Exchange: SAU | Sector: Real Estate | Industry: REIT Hotel Motel
Q2 2023
Published: Jun 30, 2023
Earnings Highlights
Revenue of $22.39M up 0% year-over-year
EPS of $-0.04 increased by 0% from previous year
Gross margin of 64.5%
Net income of -2.52M
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Jadwa REIT Al Haramain Fund (4332.SR) QQ2 2023 Results Analysis – Revenue Upside Amid Elevated Financing Costs in Saudi Hospitality REIT
Executive Summary
Jadwa REIT Al Haramain Fund reported QQ2 2023 revenue of SAR 22.39 million, delivering a solid gross margin of approximately 64.5% and an EBITDA of SAR 19.73 million. Despite a robust operating performance, net income registered a negative SAR 2.52 million, driven by elevated financing costs and other non-operating charges. The quarter benefited from a favorable gross margin and strong operating leverage, but large interest expense (SAR 8.97 million) and substantial other expenses (-SAR 16.49 million) pressured the bottom line. The result translates into a negative net margin (-11.25%) and a negative EPS of SAR -0.038. On a cash-flow basis, operating cash flow was positive at SAR 5.40 million, yielding a positive free cash flow of SAR 5.40 million, while ending cash stood at SAR 16.05 million. Leverage remains meaningful with total debt of SAR 250.87 million and net debt of SAR 234.82 million, against equity of SAR 488.23 million and total assets of SAR 749.34 million. The debt burden implies an interest-coverage of about 1.56x and a debt-to-equity ratio of roughly 0.51, underscoring financing risk amid a high cost of capital environment. Notably, the company maintains its Shariah-compliant mandate and a biannual distribution policy that targets at least 90% of net profit (excluding capital gains). Given the current loss and limited dividend visibility, the near-term distribution profile is expected to remain constrained. Management commentary (where available) was not accompanied by a formal earnings call transcript in the provided data, limiting quote-driven insights for QQ2 2023.
Key Performance Indicators
Revenue
22.39M
QoQ: N/A | YoY:N/A
Gross Profit
14.44M
64.51% margin
QoQ: N/A | YoY:N/A
Operating Income
13.97M
QoQ: N/A | YoY:N/A
Net Income
-2.52M
QoQ: N/A | YoY:N/A
EPS
-0.04
QoQ: N/A | YoY:N/A
Revenue Trend
Margin Analysis
Key Insights
Revenue: SAR 22,386,501
Gross profit: SAR 14,441,078
Gross margin: 64.5%
Operating income: SAR 13,968,710; operating margin: 62.40%
EBITDA: SAR 19,726,452; EBITDA margin: 88.12%
Financial Highlights
Revenue and profitability:
- Revenue: SAR 22,386,501
- Gross profit: SAR 14,441,078
- Gross margin: 64.5%
- Operating income: SAR 13,968,710; operating margin: 62.40%
- EBITDA: SAR 19,726,452; EBITDA margin: 88.12%
- Net income: SAR -2,517,974; net margin: -11.25%
- EPS: SAR -0.0382; weighted avg shs: 66,000,000
Liquidity and leverage:
- Cash and cash equivalents: SAR 16,054,246
- Total debt: SAR 250,872,972; net debt: SAR 234,818,726
- Total assets: SAR 749,343,911; total stockholders’ equity: SAR 488,233,840
- Debt ratio: 0.335; debt-to-equity: 0.514
- Interest coverage: 1.56x; cash flow to debt: 0.0215
Cash flow:
- Operating cash flow: SAR 5,404,472
- Free cash flow: SAR 5,404,472
- Net change in cash: SAR -1,857,709
Valuation and efficiency:
- Asset turnover: 0.0299x; revenue-to-asset scale appears modest given the asset base
- P/S: 23.47x; P/B: 1.076x; P/E: negative (loss-making year-to-date)
- Dividend yield: 0% (no dividends declared in QQ2 2023; policy contemplates distributions when profits exist)
Income Statement
Metric
Value
YoY Change
QoQ Change
Key Financial Ratios
grossProfitMargin
64.5%
operatingProfitMargin
62.4%
netProfitMargin
-11.2%
returnOnAssets
-0.34%
returnOnEquity
-0.52%
debtEquityRatio
0.51
operatingCashFlowPerShare
$0.08
freeCashFlowPerShare
$0.08
priceToBookRatio
1.08
priceEarningsRatio
-52.16
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript is provided for QQ2 2023. As a result, there are no management quotes or theme-based insights to quote in this section. If a transcript becomes available, the highlights would be organized by themes such as strategy (portfolio optimization, Shariah governance), operations (occupancy, ADR, RevPAR), and market conditions (tourism demand in Makkah/Medinah, occupancy trends, regulatory impact).
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Forward Guidance
No explicit management guidance is contained in the provided data for QQ2 2023. Nevertheless, investors should monitor several near-term factors:
- Revenue resilience and occupancy trends in holy-city hospitality assets (RevPAR dynamics in Makkah and Madinah).
- Debt refinancing risk and interest costs in a rising-rate environment, given an interest-coverage of ~1.56x and a total debt load of SAR 250.9 million.
- Dividend policy relative to profits: given the reported net loss, distributions are not expected to materialize in the near term; any reversal would hinge on sustained profitability and free cash flow strength.
- Capital allocation and maintenance capex versus expansion opportunities within the Shariah framework.
Overall, the forward view hinges on stabilizing earnings, improving operating cash flow, and managing financing costs to support a potential reinitiation of distributions.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
4332.SR Focus
64.51%
62.40%
-0.52%
-52.16%
4330.SR
45.10%
21.10%
2.29%
11.09%
4340.SR
69.20%
57.10%
0.34%
98.44%
4342.SR
70.80%
55.90%
2.38%
15.20%
4336.SR
61.20%
38.80%
-2.23%
-10.28%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Short-term: Cautious near-term profitability due to elevated financing costs and a loss for QQ2 2023, with a dividend outlook likely constrained until earnings rebound. The strong gross margin and EBITDA indicate meaningful operating leverage within the portfolio, suggesting potential for margin expansion if financing costs stabilize and occupancy recovers. Medium-term: If Mecca/Medinah occupancy and RevPAR recover in line withSaudi tourism growth and Jadwa pursues disciplined capex and portfolio optimization, there is scope for earnings stabilization and potential distributions. Valuation remains challenged by the negative earnings and the absence of yield in QQ2 2023, although the asset base and Shariah-compliant structure provide a durable franchise in the Saudi hospitality REIT landscape. Monitor occupancy metrics, debt refinancing risk, and regulatory guidance from Jadwa on capital allocation and distribution policy; scenario analysis around interest rate trajectories and pilgrimage demand will be critical to assess survivability and upside.
Key Investment Factors
Growth Potential
Potential upside from occupancy recovery and RevPAR growth in religious tourism, aided by portfolio optimization and selective acquisitions within the Mecca/Medina corridor under a Shariah-compliant framework.
Profitability Risk
Key risks include elevated financing costs, sensitivity to pilgrimage-driven demand cycles, refinancing risk on maturing debt, regulatory changes affecting REIT operations, and potential distortions in asset values from balance sheet anomalies observed in current reporting.
Financial Position
Moderate leverage with debt-to-equity around 0.51 and debt ratio ~0.34; solid equity base (SAR 488.23m) supports financing capacity; however, net losses and high interest expense weigh on profitability. Cash balance (~SAR 16.05m) provides limited liquidity vs. debt obligations; EBITDA remains strong relative to revenue, but net income remains negative due to financing and other non-operating items.
SWOT Analysis
Strengths
Prime religious tourism asset base in Makkah and Madinah with long-term, Shariah-compliant mandate
Established, CMA-licensed sponsor/Jadwa Investment expertise in asset management and REIT operations
Biannual distribution policy aligned with regulatory framework and investor expectations when profitable
Solid equity base and substantial asset value supporting financing capacity
Weaknesses
Net loss driven by high interest expense and other non-operating charges limiting near-term distributions
Potential balance sheet presentation irregularities (negative values in some current/non-current asset lines) that warrant closer audit scrutiny
Low cash balance relative to total debt, exposing liquidity to refinancing risk
Payout absence in QQ2 2023 may dampen income-focused investor appeal
Opportunities
Rising traveler demand and religious tourism could lift occupancy and ADR/RevPAR in holy-city assets
Asset optimization and selective acquisitions to grow NAV and stabilize cash flows within Shariah guidelines
Potential refinancing at favorable terms if market conditions improve, aided by Jadwa’s asset management capabilities
Threats
Rising interest rates and tightening credit conditions impacting financing costs
Sovereign/regulatory shifts affecting REITs and Shariah compliance governance
Demand volatility tied to pilgrimage cycles and broader macro conditions in Saudi Arabia