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TPL Properties Limited (PSX: TPLP) was incorporated in Pakistan as a private limited in 2007. In 2016, the company changed its status to public limited company. TPLP is engaged in investing, purchasing and development of real estate including residential and commercial buildings, shops, plots, houses etc. The company also sells, rents out or dispose off the real estate.

Pattern of Shareholding

As of June 30, 2022, TPLP has a total of 510.733 million shares outstanding which are held by 4967 shareholders. Associated companies have the highest stake of 52.85 percent in the company followed by Local General Public holding 19.5 percent shares of TPLP. Sponsors, Directors, CEO and their children account for 8.79 percent of the company’s shares. Modarbas and Mutual funds own 2.56 percent shares of the company while Foreign General Public have an ownership of 1.66 percent shares. The remaining shares are held by other categories of shareholders.

Performance Trail (2018-22)

Except for a dip in 2021, the topline of TPLP has been growing since 2018. However, in 2022, the topline boasted a terrific growth and enlarged by over 13 times. While the GP margin of the company also posts the highest value of 99.9 percent in 2022, the NP margin showed its highest value of 216 percent in 2018 after which it kept shrinking until 2021. 2022 shows a recovery in NP margin which clocked in at 82.7 percent, however the value is still not close to that of 2018. Unlike the growth trajectory followed by TPLP’s topline, its bottomline kept shrinking since 2019 with an astonishing rise of over 69 times in 2022. Let’s find out the fundamental details behind the bizarre performance pattern.

In 2018, the main source of revenue was rental income. This combined with income from electricity and conditioning services as well as maintenance and IT services culminated into a topline of Rs.553.19 million for TPLP. The GP margin for the year clocked in at 70.6 percent. What made the company attain a surprisingly high bottomline of Rs. 1196 million and an NP margin of 216 percent was the fat other income which was the result of fair value gain on investment property. EPS stood at Rs.3.65 in 2018

In 2019, the topline grew by 8 percent year-on-year which came on the back of revision of rental and maintenance contracts with some of the tenants. However, the occupancy ratio of the company’s rental property dropped during the second half of 2019. GP margin stayed almost the same as 2018. Finance cost grew by 25 percent year-on-year on the back of increased discount rates during the year. Other income which showed a stunning growth last year, shrank by 41 percent year-on-year in 2019 on the back of low fair value gain on investment property. Hence, the bottomline slid by 43 percent year-on-year to clock in at Rs.676.26 million in 2019. The NP margin plunged to 113 percent while EPS clocked in at Rs.2.07 in 2019.

There was a drop in the occupancy ratio during the 2HFY20; however, renewal of rental contracts as well as growth in other sources of revenue helped TPLP attain a topline growth of 14 percent in 2020. Direct operating cost grew by 24 percent year-on-year in 2020 on the back of provision for GIDC. This led the GP margin plunge to 68 percent in 2020. Finance cost grew by 44 percent year-on-year as discount rate was high in the first three quarters of 2020 coupled with in an uptick in long-term financing by a holding company to finance equity investment in TPL Logistic Park (Private) Limited. Other income didn’t provide any support either as it slid by 55 percent year-on-year primarily on the back of low fair value gain on investment property and low profit on saving accounts. The result was a bottomline plunge of 83 percent year-on-year in 2020 to clock in at Rs.113.21 million with an NP margin of 16.7 percent. EPS clocked in at Rs.0.35 in 2020.

Unlike other years, in 2021, the topline dropped by 35 percent year-on-year. This was the result of a drop in rental income as well as income from maintenance and other services. While the company also managed its direct costs accordingly, gross profit recorded a dip of 32 percent year-on-year. However, there was an improvement in the GP margin which clocked in at 71.6 percent in 2022. A massive increase of 325 percent was recorded in admin and general expenses which came on the back of a huge rise in salaries and wages, tenant compensation, donations etc. However, this was counterbalanced was a 153 percent year-on-year growth in the other income account which was mainly driven by fair value gain on investment property. Finance cost increased by a mere 1 percent due to low discount rate. The bottomline slid by 38 percent year-on-year to clock in at Rs.70.03 million in 2021 with an NP margin of 16 percent. EPS stood at Rs. 0.18 in 2021.

2022 appears to be the most fortunate year for TPLP as well as the entire real estate sector. During the year, the real estate prices soared by 20 percent. This was on the back of favorable initiatives by the government such as Naya Pakistan Housing Program, mandatory housing targets for banks etc. TPLP recorded a massive 1359 percent gain in its topline on the back of sale of its two projects to REIT which provided overwhelming gains. Besides, there was also a fair value gain on investments. Rental income massively dropped during the year as now the principal business of the company is to make investments. Moreover, there was no revenue from maintenance and other services. However, gain on sale and fair value gain provided growth momentum to the topline. Direct operating cost dipped by 94 percent year-on-year resulting in GP margin clocking in at 99.9 percent. While finance cost dropped by 21 percent year-on-year, admin and general expenses rose significantly driven mainly by salaries and wages, legal and professional expenses as well as donations. Other income also dipped as fair value gain on investment property in now recorded in the topline as against other income in the previous years. The company also made a profit from discontinued operations during the year. The bottomline multiplied by over 74 times in 2022 to clock in at Rs.5292.49 million. NP margin for the year was 83 percent while EPS stood at Rs.13.19.

Recent Performance (1HFY23)

TPLP is now a holding company with subsidiaries in REIT Management, property management and investment in TPL REIT Fund I. During 1HFY23, TPLP boasted a topline rise of over 137 times as it sold its property TPL Technology Zone (TTZ) to REIT Fund I. The company also made an unrealized gain on REIT units. Direct operating cost completely eliminated in 1HFY23 which took GP margin to 100 percent from 99.8 percent during the same period last year. Other income also dipped owing to the reasons explained above. The gain in topline was counterbalanced by a drop in other income as the nature of TPLP’s business has changed. Finance cost also dipped by 10 percent year-on-year in 1HFY23 while admin and general expenses soared by 270 percent. The result was the bottomline growth of 2 percent year-on-year to clock in at Rs.3536.47 in 1HFY23. EPS clocked in at Rs.6.65 in 1HFY23, marginally up from Rs.6.58 in 1HFY22.

Future Outlook

In coming times, TPLP growth will be driven by the development of its existing portfolio and additional funds added to the REIT Fund I portfolio. Moreover, independent agreements for development services and REIT management services will also provide growth momentum to the company. The partnership with UAE based TASC Towers Holdings also provides a new focus of growing and managing digital infrastructure to the company. The TPL-TASC consortium is acquiring the largest telecom infrastructure of the country from VEON, the largest telecom tower operators in Pakistan which will open new doors of opportunities and challenges to TPLP.

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