RAK Properties remains net cash-positive, and the Investment and Development Office (IDO) loan provides a sufficient financing bridge for ongoing capital expenditure requirements, according to Nomura, a research company.
"The company starts 2010 in better shape than 2009. There is more clarity on the development handover schedule and therefore revenue recognition," said Nomura.
The company has Dh882 million in cash with a committed capex of Dh950m.
Although the management has once again declared a "no dividend", Nomura said it remains to be seen whether the decision gets rolled at the upcoming annual general meeting as it did in 2009.
"We think the board will take a harder line this year than last year. Consequently, we may see some near-term price weakness given the large retail shareholder base," the report added. In July 2009, RAK Properties received a loan from the IDO for Dh550m.
"While the company had cash on hand at the time we had assumed a liquidity bridge might be required in the first half, with delays to scheduled handovers.
"We assume the loan proceeds have been invested with Dh770m in call deposits at an average effective rate of 6.8 per cent, so broadly neutral with the loan rate," Nomura said.
Total sales for the financial year 2009 was at Dh2.9 billion, which compares to Dh3.4bn in 2008 and up to third quarter 2009, which suggests that up to Dh500m projects or sales have been written off in the last quarter. Against sales, there are Dh900m in customer advances, but the report assumes near-term projects have higher levels of equity than the longer dated ones.
RAK Properties is a real estate development and investment company founded by the Ras Al Khaimah Government in February 2005.
RAK has an estimated land bank of 6.5 million square metre and is developing projects worth about Dh13bn.
Operations are principally located in the Northern Emirate, but the company has begun a process of international expansion.
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