Dar Al Arkan Gains Most in 3 Years on Growth Bets: Riyadh Mover

Dar Al Arkan Real Estate Development Co. (ALARKAN) was among the biggest gainers in Saudi Arabia’s benchmark stock index on investor speculation the company will benefit from about $500 billion in government spending.

The stock surged 8.5 percent, the most since May 2009, to 8.9 riyals at the 3:30 p.m. close in Riyadh as the volume of shares traded jumped to the highest since November 2009. The shares were the third-biggest gainer on Saudi Arabia’s Tadawul All Share Index (SASEIDX), which advanced 0.6 percent to 6,663.48, the highest since June 1. Dar Al Arkan’s shares, up 23 percent this year, trade at a price-to-earnings ratio of 9 times compared with 14 times for the country’s benchmark.

“Dar Al Arkan has been under the radar of investors for some time now because of its attractive price-to-earnings ratio,” Abdullah Alawi, head of research at Jeddah, Saudi Arabia-based Aljazira Capital, said in an e-mailed response to questions. The gains have also been driven by “the buoyant sentiment among investors toward large real estate companies in the kingdom, which are believed to benefit from the massive upcoming housing projects financed by the government.”

King Abdullah announced a $130 billion plan in 2011 to build homes and create jobs to stave off regional protests that toppled leaders in Tunisia and Egypt. The rulings added to a commitment in 2010 to spend $384 billion over five years on housing, transport and education. Prince Alwaleed bin Talal is constructing the world’s tallest tower in Jeddah at a cost of $1.2 billion.

Cash Position

Dar Al Arkan, the second-biggest real estate company in Saudi Arabia by market value, posted a fourth-quarter profit on Jan. 18 that beat analysts’ estimates. The company said last week it ended 2011 with a “strong cash position” of 2.5 billion riyals ($667 million), more than twice as much as in 2010.

Dar Al Arkan led advances today on the Real Estate Development Industries Index (SASEREAL), which has gained 9.2 percent so far this year. The shares declined 19 percent in 2011.

Ten analysts including Alawi recommend investors buy the shares of the company, while five have a hold rating on the stock, according to Bloomberg data. One analyst recommends investors sell the stock.

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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