Oman Arab Bank initiates Dar Al-Arkan at ‘buy’, TP at SAR 6.38

Oman Arab Bank has initiated coverage of Dar Al Arkan Real Estate Development Co. with a “buy” recommendation, setting the stock target price at SAR 6.38, it said in a note on Tuesday.

The real estate developer is not expected to be hurt by the white land tax, as its current land bank is either fully developed and for sale, under development and supplied with the necessary infrastructure or is purely raw with few municipal services.

“DAAR is very well positioned to settle its debt obligations as it is sitting on cash of SAR 1 billion, receivables of SAR 2.9 billion and land bank at an estimated market value of SAR 24.8 billion,” the research added.

Revenue and net income are forecast rise at a compound annual growth rate (CAGR) of 10.1 percent and 13 percent, respectively for the period from 2015 to 2019.

Upside risks to the developer’s valuation include the announcement of new recurring revenue projects, early completion of developments in addition to land bank estimated market value of SAR 24.8 billion.

Meanwhile, downsides are the company’s land portfolio exposed to the vacant land tax, delays in the commencement of income yielding projects and a higher-than-expected drop in property prices.