The winning run for shares of RAK Properties, the largest property developer in the Northern Emirates, appears to be over. After falling to a 12-month low of 35 fils at the start of last month, RAK Properties rose more than 17 per cent. But investors were disappointed in the company's second-quarter earnings, which were announced on Thursday, and sold off the shares. RAK Properties finished trading yesterday down 4.8 per cent at 39 fils. The Abu Dhabi-listed developer on Thursday said its second-quarter earnings fell 27 per cent to Dh53.6 million, compared with Dh73.2m for the same period last year. It was 16 per cent below the Dh66m analysts at the Japanese investment bank Nomura were expecting. Profits dropped 33 per cent for the first half of this year to Dh96.2m, compared with the same period last year.
"The outlook is not really exciting and it's difficult to see the value in the company," said Yazan Abdeen, a fund manager at ING Investments in Dubai. In a statement to the Abu Dhabi Securities Exchange, the company said the property industry has started a slow recovery and "we notice sales leads flowing in for the right-priced properties", but that did not convince investors. "If it is difficult to sell an apartment in Dubai, I suppose it is even harder in Ras al Khaimah," Mr Abdeen said. The company's cash position is another point of concern for analysts. RAK Properties has Dh530m in cash, against Dh823m at the end of last year and Dh664m at the close of first quarter this year.
The net cash erosion of Dh130m in the second quarter was lower than Dh163m in the first quarter, but Chet Riley of Nomura said this made the collection on "outstanding instalments" even more important, with bank lending still not apparent. The company last quarter began booking revenues from the handover of units in Mina Al Arab, Precinct 4. Mr Riley said he saw few near-term catalysts to suggest a change of view from the "reduce" rating that he previously maintained on the stock.
skhan@thenational.ae
