Promise lies beneath for Saudi developer Dar Al Arkan

What's Up: Dar Al Arkan, the Saudi real estate developer, looks like an improved prospect after positive re-valuations of its properties.

A company that releases results showing revenues down by a fifth year on year is not intuitively a stock set for prize performance.

But digging below the surface of the Saudi Arabian property developer Dar Al Arkan reveals strong foundations.

Capital Market Authority, the Saudi government organisation responsible for regulating the country's capital markets, took a sample of Dar Al Arkan's property portfolio with a book value of 9.7 billion Saudi riyals - 52 per cent of Dar Al Arkan's total investments in property - and asked to have it valued by independent local and international property valuators.

Dar Al Arkan obliged. Its full-year results for last year, out yesterday, reveal the valuators put the sample's worth at 14.8bn riyals.

The Saudi developer said the 53 per cent gain in the independent valuation reflected a general value improvement across its total property portfolio of 18.6bn riyals.

Other positive indicators are fuelling optimism about Dar Al Arkan's future.

Revenues were 3.31bn riyals last year, down from 4.14bn riyals in 2010. But gross profit margins remained healthy at about 41 per cent.

Shareholder equity grew 7.2 per cent and assets increased 3.2 per cent. By the end of last year, Dar Al Arkan had 2.5bn riyals in cash, 111 per cent more than its cash balance at the end of 2010.

The company said that increase was achieved after meeting all debt obligations, including delivery of an upcoming repayment of US$1bn for a sukuk issued in 2007.

Royal decrees issued by the Saudi ruler in March of last year will lead to the injection of 300bn riyals into the residential sector, which is likely to provide additional opportunities for Dar Al Arkan.

The company's share prices are up 0.70 riyals to 10.10 riyals a share since March 4.

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