Influx of pilgrims a boost for developer

Taiba Holding, a Saudi developer with properties in Medina, will post a strong third quarter after statistics showed foreign pilgrims increased during Ramadan, NCB Capital said yesterday.

Mosque of Prophet Mohammad in the holy city of Medina January 3, 2007. Home to Islam's holiest cities of Mecca and Medina, Saudi Arabia regards itself as the guardian of Islam and is often closed off Show more

A Medina property developer looks set to benefit from increasing numbers of pilgrims visiting Islam's second-holiest city. The number of foreign pilgrims visiting the city during Ramadan rose 35 per cent compared with the holy month last year, NCB Capital said.

Taiba Holding owns and operates hotels and leases retail space in the central district of Medina.

According to the ministry of Haj, the number of visas issued to pilgrims increased to 911,000 during Ramadan, compared with 674,000 a year earlier.

After the release of the statistics, NCB Capital increased its earnings estimate for the year for Taiba Holding to 203 million Saudi riyals, from 180m riyals.

Mr Tariq Al Alaiwat, an analyst at the Saudi investment bank, maintained an "overweight" rating on the shares but raised the price target to 20.1 riyals from 19.4 riyals.

"The company is a key player in the religious hospitality sector of Saudi Arabia, with Taiba an excellent way to gain exposure to the strong outlook of this business segment," he said.

Rents for accommodation in Mecca and Medina are expected to have increased significantly in the last 10 days of Ramadan.

"We must take into account that there is a considerable degree of seasonality in the hotel market generally, and specifically for hotel chains primarily located in Mecca and Medina," Mr Al Alaiwat said.

"During Ramadan and Haj, demand for hotels increases significantly, and in most cases occupancy rates are at 100 per cent. With demand at such high levels, and supply levels low, the average daily rates rise considerably. This translates into a strong earnings outlook for the second half of the year."

Taiba has benefited from rising rental yields for two consecutive quarters, which supported the company's earnings growth. Rental is the largest revenue source for Taiba, accounting for 63 per cent of income last year. This trend is a key driver in the company's stock price increase.