Investor Presentation - Q1 2019 - King Abdullah Economic City
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Investor Presentation Q1 2019
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
2018 & 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 48 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, 2018
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)
305
940 984
1,072
1,207
5
4,193 SAR
1,442
19.8 bn SAR
invested in 18.5 bn 8.5
building
KAEC
debt and
(as of Mar 2,605 paid up
2019) capital
3,780
Paid up Capital 5
3,307
MoF Loan
Education & Healthcare Utilities & Smart City Commercial Loan
Fixed Assets Residential Land Developmnent
Industrial Valley Infrastructure Commercial Hospitality & Leisure
Port Primary Infrastructure
Land (purchase) Housing
• 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
653 1.78 1.02
50
527
50
SAR Millions
SAR Billions
SAR Millions
768 759
603
477
2018 Q1 2019 2018 Q1 2019 Capital Work in Current Ratio
Progress (as of (as of Mar
AR Murabaha term deposits Mar 31, 2019) 31, 2019)
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 160
3,500
3,000 3,039
2,500 2,473
SAR Millions
2,083
2,000
1,668
60 63
1,500
1,351
1,000 1,022 34
19
500 348
251
186 237 222
81 116
6 32
0 2015 2016 2017 2018 2025
• Over 30 projects earmarked for leisure and tourism segment
Budgeted CAPEX Recurring Income (Actual) • Smart budgeting and liquidity management to cover SAR 16 bn
Recurring Income (Projected) CAPEX over next 7 years
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
Valuation vs. Market Capitalization
KAP, IV, residential developments, hospitality, leisure amenities
Valuation Mkt Cap
54.0
41.1 47.7
SAR Billions
KAP, IV, residential
developments,
hospitality
Initial developments, IV, Residential
infrastructure developments 18.8
13.8
12.5
11.0 11.5 6.7
8.2
7.1
3.9
DEC 2006 DEC 2009 DEC 2012 DEC 2015 DEC 2017 DEC 2018
Source of
valuation
Purchase Internal Commercial
JLL Valustrat 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 48 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 295%, Bulk and
speed rail is now months general cargo
operational handling operation
started and 1,360 MT
of cargo already
1,023 ready to handled in H1 2019
Imminent opening of
move vertical units; 2 specialty, high
464 residential land quality assets;
units readily development of a
available for sale mega water park
and 546 near
completion
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)
2,162 thousand sqm leased
3
03
Industrial Valley
Phase 2
(launched 2011)
7,012 thousand sqm sold
1,581 thousand sqm leased
36 companies in operation; 32 under construction; 48 under licensing
¾ of developed industrial land sold
Phase 3
(launched 2014)
2,110 thousand sqm sold
Land value tripled since 2012 191 thousand sqm leased
Phase 4
(launched 2017)
369 thousand sqm sold
193
4 King Abdullah Port
Commercial operation began in 2014 SAR 5.2 bn initial invested capital
Crown Prince Muhammad Bin Salman, Deputy Premier and Minister of
Defense, inaugurated the King Abdullah Port on 11 Feb 2019
2nd Largest port Reached
in KSA by 4.5 million TEU
2nd fastest 70% Customs capacity
capacity &
growing port in clearances are in 4 years. 4 new
market share
2018. completed STS cranes and
and throughput. 20 RTG cranes
(Alphaliner) within 24 hours
82nd largest port are currently
in the world being erected.
Multipurpose
Capacity of
Terminal
20m TEU,
handled Bulk At par with
438 vessels 15m tons of
cargo world’s deepest
received in H1 Bulk cargo and
throughput of water berths
2019 1.5m vehicles
1,360k Tons in (18m)
upon
H1 2019, up by
completion
295% vs. 2018.
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
75%
(golf or income housing mid-income of launched
beachfront community villas district
options) and community vertical units
plots on the
coastal road Sold / Leased
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
80%
community Valley residential of launched
close to communities
residential
Haramain
station land sold
233
03
Unlocking value through leisure & tourism
Operating environment
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)
• Souq
Opportunity • 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 academy
243
03
Leisure and tourism assets
Booming leisureSAR
Invested around and 2bn
entertainment destination
in developing a premier leisure and entertainment destination
2019
1 million visitors
(expected)
2018
Integrated Fully 700,000 visitors
Independent 30+ projects
resorts and World-class integrated
exhibition Juman Park under
independent golf course leisure and
centre development
hotels entertainment
Bay La Sun
Hotel and Marina Theme park,
Royal Greens Lagoona: Over 70,000
Bay X exhibition water park, 2017
selected for PGA water-park, sqm of family
The Views centre to offer desert camping, 400,000 visitors
European Tour ecology park, friendly park,
2,800m of hall motor park,
Championship outlet mall walking, cycling
Sunrise space Culinary
2019-21 and games
academy Visitors
Apartments
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
Successfully hosted the
The Royal Greens Golf
European PGA Tour
and Country Club is an
Championship in Feb
exclusive, first-class golfing
2019. Also, scheduled to
experience.
host in 2020 and 2021.
283
03 Esmeralda Sports & Wellness Center
Expected to open in Q3 2019
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 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. AHMED
AL-ROWAITA JAWA LINJAWY
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, now with a capacity of 2,000 • Culinary Academy, in partnership with
students, offering an international K-12 MISK Foundation
education • Aviation Academy in partnership with
GACA
Tomouh provides thousands of young
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 has reduced 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
94.1 km roads Irrigation Gas stations
84.5 km 121.2 km
Bicycle ways
Water network
6 mosques 11.0 km
127.6 km
Electricity
network
425.8 km Parks
18 tenants
office space 12 Shops and
Retail Water ways
3 renowned 3.1 km
education
2 clinics
institutions 19 Restaurants
1 fire, 2 security 27 beds Sports arenas
stations and cafes
and facilities
38Industrial Valley
Home to over 116 leading global and local non-oil businesses
Logistics Pharma
Building Automotive
materials
Consumer
Goods Packaging
6 fully serviced clusters
39APPENDIX: Q1 2019 FINANCIAL RESULTS
Quarterly Revenue and Net Income 2018-2019
Revenue and Net Income (SAR Mn)
Net Income Revenue 371 346
281
244
112
47
3 4
-45
-135
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
Q1 2019 Revenue breakdown Q1 2019 Order intake breakdown
(%) (%)
Hospitality & Leisure Hospitality & Leisure
Other Industrial Valley 4
18 68 (2%)
(5%) 24 (20%) Industrial Valley
(7%) 71
(34%)
1% Q1 2019
SAR 135
Order
211Mn (64%)
intake Residential
236
(68%)
Residential 412018 Revenue breakdown by segment
18 346
24
68
236
SAR millions
Residential Industrial Valley Hospitality & Leisure Other Total Revenue
Operating profit
margin
40% 72%
• 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 8.5 billion (as of Mar 31, 2019)
Value metrics
Investment property valued at SAR
47.7 billion
based on fair value assessment survey conducted by Valustrat
as of Dec 31, 2018
Development and Investment Property
on the books as of Mar 31, 2019
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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