Saudi Arabia’s Jabal Omar Development Company returns to profit

The biggest clock in the world with a 45 meters diameter, overlooks the Grand Mosque. (AFP)
Updated 23 October 2018
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Saudi Arabia’s Jabal Omar Development Company returns to profit

  • Developer launches roadshow to promote 'Address' brand
  • Taps into rising occupancy rates in holy city

LONDON: The Saudi developer behind the transformation of the center of Makkah — Jabal Omar Development Company — has returned to profit in the third quarter after a string of losses over the last year.
The change in fortune will be welcomed by the Tadawul-listed company as it pushes forward with its luxury hotel, residential and retail developments being built to meet the anticipated growth in demand from visitors and pilgrims to the holy city.
Net profit — minus Zakat and tax — reached SR469.62 million ($125.13 million) for the three months ending Sept. 30 in a Saudi exchange filing on Tuesday. This compared to a loss of SR593.97 million recorded in the same quarter last year.
Jabal Omar said the improved profits were due to increased revenue from sales of residential units.
Third-quarter revenue reached SR1.32 billion compared to revenue of SR45.52 million in the same time period the previous year.
The developer also cited a “positive performance” within its commercial sector as well as a reduction in some of the company’s financial burdens.
The results come in the same month Jabal Omar launched a three-day roadshow on Oct. 8 to market its new “Address“-branded Makkah luxury hotel development.
It is a project being managed by Dubai-based Emaar Hospitality Group — the company behind the high-end “Address” hotel brand. Jabal Omar said is looking to sell 741 freehold units.
The project marks the first time Emaar’s ‘Address Hotels and Resorts’ brand has expanded into Saudi Arabia. It is scheduled to open in 2019 and it will be just a few steps away from the Grand Mosque.
Market commentators say they expect demand for luxury hotels and other residential projects in Makkah to continue to be “strong” in the coming year — something Jabal Omar Development Co. will be keen to capitalize on.
“Makkah is a unique market and there is strong demand for luxury hotels throughout the year. A large proportion of demand for luxury hotels come from wealthy GCC travelers, who are largely repeat visitors to the Holy City,” said Rashid Aboobacker, director at the Dubai-based tourism consultancy, TRI Consulting.
“There has always been high demand for luxury residences in Makkah close to the Haram, driven by the prestige and special status of the location as well as the limited supply,” he said.
“Once the ongoing expansion works are complete, the visitor numbers are set to increase substantially. Consequently, we do not foresee any risk of overcapacity in Makkah in the foreseeable future,” he added.
He added that alongside the growth in luxury developments, there is also a “growing need” for midscale and economy hotels and apartments.
“We believe that there is also need for upgrade of the existing stock as a large proportion of them do not fully conform to international quality standards and guest requirements,” he said.
Christopher Lund, head of hotels, Mena, at the consultancy Colliers International, noted that the luxury sector tends to perform better than other parts of the Makkah hospitality market.
“The 5-star upper-upscale and luxury hotels in Makkah have outperformed the overall market, achieving a 12 percent higher occupancy level year-to-date September 2018, which is primarily due to the fact that the 5-star hotels are located in the most prime locations in the central area,” he said.
“So far in 2018, hotels in the central area have achieved a 49 percent higher RevPar (revenue per available room than the overall Makkah quality hotel market.”


China’s Xiaomi swings to net profit in Q3 on robust sales in India, Europe

Updated 59 min 39 sec ago
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China’s Xiaomi swings to net profit in Q3 on robust sales in India, Europe

  • Profit for the three months through September reached $357.23 million
  • The firm has been adding new brands to its smartphone portfolio to target niche consumers

HONG KONG: Chinese smartphone maker Xiaomi Inc. said on Monday it swung to a net profit in the third quarter, beating analyst estimates, driven by robust sales in India and Europe.
Profit for the three months through September reached 2.48 billion yuan ($357.23 million), versus an 11 billion yuan loss in the same period a year earlier. That compared with a 1.92 billion yuan average of five analyst estimates compiled by Refinitiv Eikon.
Xiaomi also said operating profit sank 38.4 percent to 3.59 billion yuan in the third quarter. Revenue rose 49.1 percent to 50.85 billion yuan.
The mixed results come amid a slowdown in smartphone purchases both in China, where Xiaomi once was the top-selling handset brand, and overseas.
Nevertheless Xiaomi, along with fellow low-cost handset makers Oppo and Vivo, accounted for around a quarter of the global smartphone market in the first half of 2018, showed data from researcher IDC.
Xiaomi’s fastest-growing markets are India, where it has had success with its budget Redmi phone series, and Europe, where it entered in 2017 with launches in Russia and Spain. Earlier this month it released its flagship Mi 8 Pro device in Britain.
But to weather the global market slowdown, analysts said Xiaomi needs to expand to new markets and also sell more higher-priced devices with wider profit margins.
The firm has been adding new brands to its smartphone portfolio to target niche consumers. Concurrent with today’s earnings, it announced a partnership with Meitu Inc, a maker of a photo app popular with young women, to sell phones under its brand. Earlier this year it launched Black Shark, a phone targeted at gamers, and Poco, a value-for-money device aimed at India.
Mo Jia, who tracks China’s smartphone makers at research firm Canalys, said attempts to sell more expensive devices requires changing its brand perception.
“It’s still very hard for Xiaomi to change its perception of being a low-end device manufacturer as the majority of its smartphone shipments are the Redmi series.”
Xiaomi also aims to transform itself from a smartphone firm into a software company. As the firm prepared for its IPO, founder Lei Jun touted Internet services — namely advertisements placed on the firm’s in-house apps — as its future and key differentiator from other handset brands.
In the third quarter, Xiaomi’s smartphone division grew revenue by 36.1 percent while its Internet service division grew 85.5 percent. But phones made up 64.6 percent of total sales, while Internet services made up 9.3 percent.
The results are the second set released by Xiaomi since the smartphone maker raised $4.72 billion in an initial public offering (IPO) in June, valuing the firm at about $54 billion — around half of some earlier industry estimates of $100 billion.
Its shares have fallen roughly 20 percent since they started trading in July amid a broader Chinese stock market sell-off and concern about a slowdown in China’s tech industry.