Tuesday, Mar 09, 2010

(Adds details, closing share price.)

RIYADH ( Dow Jones)--Saudi Arabia's Dar Al Arkan Real Estate Development Co. sees revenue in 2010 to be "in line" with a year earlier, and may raise more debt to fund its expansion and pay off maturing Islamic bonds, top executives at the firm said Tuesday.

"Last year has shown the resilience of the Saudi markets," Yousef Abdullah Al Shelash, the chairman of Dar Al Arkan, told reporters in Riyadh. "There is a big opportunity for growth," he added, citing Saudi Arabia's "real demand" for residential units which is driven by a young population and a shortage of available housing.

Revenue in 2009 declined 2.6% to 5.46 billion Saudi riyals ($1.45 billion) from a year earlier, due to a shift in sales from high-margin houses to apartments. Slow sales in the first half of 2009 also led to an 11.9% year-on-year fall in net income to SAR2.51 billion in 2009. Abdullatif Al Shelash, Dar Al Arkan's managing director told Dow Jones that the firm is selling a "similar mix of products" this year, which would ping revenue "in line" with 2009.

property prices in Saudi Arabia didn't experience the dramatic declines seen across the region during the global recession, and have picked up 10% this year in some areas, the managing director said.

Dar Al Arkan, the kingdom's largest listed property developer, needs a steady stream of financing and sales to deliver on large projects throughout Saudi Arabia. The property developer paid back a SAR2.25 billion sukuk, or Islamic bond, late last week. It recently raised $450 million in a five-year sukuk that pays a 10.75% annual coupon.

Dar Al Arkan's chairman said the cost of financing, which was "higher than usual," wouldn't cramp profit margins because of lower building costs and inflation rates.

The firm "shoulders a hefty debt burden, compounded by a lumpy debt-maturity profile," Malaysian-based RAM Ratings said in a note in January. It added that the developer's outstanding debt stood at SARR8.34 billion last year and is "subject to hefty sukuk repayments in 2010 and 2012."

Deutsche Bank, Goldman Sachs and Unicorn Investment managed the latest sukuk issue, which was sold to investors in the U.S., Europe, and in the oil-rich persian Gulf.

The ability of the company "to successfully meet its obligations sends a positive signal to the international financial community," said Ikbal Daredia, managing director and head of capital markets at the Bahrain-based Unicorn Investment Bank.

"It's a testament to Dar Al Arkan's investment story," said Daredia. Unicorn has been involved in all four sukuk issues the property developer has pought to the market. He said the cost of financing is still below comparable issues from real-estate firms in emerging markets.

Dar Al Arkan's shares closed down 0.37% Tuesday at SAR13.50, mirroring the day's decline of Saudi's main market index.

-By Mohammed Aly Sergie, Dow Jones Newswires; +966-55-622 1334; mohammed.sergie@dowjones.com

Copyright (c) 2010 Dow Jones & Co.

(END) Dow Jones Newswires

09-03-10 1419GMT