TPL Properties Limited

TPL Properties Limited (PSX: TPLP) was set up in 2007 as a private limited company under the Companies Ordinance, 1984. The company conducted its initial public offering in June 2016. It invests, purchases, develops, sells, leases and disposes off real estate assets predominantly in the commercial and residential asset classes. The company’s first project is Centre Point located off Shaheed-e-Millat Expressway in Karachi.

Shareholding pattern

As at June 30, 2021, over 53 percent shares were held in associated companies. of this 27 percent shares are owned by TPL Corp Limited. The sponsors, directors, CEO and children collectively hold over 12 percent shares of which close to 12 percent shares are held by Mr. Muhammad Ali Jameel, the CEO of the company. Another 27 percent shares are owned by the local general public, while the remaining about 7 percent shares are with the rest of the shareholder categories.

Historical operational performance

TPL Properties has mostly seen a rising topline since FY16, except for in FY17 and more recently in FY21. Net margin on the other hand, have followed a downward trajectory since FY18, while gross margin has remained more or less stable.

Revenue in FY18 increased only marginally by almost 1 percent while the company maintained a 100 percent tenancy in its rental portfolio. It also witnessed capital appreciation of its asset under the same portfolio. During the year, the company also planned to launch its first REIT scheme in 2019 that would include several Real Estate Assets. It also planned more high-end projects for 2020 and 2021. On the other hand, while gross margin was flat due to little changes in revenue or costs, the bottom-line was supported by the substantial rise in other income that came from a combination of profit on Islamic saving account and a fair value gain on investment property.

Topline in FY19 increased by 10 percent to reach Rs 403 million. This was attributed to a revision in rental contracts with a few tenants. But with a slight upward change in costs, gross margin reduced very marginally. The major costs for the company are the administrative costs that witnessed a decrease as a share in revenue. Despite this, the bottom-line and net margin were lower year on year as fair value gain on investment property reduced from Rs 1.2 billion in FY18 to Rs 667 million in FY19. Thus, bottom-line was recorded at Rs 730 million for the year, compared to Rs 1.2 billion in the previous year.

In FY20, revenue went up by over 68 percent. This was attributed to renewal of contracts of five floors, and majorly due to a merger of Centrepoint Management Services Private Limited (CPMS). CPMS is a 100 percent owned subsidiary of the company that was merged into TPL Properties Limited. The higher topline allowed gross profit to increase in value terms, while gross margin was lower due to a rise in costs as well. With other income reverting to its previous levels, and finance expense escalating due to interest rates remaining high for a large part of the year, net profit reduced to Rs 277 million for the year.

Revenue in FY21 contracted by 58 percent as it more than halved in value terms. This was due to a substantial reduction in rental income that made the largest contribution to the topline. Moreover, administrative expense escalated to Rs 564 million, from Rs 147 million in FY20. This was due to a combination of factors, the prominent ones being salaries expense, and tenant compensation for early termination of rental contracts. Coupled with this was the reduction in other income that primarily came from fair value gain on investment property. With finance expense also incurred, the company posted a loss for the first time since FY15, of Rs 564 million for the year.

Quarterly results and future outlook

Revenue in the first quarter of FY22 was notably lower at Rs 11 million, compared to Rs 120 million in the same period last year. This was due to revenue dry up after the sale of Centrepoint. There was some support to the bottom-line coming from an increase in other income and a reduction in finance expense that kept the company from incurring huge losses. Net loss for the period was recorded at Rs 2 million, compared to a profit of Rs 1 million in the first quarter of FY21.

Additionally, the company claims that the period has been rather challenging as it was not able to achieve its milestones of One Hoshang groundbreaking and REIT formation was also not achieved because of regulatory bottlenecks. In the future, after the formation of TPL REIT Fund 1, the company will generate revenue streams through dividends, development fees, etc. It will also generate earnings through project management as it continues to own TPL Property Management Services.