NCB Capital said on Tuesday that it has downgraded its rating on Saudi Real Estate Co. (SRECO) to “neutral” from “overweight” on the expectation that it will be impacted by taxes related to undeveloped land.
It also put shares of Dar Al Arkan Real Estate Development Co. (Dar Al Arkan) under review after the firm previously held an “overweight” position.
SRECO is estimated to have 20.6 million square meters of land. It is planning to develop some areas with about SAR 3.7 billion that it recently received in credit facilities.
Dar Al Arkan has a total of 34 million square meters of partly-developed land, which accounts for 90 percent of the company’s current net value.
Meanwhile, the investment arm of NCB kept its “neutral” rating on Taiba Holding Co. Last month, it maintained the same rating on the firm as the brokerage firm said it remained concerned about Taiba’s profit margins.
The long-term outlook for the housing sector will hinge mainly on the unbuilt land taxes, the accomplishment rate of housing projects, and mortgage loan terms that impact demand for short-term facilities.
Last March, Argaam reported on the Saudi cabinet’s approval of a new tax on undeveloped lands in urban areas. The initiative is aimed at addressing the kingdom’s ongoing affordable housing shortage.
|
NCB Capital Forecasts & Net Profit Estimates |
|||||
|
Change (%) |
Current estimates FY-15 |
Previous estimates FY-15 |
Target price |
Rating |
Company |
|
(18%) |
592 |
723 |
NA |
Under review |
Dar Al-Arkan |
|
+47% |
377 |
257 |
42.3 |
Neutral |
Taiba Holding |
|
(26%) |
191 |
258 |
39.9 |
Neutral |
Saudi Real Estate Co. |
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