Investor Presentation - Q3 2018 - KAEC
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Investor Presentation Q3 2018
What to look forward to
Investment Business Management 30-
3 6-9 31
thesis model team
King Abdullah Financial 10- Additional 32-
4 39
Economic City position 13 information
How we are Intrinsic & 14- Financial 40-
5 43
different future value 29 results
2
Investment thesis
• Developing a logistics gateway to capitalize on KAEC’s strategic location on the Red
Developing the Sea coast
largest privately • Establishing a manufacturing hub, focusing on high-growth non-oil industries
funded • Creating a tourism and leisure destination to meet demand from domestic and
international tourism
new city in the
• Supporting the development and activities of SMEs and entrepreneurs
world • Fostering a modern Saudi lifestyle through fully serviced residential communities
• Unique business model with a diversified asset base with a long term goal of delivering
Diversified results to shareholders
portfolio of • Portfolio of built assets consists of:
assets that • Residential communities and industrial zone, with land and developed
creates long-term properties that are either sold or leased;
benefits to • 50% ownership in King Abdullah Port (KAP), KSA’s 2nd largest deep sea port;
shareholders • Commercial assets (hospitality, retail, F&B, office space), generating recurring
income
Clear, focused • Supported by Saudi Vision 2030
strategy aimed • Well positioned to benefit from strong demand and favourable outlook, driven by social,
demographic and macroeconomic tailwinds
at capitalizing
• Creating a stable business ecosystem to attract investment (FDI, third party investment)
on emerging
opportunities
3
King Abdullah Economic City
KAEC is a fast growing coastal
city in the western region of
Saudi Arabia with a booming
manufacturing and logistics
hub, up and coming vibrant
living community and a
burgeoning entertainment
destination
Page 4
Emaar Economic City – why we are different
BUSINESS MODEL
1 Unique business model with a diverse portfolio of real estate and
infrastructure assets, providing synergies and self-sustaining growth
FINANCIAL POSITION
2 Well-capitalized and growing balance sheet supported by smart
cash-flow management
INSTRINSIC & FUTURE VALUE
3 Significant value creation opportunity backed by a focused strategy,
allowing us to grow profitably
MANAGEMENT TEAM
4 Experienced and dynamic management team with a proven track record
of creating value and managing risk
5
1 BUSINESS MODEL Unique business model with a diverse portfolio of real estate and infrastructure assets, providing synergies and self-sustaining growth
1 Our approach and unique competitive advantage
We take a long-term, value focused view and leverage our unique proposition to expand in a
measured way
Our balanced approach
Develop relevant Actively
assets and smartly manage assets
Identify Diversify
manage project revenue source
opportunity pipeline Provide earnings visibility
for shareholders in various
stages of economic cycles
Our competitive advantage
Sole owner and operator of mega greenfield project in
Strategic location and ease of access KSA
Partnership & endorsement from various Government entities
7
1 Our business model
Our business model will help us to deliver financial returns in a sustainable way
Cash + Land Bank
Debt and Equity 168 million sqm
CapEX +
OpEX
Primary infrastructure supports assets and increases base land value
Residential Industrial Commercial Retail and Port City
Port
& Leisure F&B Operations
Reinvestment
Sales
Leasing
Operating Activities
One time revenue Recurring revenue
Charges
Disbursement
Cover debt obligations Banks and creditors
Fund projects
Pay dividends Long term Investors
8
1 Multiplied value
Building foundations &
2006 early development
Aggressive development
New city was born
2017 & expansion
2035 Operations &
Modern city with organic maintenance
population growth
Land acquisition value Vibrant city contributing
= SAR 3.8 bn to KSA’s socio-economic
Value of Investment development
Property = SAR 54 bn*
Multiplied value
In excess of Funded via debt, Self-
SR 30 bn operating income sustaining
capital
invested since
inception (by
EEC and third
parties)
9
* Based on fair value assessment survey conducted by Valustrat as of Dec 31, 2017
2 FINANCIAL POSITION
Well-capitalized and growing balance sheet
supported by smart cash-flow management2 Invested capital and debt & equity profile
Invested capital, healthy financial leverage has enabled us to build KAEC, and will continue to
support our growth
Breakdown of EEC’s invested capital (SAR mn) Debt and equity (SAR bn)
296
908
896
4,061 5
1,051
SAR
19.3 bn SAR
1,138
invested in 18.5 bn 8.5
building debt and
1,394
KAEC (as paid up
of Sep 3,780 capital
2018)
2,605
Housing Paid up Capital 5
Land (purchase)
3,184 MoF Loan
Primary infrastructure
Port Commercial Loan
Commercial, Hospitality & Leisure
Industrial Valley Infrastructure
Residential land development
Fixed Assets
Utilities
Education & Healthcare
• Financial leverage is significantly lower than regional
• KAEC is the largest privately funded city in the world
and international property developers
112 Cash and liquidity analysis
Strong liquidity position with a comfortable cash buffer to help fund current projects and pay down
debt 1,752
749 524 2.32
SAR 1.44 bn
1,054
134
SAR Millions
SAR Millions
1.6
(Industry
1,228 Average,
739 Thomson
920 Reuters)
2017 Q3'18 2017 Q3'18 Capital Work Current Ratio (as of
in Progress (as Sep 30, 2018)
AR of Sep 30,
Murabaha term deposits 2018)
Cash & cash equivalents
• Combination of liquid assets and unused commercial loans can cover construction in progress
• Comfortably cover our short-term debt obligations
122 Recurring income from operational assets
Recurring revenue is contributing to a greater portion of our profit, and as more operating assets
come online we expect that contribution to escalate
Recurring revenue & planned CAPEX Number of projects under operation
3,500
3,271
160
3,000
2,613
SAR Millions
2,500 2,331 2,311
2,000 1,822
1,454 1,325 60
1,500
1,292
34
1,000
19
500
2015 2016 2017 2025
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
• Over 30 projects earmarked for leisure and tourism segment
Budgeted Projected recurring • Smart budgeting and liquidity management to cover SAR 16 bn
CAPEX CAPEX over next 7 years
revenue
Recurring income (Actual)
133 INTRINSIC & FUTURE VALUE
Significant value creation opportunity backed
by a focused strategy, allowing us to grow
profitably3 Intrinsic value
We are trading at a discount to our intrinsic value; our stock price does not reflect the strength of
our assets or our future earnings potential
KAP, IV, residential
Valuation vs. Market Capitalization developments, hospitality,
leisure amenities
Valuation Mkt Cap
KAP, IV,
residential 54.0
developments,
hospitality 41.1
SAR Billions
Initial
IV, Residential
developments,
developments
infrastructure
18.8
11.8
14.0
12.5
11.0
8.2 7.1
3.9
DEC 2006 DEC 2009 DEC 2012 DEC 2015 DEC 2017
Source of
valuation
Purchase Internal Commercial
JLL Valustrat
price estimation Banks
153 Near term value enhancers
There are some imminent catalysts that are set to increase our value in the short to mid-term
Easy access to 10 Additional 32 IV KAP’s operational
million people licensed volume rose
within 1 hour of companies significantly. YOY
KAEC. expected to Container volume up
Haramain high- come online in 12-18 by 40% and no. of
speed rail is now months Vessel calls up by
operational 20%, Bulk and
general cargo
handling operation
874 ready to move started and 484 MT of
Imminent opening of
vertical units; 247 cargo already
2 specialty, high
near completion; handled
quality assets;
448 residential land development of a
units available for mega water park
sale
163 Future outlook
We are well positioned to benefit from the socio-economic changes underway in Saudi Arabia
and are capitalizing on those opportunities by having a focused strategy for each segment
Macroeconomic and Well integrated and
focused strategy to Multiplied value for all
social tailwinds
capitalize on new major stake holders
accelerating demand
demand trends
Saudi Vision 2030 Shareholders
Growing population, with
young demographic profile Industry, Leisure & Residents
Regulation and changes to Commerce Tourism
& SME
industry framework KAEC
KSA
Modernization of Saudi
Arabian society Business owners
Residential
173
03
Unlocking value via industry & commerce segment
Operating environment
Ease of foreign business establishment
Growing private sector contribution to GDP
Underdeveloped specialized non-oil industrial zones
Increasing the role of SMEs in the economy
Fast growing regional market of over 600 million people
Increase in Red Sea cross border trade
Strategically located on the Chinese maritime trade
route, connecting Asia, Europe and Africa
Opportunity Current activity
Development of re-export zone
Attract greater number of non-oil manufacturing
On schedule development of KAP
companies
On schedule development of IV
Increase container volumes in port by capturing greater
Gas zone to provide feedstock for
volume of trade via Red Sea
industrials
Catering to underserved local manufacturing industries
Tech hub to support data centers
(automotive, pharmaceuticals etc.)
Managing a viable entrepreneur/start
Entice entrepreneurs to establish presence in KAEC
up ecosystem
18Phase 1
(launched 2007)
22 thousand sqm leased
3
03
Industrial Valley
Phase 2
(launched 2011)
16 thousand sqm sold
7 thousand sqm leased
34 companies in operation; 32 under construction; 116 licensed
¾ of developed industrial land sold
Phase 3
(launched 2014)
21 thousand sqm sold
Land value tripled since 2012 92 thousand sqm leased
Phase 4
(launched 2017)
369 thousand sqm sold
193
4 King Abdullah Port
Commercial operation began in 2014 SAR 7.0 bn initial invested capital
2nd Largest
3-4 days Reached
8thfastest port in KSA by
clearing time, 4.5 million TEU
growing port in capacity and
matching capacity
2017. throughput. 69th
world’s most in 4 years
(Alphaliner) largest port in
efficient ports
the world
735 vessels Capacity of
At par with
received till First dedicated 20m TEU and
world’s deepest
YTD Sep 2018, RO/RO terminal Bulk cargo of
water berths
up by 20% vs. in the GCC 15m tons upon
(18m)
YTD Sep 2017 completion
203 Supporting youth and entrepreneurship
Circle 301 is an EEC initiative which serves to create an efficient start-up ecosystem
KNOWLEDGE
EMPOWERMENT
GOVERNMENT
HOUSING SERVICES
SOLUTIONS Circle
301
SCHOLARSHIP ENTREPRENEURSHIP
HUB
VENTURE
CAPITAL (SAR 75
MILLION FUND)
213
03
Unlocking value via residential segment
Operating environment
Growing Saudi population with a young demographic
profile
Shifting mindset of young Saudis towards modernity
Expanded private-sector role in mortgage market
Current activity
Opportunity Develop high end and middle income
Attract first-time home buyers housing communities
Cater to various income groups and psychographic Building unique, upscale golf
needs community
Sports complex and other amenities
Enhancing landscaping and
beachfront
223 Residential communities
Complete portfolio of housing solutions readily available
Al Talah Al Waha
Bay La Sun
is an urban
district
Al Murooj
is an upmarket
community
Gardens
is a series of mid-
is an award
winning
61%
(golf or income housing mid-income of developed
beachfront community villas district
options) and community vertical units
plots on the
coastal road Sold
Miram Al- Al Shurooq The Village Many
Hejaz
is a mid-
income
is suitable for
first time home
owners
is located
within the
Industrial
upcoming
unique,
modern
91%
community Valley residential of developed
close to communities
residential
Haramain
station land sold
233
03
Unlocking value through leisure & tourism
Operating environment
Anticipated introduction of leisure tourist visa
Increase in number of Muslim pilgrims
Boom in nascent entertainment sector
Latent demand for international quality entertainment
and leisure
Current activity
Over 30 projects under development
including:
• Sports complex (Esmeralda)
• Marina and yacht club
Opportunity • Souq
• Malls
Convert repeat visitors to home owners • Islamic exhibition center
Attract greater number of visitors by positioning KAEC • Tethered balloon
as leisure lifestyle and tourism destination • Laguna (amusement & waterpark)
Leverage location and Haramain rail, (catchment area • Motor park
of 10m people within 1 hour of KAEC) • Desert camps
• Culinary and aviation academy
243
03
Leisure and tourism assets
Booming leisureSAR
Invested around and 2bn
entertainment destination
in developing a premier leisure and entertainment destination
2018
1 million visitors
(expected)
2017
Integrated Fully 400,000 visitors
Independent 30+ projects
resorts and World-class integrated
exhibition Juman Park under
independent golf course leisure and
centre development
hotels entertainment
Royal Greens Lagoona: Over 70,000
Bay La Sun Bay X exhibition Theme park, 2016
selected for PGA water-park, sqm of family
Hotel and Marina centre to offer water park, 160,000 visitors
European Tour ecology park, friendly park,
2,800m of hall desert camping,
Championship outlet mall walking, cycling
The Views space motor park
2019 and games Visitors
253
03 Lagoona
A large scale leisure destination situated within the lagoon waterfront; designed
around a unique blend of local and international IP
263
03
Bay la Sun Yacht Club and Marina
Luxury marine and Opening up nascent
watersports facility with marine tourism industry
berthing for private boats for KAEC
273
03 Royal Greens Golf and Country Club
Formally opened in April 2018, the first of its kind golf course in the Kingdom
The Royal Greens Golf Selected to host the
and Country Club is an European PGA Tour
exclusive, first-class Championship in 2019
golfing experience
.
283
03 Esmeralda Sports & Wellness Center
Expected to open in Q4 2018
First of its kind family Won 2017 International
fitness and leisure center Property Award for Best
in the kingdom International Leisure
Development
294 MANAGEMENT TEAM
Experienced and dynamic management team with a
proven track record of creating value and managing risk4 World-class management team
Local and international management team with proven track record of creating
value and managing risk
Management Team
Board of Directors
H.E. MR. MOHAMED MR. ABDULLAH MR. AHMED
ALABBAR KAMEL LINJAWY
Chairman Vice Chairman Acting Group CEO
Board Members
H.E. ENG. H.E. SAUD MR. JAMAL
KHALID AL-SALEH BIN
AL-MOLHEM THENIYEH
ENG. MR.
ABDULRAHMAN MR. AHMED MR. FAHD
AL-ROWAITA JAWA ALRASHEED
ENG. MR.
ABDULLAH
TAIBAH
31ADDITIONAL INFORMATION
Prince Mohammad Bin Salman College
of Business and Entrepreneurship (MBSC)
Established in partnership with Babson Global, Lockheed Martin and MISK foundation
1st private business and Practical learning and academic teachings to
entrepreneurship college cultivate a well rounded entrepreneurial culture
in Saudi Arabia offering
MBA program Under the umbrella of MISK
Foundation
Inspired by Vision 2030
Female and male students
taught by high caliber
professors
33Education & training
Offering every generation the ability to explore, learn, create and teach
GEMS World Academy was set up in Vocational training facilities including:
2014, with capacity of 600 students, • Culinary Academy, in partnership with
offering an international K-12 education MISK Foundation
• Aviation Academy in partnership with
Tomouh provides thousands of young GACA
Saudi men and women with the skills and
training required to compete in the modern
work environment
34Haramain Station
Harmain station is currently operational
The High Speed Railway will reduce the travel times significantly making KAEC an ideal
housing location and leisure destination
Area around Haramain 450 km high speed train
Station will be the new • 25 minutes to new Jeddah
downtown with retail, International Airport
housing and other • 35 minutes to downtown
Jeddah
commercial centers
• 55 minutes to Makkah
• 55 minutes to Medina
35Strategic geographic location
Prime location along the Red Sea trade route
Tourism Business Resident Commerce &
attraction: advantage: attraction: Trade advantage:
Red Sea coastal city Opportunity to join Proximity to Jeddah, >10% of world trade
located close to the Western Makkah, Madinah and passes through the
Jeddah offering a Region’s well- well connected by every Red Sea which is a
variety of established mode of transport to prime East-West hub
entertainment and international and other cities on the main trade
leisure facilities local business route between Asia,
clusters Europe and Africa
Gateway to the
Middle East’s 400+
KAEC million population
36KAEC’s development
37Hard and soft infrastructure
All of KAEC’s offerings are underpinned by high quality infrastructure that
serves businesses, residents and visitors
Telecom
network
Primary roads 227.7 km
83 km
Sewage network Secondary
85.9 km roads Irrigation Gas stations
84.5 km 121.2 km
Bicycle ways
Water network
5 mosques 11.0 km
114.4 km
Electricity
network
369.9 km Parks
15 tenants
office space 12 Shops and
Retail Water ways
2 renowned 3.1 km
education
2 clinics
institutions 19 Restaurants
1 fire, 2 security Sports arenas
stations and cafes
and facilities
38Industrial Valley
Home to over 110 leading global and local non-oil businesses
Logistics Pharma
Building Automotive
materials
Consumer
Goods Packaging
6 fully serviced clusters
39APPENDIX: Q3 2018 FINANCIAL RESULTS
Quarterly Revenue and Net Income 2017-2018
Revenue and Net Income (SAR Mn)
Net Income 628
Revenue
318 269 281
223 244
180
112
35 27 3
-19 -45
-135
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
Revenue breakdown, YTD Q3 2018 Order intake breakdown, YTD Q3 2018
(%) (%)
Other
16%
47%
54% YTD Q3 Residential
Industrial
1% Valley 53% Industrial Valley
30% 2018 SAR
Residential
Order 144Mn
intake
41YTD Q3 2018’s revenue breakdown
Breakdown of revenue by segment (YTD Q3 2018) 66 637
37
188
346
SAR millions
Residential Industrial Hospitality & leisure Other Total Revenue
development
Operating profit
margin
20% 70%
• Residential and Industrial business segments are very profitable and are helping fund the expansion into
hospitality and leisure
42Intrinsic value
Appraised value of investment property, as disclosed in the financial statements,
implies high upside potential to market capitalization
Market capitalization of the company is
SAR 8.08 billion (as of 30/09/2018)
Value metrics
Investment property valued at SAR
54.0 billion
based on fair value assessment survey conducted by Valustrat
as of Dec 31, 2017
Development and Investment
Property on the books in 2017
is SAR 6.9 billion
43Page 44
KAEC.net/Investor-Relations IR@kaec.net T. +966 12 510 6955
KAEC Investor Relations APP
44DISCLAIMER
This presentation (Presentation) has been prepared by Emaar the Economic City (EEC) and/or its subsidiaries based on information available to it internally and third
party sources. This Presentation does not purport to contain all the information that a prospective investor may require in connection with any potential investment in
EEC. You should not treat the contents of this Presentation, or any information provided in connection with it, as financial advice, financial product advice or advice
relating to legal, taxation or investment matters. No representation or warranty is made by EEC or any of its advisers, agents or employees as to the accuracy,
completeness or reasonableness of the information in this Presentation or provided in connection with it. No information, including but not limited to numbers, maps,
drawings, or maps contained in this Presentation or any other written or oral communication in connection with it is, or shall be relied upon as, a promise or
representation and no representation or warranty is made as to the accuracy or attainability of any estimates, forecasts or projections set out in this Presentation. No
liability will attach to EEC, with respect to any such information, estimates, forecasts or projections. EEC does not accept responsibility or liability for any loss or
damage suffered or incurred by you or any other person or entity however caused (including, without limitation, negligence) relating in any way to this Presentation
including, without limitation, the information contained in or provided in connection with it, any errors or omissions from it however caused (including without limitation,
where caused by third parties), lack of accuracy, completeness, currency or reliability or you, or any other person or entity, placing any reliance on this Presentation, its
accuracy, completeness, currency or reliability. EEC does not accept any responsibility to inform you of any matter arising or coming to EEC’s notice after the date of
this Presentation which may affect any matter referred to in this Presentation. Any liability of EEC, their advisers, agents and employees to you or to any other person
or entity arising out of this Presentation including pursuant to any applicable Saudi law is, to the maximum extent permitted by law, expressly disclaimed and excluded.
This Presentation contains reference to certain intentions, expectations, future plans, strategy and prospects of EEC. Those intentions, expectations, future plans,
strategy and prospects may or may not be achieved. They are based on certain assumptions, which may not be met or on which views may differ and may be affected
by known and unknown risks. The performance and operations of EEC may be influenced by a number of factors, many of which are outside the control of EEC. No
representation or warranty, express or implied, is made by EEC, or any of its directors, officers, employees, advisers or agents that any intentions, expectations or
plans will be achieved either totally or partially or that any particular rate of return will be achieved. Given the risks and uncertainties that may cause EEC’s actual future
results, performance or achievements to be materially different from those expected, planned or intended, Recipients should not place undue reliance on these
intentions, expectations, future plans, strategy and prospects. EEC does not warrant or represent that the actual results, performance or achievements will be as
expected, planned or intended.
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