Investor Presentation Q3 2018

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Jacob Morrison
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1 Investor Presentation Q3 2018

2 What to look forward to Investment thesis 3 Business model 6-9 Management team King Abdullah Economic City 4 Financial position Additional information How we are different 5 Intrinsic & future value Financial results

3 Investment thesis Developing the largest privately funded new city in the world Developing a logistics gateway to capitalize on KAEC s strategic location on the Red Sea coast Establishing a manufacturing hub, focusing on high-growth non-oil industries Creating a tourism and leisure destination to meet demand from domestic and international tourism Supporting the development and activities of SMEs and entrepreneurs Fostering a modern Saudi lifestyle through fully serviced residential communities Diversified portfolio of assets that creates long-term benefits to shareholders Unique business model with a diversified asset base with a long term goal of delivering results to shareholders Portfolio of built assets consists of: Residential communities and industrial zone, with land and developed properties that are either sold or leased; 50% ownership in King Abdullah Port (KAP), KSA s 2nd largest deep sea port; Commercial assets (hospitality, retail, F&B, office space), generating recurring income Clear, focused strategy aimed at capitalizing on emerging opportunities Supported by Saudi Vision 2030 Well positioned to benefit from strong demand and favourable outlook, driven by social, demographic and macroeconomic tailwinds Creating a stable business ecosystem to attract investment (FDI, third party investment) 3

4 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 1 BUSINESS MODEL Unique business model with a diverse portfolio of real estate and infrastructure assets, providing synergies and self-sustaining growth 2

5 Emaar Economic City why we are different 1 BUSINESS MODEL Unique business model with a diverse portfolio of real estate and infrastructure assets, providing synergies and self-sustaining growth 2 FINANCIAL POSITION Well-capitalized and growing balance sheet supported by smart cash-flow management 3 INSTRINSIC & FUTURE VALUE Significant value creation opportunity backed by a focused strategy, allowing us to grow profitably 4 MANAGEMENT TEAM Experienced and dynamic management team with a proven track record of creating value and managing risk 5

6 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 Identify opportunity

7 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 Identify opportunity Develop relevant assets and smartly manage project pipeline Actively manage assets Diversify revenue source Provide earnings visibility for shareholders in various stages of economic cycles Our competitive advantage Strategic location and ease of access Sole owner and operator of mega greenfield project in KSA Partnership & endorsement from various Government entities 7

8 Reinvestment 1 Our business model Our business model will help us to deliver financial returns in a sustainable way Residential Cash Debt and Equity + Land Bank 168 million sqm Primary infrastructure supports assets and increases base land value Industrial Commercial & Leisure Retail and F&B Port City Port Operations CapEX + OpEX Sales One time revenue Recurring revenue Leasing Operating Activities Disbursement Charges Cover debt obligations Fund projects Banks and creditors Pay dividends Long term Investors 8

9 1 Multiplied value 2006 Building foundations & early development New city was born 2017 Aggressive development & expansion Modern city with organic population growth 2035 Operations & maintenance Land acquisition value = SAR 3.8 bn Value of Investment Property = SAR 54 bn* Vibrant city contributing to KSA s socio-economic development Multiplied value In excess of SR 30 bn capital invested since inception (by EEC and third parties) Funded via debt, operating income Selfsustaining * Based on fair value assessment survey conducted by Valustrat as of Dec 31,

10 2 FINANCIAL POSITION Well-capitalized and growing balance sheet supported by smart cash-flow management

11 2 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) 296 Debt and equity (SAR bn) Housing 1,138 1,394 1,051 2, SAR 19.3 bn invested in building KAEC (as of Sep 2018) 4,061 3,780 Paid up Capital 5 5 SAR 18.5 bn debt and paid up capital 8.5 Land (purchase) Primary infrastructure 3,184 MoF Loan Port Commercial, Hospitality & Leisure Commercial Loan Industrial Valley Infrastructure Residential land development Fixed Assets Utilities Education & Healthcare KAEC is the largest privately funded city in the world Financial leverage is significantly lower than regional and international property developers 11

12 SAR Millions SAR Millions 2 Cash and liquidity analysis Strong liquidity position with a comfortable cash buffer to help fund current projects and pay down debt 1, SAR 1.44 bn , , (Industry Average, Thomson Reuters) 2017 Q3'18 AR 2017 Q3'18 Murabaha term deposits Capital Work in Progress (as of Sep 30, 2018) Current Ratio (as of Sep 30, 2018) Cash & cash equivalents Combination of liquid assets and unused commercial loans can cover construction in progress Comfortably cover our short-term debt obligations 12

13 SAR Millions 2 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, ,000 2,613 2,500 2,331 2,311 2,000 1,822 1,500 1,454 1,325 1, , Over 30 projects earmarked for leisure and tourism segment Budgeted CAPEX Recurring income (Actual) Projected recurring revenue Smart budgeting and liquidity management to cover SAR 16 bn CAPEX over next 7 years 13

14 3 INTRINSIC & FUTURE VALUE Significant value creation opportunity backed by a focused strategy, allowing us to grow profitably

15 Source of valuation SAR Billions 3 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 Valuation Mkt Cap KAP, IV, residential developments, hospitality KAP, IV, residential developments, hospitality, leisure amenities Initial developments, infrastructure IV, Residential developments DEC 2006 DEC 2009 DEC 2012 DEC 2015 DEC 2017 Purchase price Internal estimation JLL Commercial Banks Valustrat 15

3 Near term value enhancers There are some imminent catalysts that are set to increase our value in the short to

Haramain highspeed rail is now operational 874 ready to move vertical units; 247 near completion; 448 residential

Imminent opening of 2 specialty, high quality assets; development of a mega water park KAP s operational volume

16 3 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 million people within 1 hour of KAEC. Haramain highspeed rail is now operational 874 ready to move vertical units; 247 near completion; 448 residential land units available for sale Additional 32 IV licensed companies expected to come online in months Imminent opening of 2 specialty, high quality assets; development of a mega water park KAP s operational volume rose significantly. YOY Container volume up by 40% and no. of Vessel calls up by 20%, Bulk and general cargo handling operation started and 484 MT of cargo already handled 16

3 Future outlook We are well positioned to benefit from the socio-economic changes underway in Saudi Arabia and are capitalizing on those opportunities by

17 3 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 social tailwinds accelerating demand Well integrated and focused strategy to capitalize on new demand trends Multiplied value for all major stake holders Saudi Vision 2030 Growing population, with young demographic profile Regulation and changes to industry framework Modernization of Saudi Arabian society Industry, Commerce & SME KAEC Residential Leisure & Tourism Shareholders Residents KSA Business owners 17

18 0 3 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 Attract greater number of non-oil manufacturing companies Increase container volumes in port by capturing greater volume of trade via Red Sea Catering to underserved local manufacturing industries (automotive, pharmaceuticals etc.) Entice entrepreneurs to establish presence in KAEC Current activity Development of re-export zone On schedule development of KAP On schedule development of IV Gas zone to provide feedstock for industrials Tech hub to support data centers Managing a viable entrepreneur/start up ecosystem 18

thousand sqm leased Phase 2 (launched 2011) 16 thousand sqm sold 7 thousand sqm leased Phase 3

19 0 3 Industrial Valley 34 companies in operation; 32 under construction; 116 licensed ¾ of developed industrial land sold Land value tripled since 2012 Phase 1 (launched 2007) 22 thousand sqm leased Phase 2 (launched 2011) 16 thousand sqm sold 7 thousand sqm leased Phase 3 (launched 2014) 21 thousand sqm sold 92 thousand sqm leased Phase 4 (launched 2017) 369 thousand sqm sold 19

20 3 4 King Abdullah Port Commercial operation began in th fastest growing port in (Alphaliner) 735 vessels received till YTD Sep 2018, up by 20% vs. YTD Sep 2017 SAR 7.0 bn initial invested capital 2nd Largest port in KSA by capacity and throughput. 69th largest port in the world 3-4 days clearing time, matching world s most efficient ports First dedicated RO/RO terminal in the GCC At par with world s deepest water berths (18m) Reached 4.5 million TEU capacity in 4 years Capacity of 20m TEU and Bulk cargo of 15m tons upon completion 20

SCHOLARSHIP Circle 301 GOVERNMENT SERVICES

21 3 Supporting youth and entrepreneurship Circle 301 is an EEC initiative which serves to create an efficient start-up ecosystem KNOWLEDGE EMPOWERMENT HOUSING SOLUTIONS SCHOLARSHIP Circle 301 GOVERNMENT SERVICES ENTREPRENEURSHIP HUB VENTURE CAPITAL (SAR 75 MILLION FUND) 21

22 0 3 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 Opportunity Attract first-time home buyers Cater to various income groups and psychographic needs Current activity Develop high end and middle income housing communities Building unique, upscale golf community Sports complex and other amenities Enhancing landscaping and beachfront 22

3 Residential communities Complete portfolio of

urban district Al Murooj is an upmarket community

series of midincome housing community villas and

award winning mid-income district 61% of developed

community close to Haramain station Al Shurooq is

located within the Industrial Valley Many upcoming

23 3 Residential communities Complete portfolio of housing solutions readily available Bay La Sun is an urban district Al Murooj is an upmarket community (golf or beachfront options) Al Talah Gardens is a series of midincome housing community villas and community plots on the coastal road Al Waha is an award winning mid-income district 61% of developed vertical units Sold Miram Al- Hejaz is a midincome community close to Haramain station Al Shurooq is suitable for first time home owners The Village is located within the Industrial Valley Many upcoming unique, modern residential communities 91% of developed residential land sold 23

24 0 3 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 Opportunity Convert repeat visitors to home owners Attract greater number of visitors by positioning KAEC as leisure lifestyle and tourism destination Leverage location and Haramain rail, (catchment area of 10m people within 1 hour of KAEC) Current activity Over 30 projects under development including: Sports complex (Esmeralda) Marina and yacht club Souq Malls Islamic exhibition center Tethered balloon Laguna (amusement & waterpark) Motor park Desert camps Culinary and aviation academy 24

0 3 Leisure and tourism assets Booming leisure and entertainment destination Invested around

(expected) Integrated resorts and independent hotels World-class golf course Independent

development 2017 400,000 visitors Bay La Sun Hotel and Marina The Views Royal Greens selected

Lagoona: water-park, ecology park, outlet mall Over 70,000 sqm of family friendly park,

25 0 3 Leisure and tourism assets Booming leisure and entertainment destination Invested around SAR 2bn in developing a premier leisure and entertainment destination million visitors (expected) Integrated resorts and independent hotels World-class golf course Independent exhibition centre Fully integrated leisure and entertainment Juman Park 30+ projects under development ,000 visitors Bay La Sun Hotel and Marina The Views Royal Greens selected for PGA European Tour Championship 2019 Bay X exhibition centre to offer 2,800m of hall space Lagoona: water-park, ecology park, outlet mall Over 70,000 sqm of family friendly park, walking, cycling and games Theme park, water park, desert camping, motor park ,000 visitors Visitors 25

26 0 3 Lagoona A large scale leisure destination situated within the lagoon waterfront; designed around a unique blend of local and international IP 26

27 0 3 Bay la Sun Yacht Club and Marina Luxury marine and watersports facility with berthing for private boats Opening up nascent marine tourism industry for KAEC 27

exclusive, first-class golfing experience.

28 0 3 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 and Country Club is an exclusive, first-class golfing experience. Selected to host the European PGA Tour Championship in

29 0 3 Esmeralda Sports & Wellness Center Expected to open in Q First of its kind family fitness and leisure center in the kingdom Won 2017 International Property Award for Best International Leisure Development 29

30 4 MANAGEMENT TEAM Experienced and dynamic management team with a proven track record of creating value and managing risk

ABDULLAH KAMEL Vice Chairman MR. AHMED LINJAWY Acting Group CEO H.E. ENG. KHALID AL-MOLHEM ENG. MR. ABDULRAHMAN AL-ROWAITA Board Members H.

31 4 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 ALABBAR Chairman MR. ABDULLAH KAMEL Vice Chairman MR. AHMED LINJAWY Acting Group CEO H.E. ENG. KHALID AL-MOLHEM ENG. MR. ABDULRAHMAN AL-ROWAITA Board Members H.E. SAUD AL-SALEH MR. AHMED JAWA ENG. MR. ABDULLAH TAIBAH MR. JAMAL BIN THENIYEH MR. FAHD ALRASHEED 31

32 ADDITIONAL INFORMATION

Prince Mohammad Bin Salman College of Business and Entrepreneurship (MBSC)

foundation 1 st private business and entrepreneurship college in Saudi Arabia

teachings to cultivate a well rounded entrepreneurial culture Under the

33 Prince Mohammad Bin Salman College of Business and Entrepreneurship (MBSC) Established in partnership with Babson Global, Lockheed Martin and MISK foundation 1 st private business and entrepreneurship college in Saudi Arabia offering MBA program Inspired by Vision 2030 Practical learning and academic teachings to cultivate a well rounded entrepreneurial culture Under the umbrella of MISK Foundation Female and male students taught by high caliber professors 33

Education & training Offering every generation the ability to explore, learn, create and teach GEMS World Academy was set up in 2014, with capacity of 600 students, offering an international K-12

34 Education & training Offering every generation the ability to explore, learn, create and teach GEMS World Academy was set up in 2014, with capacity of 600 students, offering an international K-12 education Tomouh provides thousands of young Saudi men and women with the skills and training required to compete in the modern work environment Vocational training facilities including: Culinary Academy, in partnership with MISK Foundation Aviation Academy in partnership with GACA 34

Station will be the new downtown with retail, housing and other commercial centers 450 km high speed train

35 Haramain 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 Station will be the new downtown with retail, housing and other commercial centers 450 km high speed train 25 minutes to new Jeddah International Airport 35 minutes to downtown Jeddah 55 minutes to Makkah 55 minutes to Medina 35

Strategic geographic location Prime location along the Red Sea trade route Tourism attraction: Red Sea coastal city located close to Jeddah offering a variety of

attraction: Proximity to Jeddah, Makkah, Madinah and well connected by every mode of transport to other cities Commerce & Trade advantage: >10% of world trade

36 Strategic geographic location Prime location along the Red Sea trade route Tourism attraction: Red Sea coastal city located close to Jeddah offering a variety of entertainment and leisure facilities Business advantage: Opportunity to join the Western Region s wellestablished international and local business clusters Resident attraction: Proximity to Jeddah, Makkah, Madinah and well connected by every mode of transport to other cities Commerce & Trade advantage: >10% of world trade passes through the Red Sea which is a prime East-West hub on the main trade route between Asia, Europe and Africa KAEC Gateway to the Middle East s 400+ million population 36

37 KAEC s development 37

38 Hard and soft infrastructure All of KAEC s offerings are underpinned by high quality infrastructure that serves businesses, residents and visitors Primary roads 83 km Telecom network km Water network km Sewage network 85.9 km 5 mosques Secondary roads 84.5 km Irrigation km Bicycle ways 11.0 km Gas stations 1 fire, 2 security stations Electricity network km 2 clinics 2 renowned education institutions 15 tenants office space Sports arenas and facilities 12 Shops and Retail 19 Restaurants and cafes Parks Water ways 3.1 km 38

39 Industrial Valley Home to over 110 leading global and local non-oil businesses Logistics Pharma Building materials Automotive Consumer Goods Packaging 6 fully serviced clusters 39

40 APPENDIX: Q FINANCIAL RESULTS

41 Quarterly Revenue and Net Income Revenue and Net Income (SAR Mn) Net Income 628 Revenue Q Q Q Q Q Q Q Revenue breakdown, YTD Q (%) Order intake breakdown, YTD Q (%) Other 16% Industrial 1% Valley 30% 54% Residential YTD Q Order intake SAR 144Mn Residential 47% 53% Industrial Valley 41

42 Operating profit margin SAR millions YTD Q s revenue breakdown Breakdown of revenue by segment (YTD Q3 2018) Residential Industrial development Hospitality & leisure Other Total Revenue 20% 70% Residential and Industrial business segments are very profitable and are helping fund the expansion into hospitality and leisure 42

08 billion (as of 30/09/2018) Investment property valued at SAR 54.

43 Value metrics Intrinsic 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) 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 43

44 Page 44 KAEC.net/Investor-Relations T KAEC Investor Relations APP 44

45 DISCLAIMER 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. 45

Saudi Arabia Beyond Oil

Saudi Arabia Beyond Oil Saudi Arabia at a Glance tal Population 1.7 illion entage of Youth er 25) 50% GDP $646 Billion Population Growth Rate 2.5% FDI Inward Sto $224 Billion Source : 1) UNCTAD 2016 2)