x Abu Dhabi, UAEWednesday 26 July 2017

Mecca developer off in the right direction

Jabal Omar Development Company is gaining ground on financing it needs to complete its Mecca project as the kingdom's regulator approves a rights issue

Jabal Omar Development still has a way to go before it completes construction of a long-delayed project in the heart of Mecca.

But approval for a 2.58 billion Saudi riyal rights issue from the kingdom's market regulator yesterday signalled to investors it was going in the right direction.

Shares in the company rose 3.5 per cent to 16.10 riyals on the Tadawul exchange yesterday, after the company posted the announcement of the rights issue on the bourse website.

Jabal Omar was formed in 2006 by the Makkah Construction and Development Company solely to develop a mixed-use project in Mecca, but has made slow progress.

The development plans call for at least three luxury hotels, hundreds of shops and air-conditioned prayer facilities for 100,000 worshippers, as well as housing for 87,000 people.

The property company is keen to begin construction on the project with money raised from the rights issue.

It has already been through several rounds of capital raising, including 1.35bn riyals in bridging loans from five banks in October.

The company raised US$537 million in 2007 by selling a 30 per cent stake in an initial public offering.

"In general, business in Mecca is expected to do very well," said Ahmed al Qahtani, an analyst at NCB Capital in Riyadh, commenting on the property market in Mecca.

The number of pilgrims is expected to double within the next decade, according to a recent Jones Lang LaSalle note.

But Mr al Qahtani added the earnings outlook was still unclear because of doubts over how fast the project would be completed.

The development has also undergone major revisions, which has led to a rise in expenses.

In its latest results, Jabal Omar made a loss of 7.4mriyals in the first quarter of this year, compared with a loss 8.9m riyals in the first quarter of last year.