2023 is the impairment of investments listed in the GCC at fair value through other comprehensive income. He pointed out that the total assets and shareholders’ equity of the parent company decreased by 8% and 13%, respectively, mainly due to the distribution of profits. The total assets of national investments are about 77%, of which 12% are in real estate and the rest in other assets.
Performance of Key Sector
Mr. Bashar Khan, Executive Vice President of Investment Banking at The National Investments Company, referred to the prominent events during the fourth quarter of 2023 and said that the company is based on four strategic elements that it takes to grow the business and enhance its competitive position: building assets under management, enabling technology and competencies, developing investment banking leadership in the market, and improving governance.
As for building assets under management, which is built on three leading enterprises, where advisory services are developed in an organized manner, with a focus on venture capital and international real estate products, the company is building a solid team by adding qualified bankers to support growth, in addition to creating a solid reputation to bring joint investment opportunities to the company’s investors, such as Boursa Kuwait, Kuwait Foundry, Lidl France and The Farm. The Department is also in the process of launching the first private mortgage trust fund in Kuwait.
Mr. Khan addressed the second element of the strategy, which focuses on enabling technology and efficiencies, as the company is committed to leveraging the latest digital business technologies, including artificial intelligence, to drive work flexibility, productivity, and efficiency, ensure business sustainability, and adhere to the company’s digital strategy, which provided many services including online trading, client platform, real estate system development, in addition to the digital subscription system service.
The third pillar of leadership in investment banking is the company’s focus on building a dedicated team with full knowledge of capital and debtor capital markets and executing groundbreaking deals in Kuwait, where the company completed one of the largest mergers and acquisitions in the education sector in Kuwait, in addition to the first issue of preferred shares in the State of Kuwait. In line with continuous development and improvement, the company is working to strengthen the work teams by attracting first-class specialists. Four new members were welcomed to the team.
Concerning enhancing governance, which is one of the elements of NIC’s Strategy, he pointed out that the company continues to improve its risk management framework to include quantitative and qualitative metrics in line with international best practices and its commitment to supporting the highest standards of corporate governance and providing a solid foundation for sustainable growth and success.
Mr. Bashar Khan added that the MENA Securities Sector maintained its outstanding performance, with some investment funds achieving exceptional performance until the end of 2023. The Mawarid Fund for Industrial and Petroleum Services achieved a return of 7.04%. Zajil Services & Telecommunications Fund achieved a return of 8.05%. In comparison, Al Mada Investment Fund achieved a return of 6.37% for the same period. Such exceptional results reflect the sector’s expertise in managing funds professionally, even considering the volatility of the financial markets.
The sector continues to offer a wide range of investment products and services that meet the risk appetites and multiple investment objectives of our clients, which confirms its continuous keenness to provide diversified investment opportunities that suit all segments of the market.
NIC has also been a leading Market Maker provider since its launch in 2021. During that time, we could renew the primary market maker contracts for the company’s existing clients because we effectively achieved the turnover and liquidity rates required on those shares. The company has also expanded its portfolio as a market maker to cover 13 shares of companies listed on Boursa Kuwait after joining three companies in 2023, so our company maintains a significant share among the companies that provide market maker services in Boursa, Kuwait.
As for the Real Estate Investment Sector, due to the active management and improvement of the company’s real estate, the sector has been instrumental in enhancing the overall performance of the company’s real estate portfolio, which reached a collection rate during the fourth quarter of 81% and maintained a strong occupancy rate of 89%.
Mr. Khan also presented clear examples of the company’s ability to seize opportunities and implement them in the market, such as Boursa Kuwait, which was the idea of investing in obtaining a strategically important asset with intense, frequent, and sustainable cash flows due to its leading position in the market, a controlling stake in Boursa Kuwait was acquired in February 2019. The company’s direct stake has reached 14.4% since the acquisition, Boursa Kuwait has undergone public subscription and listing, and today’s market price is many times the purchase cost. Based on current market values, the investment has achieved a total return multiplier of 8.6 times.
The second example is Kuwait Foundry, where the significance of the investment was the acquisition of the pricing asset with a substantial value much greater than the prevailing market value. 21% was acquired in January 2019, and the necessary work was done to achieve the value. Most of the company’s shares were restored in this deal, and the total multiplier return reached 1.6 times based on market value.
The Third example is Lidl France; the company financed this facility to buy, lease, and sell three storage properties in France. Lidl sold and released the Properties, and the project is expected to achieve a return of 12% over two and a half years.
At the end of the conference, NIC affirmed its commitment to communicating with its customers and shareholders and keeping them informed of company developments through the quarterly analysts’ conference.
