Dar Al-Arkan plans to buy foreign properties
Dar Al-Arkan plans to buy foreign properties
Al-Shelash said the company owned just under 35 million square meters (8,650 acres) of land, and in the past it has relied heavily for revenue on sales of land within Saudi Arabia.
Its decision to branch out overseas illustrates how a growing number of Saudi companies, buoyed by the economic boom of the past two years, are looking to diversify abroad.
Outward flows of foreign direct investment from Saudi Arabia hit $ 3.4 billion last year, close to a record $ 3.9 billion recorded in 2010, according to the Arab Investment and Export Credit Guarantee Corp.
“We are targeting some geographical diversification. We have a concentration issue. Most of our assets are in Saudi so we would like to diversify outside Saudi Arabia through a long plan over five to seven years,” Al-Shelash said at the Reuters Middle East Investment Summit.
He said the company was targeting assets outside the Gulf and North Africa, “maybe in Turkey or Asia, Malaysia, Singapore, some stable countries,” and that it would look to buy existing buildings rather than develop new sites.
“We would like to get some stability in the company income,” he said, but said it would likely take five to seven years to generate 40 percent of revenue from rental income, a goal which he said last year would hopefully take three years.
Al-Shelash added the company was still finalyzing a more detailed strategy, which it hoped to have ready early next year.
Dar has enjoyed a dramatic recovery in its fortunes over the past two years, which to some degree mirrors the fortunes of the Saudi economy.
When Dar issued an Islamic bond or sukuk in 2010, investor demand was sluggish and the company had to settle for raising $450 million instead of its target of $ 500-700 million.
This year, however, its sukuk yields have dropped sharply and its share price has jumped 14 percent, far outperforming a 4 percent gain by Saudi Arabia’s main stock index — although the stock’s value is still less than a quarter of its 2007 peak.
Although Dar is not explicitly backed by the government, official action has convinced investors that authorities would like to see the company succeed.
Last October, the country’s Public Investment Fund approved a SR 4 billion ($ 1.1 billion) facility to finance one of Dar’s biggest projects, the Qasr Khozam development in Jeddah, estimated to cost SR 12 billion.
The company now has outstanding debt of around SR 4.4 billion, with sukuk of SR 750 million and SR 1.69 billion maturing in May 2014 and February 2015 respectively. It also has short-term murabaha Islamic loans with local and international banks, which it plans to roll over.
Dar, which posted third-quarter net income of SR 867 million, paid off a $ 1 billion sukuk in July this year after selling land.
Al-Shelash said the sukuk maturing in 2014 and 2015 could be paid off through company earnings without selling assets and would not be rolled over, adding that the company was waiting to see the impact of the US “fiscal cliff” on international debt markets before it would consider raising more money.
Al-Shelash said it was too soon to predict the impact of the mortgage law on the real estate sector, but that it was likely to increase prices as lenders eventually gained confidence in the regulatory system and more consumers gained access to financing.
“It will add new additional demand. It will also make the price...to be a little bit up,” he said. He added that he was not sure what the direct impact would be on Dar’s business.
Although the cabinet approved the law in July, details have yet to be made public by the central bank.
Analysts have said most housing demand in Saudi Arabia is among lower-income Saudis, while many developers have tended to focus on building more expensive properties which yield higher profits. Rising land prices mean it is sometimes more profitable for firms to simply trade land than to build low-cost houses.
Al-Shelash said a housing-loan company partly owned by Dar would likely focus on the upper-middle segment of the housing market.
Saudi insurance stocks soar as female drivers take to the road
LONDON: Saudi insurance stocks surged on Sunday, with investors expecting the sector to reap significant dividends following the lifting of the ban on female drivers.
Insurance stocks — one of the worst performing sectors on the Saudi bourse for the year to date — outperformed other classifications on Sunday, ending 2.4 percent higher, compared with a 1.8 percent rise for the Kingdom’s headline index.
Amana Insurance and AlRajhi Takaful were the best performers of the day, gaining 9.9 percent each. Tawuniya, the Kingdom’s largest insurer, ended Sunday 1.1 percent higher, with only one of the country’s 33 listed insurance providers closing lower for the day.
The lifting of restrictions on female drivers — which came into effect on Sunday after first being announced in September — is part of a series of wide-ranging reforms introduced as part of Saudi Arabia’s Vision 2030 economic transformation program, designed to diversify the economy away from a reliance on oil revenues.
The advent of women drivers is forecast to benefit the economy by significantly increase female participation in the workforce, and stimulating financial, insurance and retail sectors among others.
The insurance sector is set to draw particular benefit from the move, but may remain under pressure, according to rating agency S&P.
“We anticipate that efforts of the local authorities to tackle the large number of uninsured drivers, combined with the arrival of women drivers … and the introduction of additional benefits under the unified medical policy from July 1, will support further premium growth in the industry in the medium term,” said S&P in a research note in April.
“However, these factors may be offset by the large number of foreign workers that have already left or will be leaving the Kingdom in 2018.”
In spite of yesterday’s price surge, insurance stocks are 8.4 percent lower for the year to date. Tadawul as a whole is up 15.6 percent so far this year, making the bourse one of the world’s best performers for 2018.
Investor sentiment on Sunday was also boosted by investor optimism after index provider MSCI announced last week that it would upgrade Saudi stocks to its Emerging Markets Index from next year.
The widely anticipated upgrade — which puts Saudi equities on an index tracked by around $2 trillion worth of global assets — is expected to attract up to $40 billion of international funds, Tadawul CEO Khalid Al-Hussan told Arab News last week.
MSCI’s upgrade came after a similar move by fellow index provider FTSE Russell in February, which is also scheduled to come into effect from next year.
Banks were among the other bright performers on Tadawul on Sunday. Arab National Bank led gains, closing up 4.2 percent, while blue-chip names NCB and AlRajhi rose 1.6 percent and 2.3 percent respectively.
Some petrochemical companies also added value, Reuters reported, following a rise in oil prices after OPEC decided on only modest increases in crude production last week.
Outside Saudi Arabia, Gulf markets posted minor gains. In Dubai, where the index was flat, Air Arabia was unchanged. Shares in the airline have declined by more than 10 percent since early last week, when the company said it had hired experts to protect its business interests in private equity firm Abraaj, which has filed for provisional liquidation. The airline said its exposure was around $336 million.
Last week, the UAE’s securities regulator asked listed companies to declare their exposure to Abraaj.