Exchange: SAU | Sector: Real Estate | Industry: REIT Diversified
Q1 2024
Published: Mar 31, 2024
Earnings Highlights
Revenue of $16.60M up 3.9% year-over-year
EPS of $0.15 decreased by 6.3% from previous year
Gross margin of 94.3%
Net income of 7.75M
"N/A" - N/A
Taleem REIT Fund (4333.SR) QQ1 2024 Results Analysis – Saudi Real Estate REIT Diversified: resilient cash flows, strong profitability with quarterly seasonality
Executive Summary
Summary of QQ1 2024 results for Taleem REIT Fund (4333.SR): The fund delivered solid profitability with a robust gross margin and positive net income of SAR 7.75 million on revenue of SAR 16.60 million, underpinned by a high gross margin of ~94%. EBITDA stood at SAR 15.58 million, and operating income was SAR 15.58 million, reflecting the portfolio’s steady income generation from developed real estate linked to education and training facilities. However, quarterly dynamics were marked by a substantial negative swing in total other income/expenses, totaling SAR -7.83 million, which compressed pretax income and contributed to a weaker QoQ performance. Net income declined sharply on a QoQ basis (-61.5%), despite a YoY improvement in revenue (+3.9%) and gross profit (+4.1%). The company maintains a conservative liquidity profile, with a current ratio of 14.47x, but a cash position that ended the period negative (SAR -2.97 million) due to dividend distributions and financing activity; operating cash flow remained strong at SAR 10.90 million. The balance sheet shows a sizable investment in property, plant and equipment (net) of SAR 703.25 million and long-term debt of SAR 297.63 million, yielding a debt ratio of 0.35 and a prudent leverage posture for a diversified REIT. The dividend payout appears to have exceeded net income for the quarter (payout ratio ~1.05x), suggesting distributions funded from prior periods or other sources in addition to current earnings. Management guidance is not explicitly disclosed in the provided data; therefore, the assessment relies on disclosed metrics and the REIT’s dividend policy to assess sustainability. Investors should monitor rent collections, lease maturities, refinancing risk, and portfolio occupancy while evaluating the potential for steady, albeit potentially asymmetric, dividend growth.
Other income/expenses: net -7,830,764 (material negative swing in QoQ);
Financial Highlights
Revenue and profitability metrics (Q1 2024, SAR):
- Revenue: 16,596,604; YoY change +3.90%; QoQ change -51.83%
- Gross Profit: 15,645,579; Gross margin 0.943; YoY +4.13%; QoQ -46.22%
- Operating Income: 15,576,826; Operating margin 0.939; YoY +15.87%; QoQ -46.30%
- EBITDA: 15,576,827; EBITDA margin 0.939; YoY activity supports cash flow resilience amid higher other expenses
- Other income/expenses: net -7,830,764 (material negative swing in QoQ);
- Income Before Tax: 7,746,062; Margin 0.467; YoY flat to positive; QoQ -57.83%
- Net Income: 7,746,062; Net margin 0.467; YoY -4.18%; QoQ -61.52%
- EPS: 0.15 SAR; Diluted EPS: 0.15 SAR; YoY -6.25%; QoQ -61.54%
- Dividends paid: -8,160,000; Payout ratio: 1.053x; indicates distributions funded beyond current period net income
- Cash flow from operations: 10,903,662; Free cash flow: 10,903,662; Net cash from operating activities supports dividend capacity despite negative period-end cash balance.
- Balance sheet highlights: Total assets 857,251,035; Total liabilities 308,270,652; Equity 548,980,383; Long-term debt 297,629,589; Current ratio 14.47x; Debt ratio 0.347; Net debt 297,076,587.
- Liquidity and efficiency: Receivables turnover implied by reported days of receivables outstanding (822 days) suggests seasonality and potential collection timing effects; cash ratio is low (0.0520x) relative to current assets, highlighting reliance on non-cash working capital components.
- Valuation and returns: Price-to-book ~1.03x; Price-to-sales ~34.05x; Dividend yield ~1.44%; Implied leverage and payout policy influence total return profile.
Notes: YoY and QoQ figures reflect quarterly volatility and seasonal patterns common to property rental REITs with education-focused assets. The strong gross margin indicates stable rental yields within the portfolio, while the large negative other income/expense line in the quarter suggests non-operating items influenced quarterly profitability.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
16.60M
3.90%
-51.83%
Gross Profit
15.65M
4.13%
-46.22%
Operating Income
15.58M
15.87%
-46.30%
Net Income
7.75M
-4.18%
-61.52%
EPS
0.15
-6.25%
-61.54%
Key Financial Ratios
currentRatio
14.47
grossProfitMargin
94.3%
operatingProfitMargin
93.9%
netProfitMargin
46.7%
returnOnAssets
0.9%
returnOnEquity
1.41%
debtEquityRatio
0.54
operatingCashFlowPerShare
$0.21
freeCashFlowPerShare
$0.21
dividendPayoutRatio
105.3%
priceToBookRatio
1.03
priceEarningsRatio
18.24
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Earnings call transcript not provided for QQ1 2024. As a result, the synthesis below relies on disclosed financials and reported ratio trends rather than management color from an earnings call.
- N/A: No management quotes available in the provided data.
- Key takeaways (based on disclosed metrics): profitability remains solid on operating metrics, but the quarter was marred by a significant negative swing in other income/expenses, driving a sharp QoQ decline in net income and EPS. Dividend policy and payout ratio indicate a distribution framework that may extend beyond quarterly earnings, underscoring the need to monitor cash flow adequacy and financing activity.
N/A
— N/A
N/A
— N/A
Forward Guidance
No explicit forward guidance provided in the data. Based on QQ1 2024 results and REIT fundamentals, the following qualitative assessment applies:
- Dividend sustainability: Given a payout ratio of approximately 1.05x and a strong operating cash flow (SAR 10.9 million), Taleem REIT Fund is capable of maintaining dividend distributions, albeit with potential variability if quarterly non-operating items persist.
- Revenue stability: The portfolio appears to deliver steady rental income with high gross margins, but QoQ softness in revenue and the substantial negative swing in other income/expenses warrant close monitoring of lease maturities, occupancy levels, and rent escalations.
- Balance sheet and funding: Leverage remains moderate with long-term debt of SAR 297.63 million and a debt ratio around 0.35. The company may have room for selective refinacing or capex if accretive opportunities arise, but rising interest rates or tighter credit conditions could affect financing cost and dividend capacity.
- Key factors to monitor: occupancy/lease renewals in education-related properties, tenant mix concentration risk, refinancing maturities, changes in regulatory treatment of REIT distributions, and any one-off items that could affect quarterly profitability.
- Outlook: Absent explicit guidance, investors should anchor expectations on sustained distributions supported by robust operating cash flow, while remaining vigilant about non-operating items and macro-real estate headwinds in the Saudi market.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
4333.SR Focus
94.27%
93.90%
1.41%
18.24%
4339.SR
0.00%
0.00%
0.00%
0.00%
4330.SR
66.80%
37.80%
1.15%
22.63%
4340.SR
1.00%
98.70%
1.62%
16.83%
4334.SR
83.80%
69.60%
2.18%
12.32%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Taleem REIT Fund presents a positive albeit nuanced investment proposition. On a standalone basis, QQ1 2024 reflects strong operating profitability and a solid balance sheet, with a very high gross margin and positive net income. The quarter’s significant negative swing in other income/expenses, together with a QoQ revenue/earnings drop, suggests that near-term earnings may exhibit volatility driven by non-operating items and seasonality inherent to real estate investment trusts. The fund’s dividend policy, combined with a healthy operating cash flow, supports a reasonable current income profile, but the payout ratio exceeding 1x warrants ongoing scrutiny of cash flow sufficiency in disparate quarters. Relative to peers, Taleem’s margins are competitive, and its P/B and P/S multiples align with a premium REIT profile that benefits from a stable, education-linked asset base. Investors should watch occupancy trends, lease renewal activity, and any non-operating items that could affect quarterly results. If management maintains discipline around distributions and leverages opportunities prudently, Taleem REIT Fund could offer steady income with potential for modest capital appreciation driven by portfolio growth and favorable leasing conditions in Saudi Arabia’s education sector.
Key Investment Factors
Growth Potential
Portfolio diversification into education/training real estate assets provides a relatively resilient income base with potential upside from lease escalations and expansion opportunities within the education sector. With current assets of SAR 857.25 million and a strong liquidity posture, Taleem REIT Fund could pursue targeted acquisitions or development partnerships to enhance NOI and dividend capacity over time.
Profitability Risk
Key risks include: (1) high dependence on education-related tenants; (2) quarterly variability due to other income/expenses and potential non-operating items; (3) refinancing risk if maturities cluster and market liquidity tightens; (4) occupancy and rent collection timing, as suggested by long days sales outstanding; (5) regulatory and tax policy changes regarding REIT distributions and property taxes in KSA.
Financial Position
Strong balance sheet metrics with total assets of SAR 857.25m and equity of SAR 548.98m; debt burden manageable (long-term debt SAR 297.63m; debt ratio 0.347); current ratio of 14.47x indicates ample liquidity, though cash ratio is modest (0.052x) reflecting reliance on working capital and receivables. P/B ~1.03x and P/S ~34.05x point to a premium valuation relative to book value, consistent with a high-margin, asset-light-looking REIT with a stable income stream from education assets. Dividend payout policy appears aggressive in the short term, requiring careful cash flow monitoring to sustain distributions.
SWOT Analysis
Strengths
Very high gross margin (~0.94) and solid profitability metrics in QQ1 2024
Diversified portfolio focused on educational and training real estate assets
Strong liquidity indicators (current ratio 14.47x) and robust operating cash flow (SAR 10.90m)
Net debt level is moderate relative to asset base; debt ratio around 0.347
Weaknesses
QoQ revenue and earnings decline driven by non-operating items and a large negative swing in other income/expenses
Negative ending cash balance despite positive operating cash flow indicates reliance on financing and dividend funding strategies
Long days payable/receivables suggest potential cash collection timing and working capital pressure
Payout ratio above 1x (1.053x) raises questions about near-term dividend sustainability if operating dynamics deteriorate
Opportunities
Opportunity to selectively expand the education asset portfolio or pursue accretive acquisitions
Potential refinancings at favorable rates if market conditions improve, reducing funding costs
Growing Saudi education sector could support higher occupancy and rent escalations
Threats
Interest rate volatility and financing costs impacting dividend capacity
Tenant concentration risk within the education sector and potential lease expiries
Macro-headwinds in the Saudi real estate market and regulatory shifts affecting REIT distributions