Eshraq Properties has revealed it is owed almost Dh500 million (US$136.1m) in overdue payments, only months after receiving approval to list on the Abu Dhabi Securities Exchange.
One of Abu Dhabi's highest-profile property developers, Eshraq reported a loss for the third quarter of Dh919,117 on Sunday. The developer did not report any revenue from the handover of properties during the period.
But among the disclosures in the company's financial statements are Dh499.3m worth of unpaid trade receivables that are at least two months in arrears, an amount described as "shocking" by one industry expert, who asked not to be named. Such debts have swelled by 41 per cent since the end of last year.
Eshraq is likely to be forced to set aside significant amounts of cash to cover the costs of these doubtful debts, said Ankur Khetawat, a property analyst at HC Securities.
"It appears that the customers have not been paying the land dues on time and given the level of overdues [almost 98 per cent], going forward the possibility of provisioning cannot be ruled out," he said.
The stock has found little interest among institutional investors since its Dh825m listing in September, he added.
"With property companies in Dubai and Abu Dhabi, nobody is really bothered," Mr Khetawat said. "Current market conditions are not compelling enough to lure investors to the property sector, even in the blue chip stocks, as there remains a big question mark about monetisation of assets."
Eshraq's shares have fallen 35 per cent from the listing price of 40 fils to 26 fils.
The sharp decrease in Eshraq's earnings was due to its conversion from a private joint stock company to a public joint stock company, said Abdulfattah Al Barghouthi, the head of investor relations at Eshraq.
"Because of the conversion date of July 7, SCA [Securities and Commodities Authority] asked us not to include the profit from the initial public offering [IPO]," he said.
Eshraq's only income for the quarter was Dh7.5m in "sundry income", which Mr Al Barghouthi said reflected income from sales of land and transactions that had not yet been finalised.
Three projects the company listed before the IPO as key sources of future revenue were still awaiting government approval before work could begin, he said. The company will also try to purchase distressed properties to try to generate rental and sales income.