Arqaam Cap­i­tal con­firms Al-Mazaya’s fair value per share at 160 fils

Kuwait Times - - BUSINESS -

Arqaam Cap­i­tal has con­firmed Al-Mazaya Hold­ing’s fair value per share at KD 160 fils, 50 per cent higher than its cur­rent trad­ing price at the Kuwaiti Stock Ex­change.

Ac­cord­ing to a re­port is­sued by ARQAAM Cap­i­tal, the new val­u­a­tion is jus­ti­fied by the ro­bust growth in­cen­tives of Al-Mazaya Hold­ing’s in­vest­ments, which are cen­tered in Kuwait, UAE, Saudi Ara­bia, Oman, Bahrain and Turkey. In ad­di­tion, the profit mix gen­er­ated by the com­pany’s real es­tate sales and rental re­turns earned the com­pany the high val­u­a­tion.

The re­port in­di­cated that the Earn­ings Mul­ti­plier of Mazaya Hold­ing’s share at the cur­rent prices proves the re­silience and at­trac­tive­ness boasted by the com­pany as com­pared to other firms, with its 2014’s Earn­ings Mul­ti­plier placed at 8.6 times and 2015’s at 7.4 times. The re­port fore­casts that the mul­ti­plier will reach up to 6.1 times dur­ing this year, at­tribut­ing the share’s re­silience to the com­pany’s abil­ity to in­crease its to­tal profit value over the com­ing 5 years.

Ac­cord­ing to the re­port, Al-Mazaya Hold­ing has man­aged to de­liver up to 10,000 real es­tate units through the 25 projects it has been de­vel­op­ing since 2004 un­til now, a fact that re­flects the com­pany’s op­er­at­ing re­silience.

The re­port shed light on the prof­its achieved and those an­tic­i­pated un­til 2019, 70 per cent of which will be rental re­turns due to the ap­proach­ing final de­liv­ery dates, a fact that con­firms the com­pany’s high op­er­at­ing re­turns and cash flows at the re­gional level.

The share val­u­a­tion mech­a­nism is mainly based on dis­count­ing cash flows of ready in­vest­ment prop­er­ties as well as those un­der de­vel­op­ment and the avail­able for sale ones. When af­firm­ing the fair value of share at 160 Fils, 50 per cent is de­ducted from the value of the land port­fo­lio owned by the com­pany. Any an­tic­i­pated growth in sale or rental prices of the ex­ist­ing or avail­able for sale prop­er­ties is ruled out as well when af­firm­ing the fair value of share. The sur­plus cash has not been uti­lized in any new projects over the com­ing years, and there­fore, the re­port de­pends only on ex­ist­ing projects and those whose de­vel­op­ment has al­ready started, which means that no profit has been reaped from the avail­able or cu­mu­la­tive cash all through the val­u­a­tion pe­riod.

In the mean­time, the re­port, while eval­u­at­ing the com­pany’s in­vest­ment prop­er­ties, con­ser­va­tively in­creased the cap­i­tal­iza­tion rate 47 per cent, higher than the com­pany’s used rate and thus dis­count­ing the in­vest­ment prop­er­ties con­sid­er­ably. In ad­di­tion, the com­pany’s debt ser­vice risks are very low given that the in­ter­est cov­er­age mul­ti­plier equals 3.5.

The re­port high­lighted Al-Mazaya Hold­ing’s strengths at present and over the com­ing five years. The com­pany’s ge­o­graph­i­cal in­vest­ment di­ver­sity is likely to mit­i­gate any op­er­at­ing risks, and rather keeps real es­tate re­turns at a sta­ble growth level. In ad­di­tion, ac­cord­ing to the re­port, fu­ture earn­ing qual­ity is high, given that more than 60 per­cent of the in­com­ing BUA is pre-sold.

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