NBK Capital 2015

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December 21, 2015
MAZAYA HOLDING
Strong Profile, Low Valuation; Reiterate Buy
KEY DATA
Fair Value per S hare (KD) 0.165
Closing Price (KD)* 0.104
52-week High / Low (KD) 0.140 / 0.098
YTD / 12-month Return -16% / -15%
P/B (TTM) 0.6
S hares Outstanding (million) 620
Market Cap (KD million) 64
Free Float 65%
Reuters / B loomberg Code / MAZAYA KK
*Prices as of December 21, 2015. Source: Bloomberg and NBK Capital
KEY METRICS
2014A 2015F 2016F 2017F
E PS (KD) 0.013 0.014 0.015 0.014
E PS Growth 35% 9% 7% -6%
P/E 8.0 7.3 6.8 7.2
Dividend Yield 5.8% 5.8% 5.8% 5.8%
P/B 0.6 0.6 0.6 0.6
Revenue (KD million) 16.7 55.0 59.3 43.6
Revenue Growth -36% 230% 8% -26%
Op. Profit (KD million) 3.9 12.1 13.5 12.6
Op. Profit Growth -13% 209% 12% -7%
Op. Profit Margin 23.4% 21.9% 22.8% 29.0%
Source: Mazaya and NBK Capital
QUARTERLY FORECASTS
KD 000s 4Q2014A 3Q2015A 4Q2015F 1Q2016F
Revenue 1,366 17,068 15,995 13,643
Operating profit 1,183 3,495 3,444 3,082
Source: Mazaya and NBK Capital
REBASED PERFORMANCE
80
90
100
110
120
Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15
Mazaya MSCI Kuwait
Source: Bloomberg
• Strong profile, low valuation; reiterate Buy. We maintain
our positive view on Mazaya as we expect the company to
continue benefitting from its ongoing mid-income real estate
development in Dubai despite the general softness in the
market, and its fully occupied rent-generating properties
across prime locations in Dubai and Kuwait. Despite the
strong profile of Mazaya’s assets, the stock currently trades
at a price-to-book ratio of 0.6x (trailing; we note that Mazaya
carries investment properties on a fair-value basis). Thus,
we reiterate our Buy recommendation with a fair value of
KD 0.165 per share.
• Solid and fully occupied rental properties in Dubai and
Kuwait. Mazaya owns around 270 residential units in
Sky Gardens in the Dubai International Financial Center
(DIFC) area (accounting for roughly 20% of our EV for the
company). So far this year, rents in the DIFC area have
outperformed the broader market, which we see as a positive
for Mazaya’s rental income in Dubai. In addition, Mazaya
has four commercial towers in Kuwait (more than one-third
of our EV) that are fully occupied, unlike the general Kuwaiti
commercial real estate market. Although we lack specific
data, anecdotal evidence points towards significant vacancy
rates in Kuwait’s commercial market.
• Mid-income segment in Dubai housing market continues
to outperform amid overall softness – a key positive for
Mazaya’s ongoing development project. Mazaya is developing
a 2.9 million sqft mid-income project, Queue Point/Queue
Line (accounting for 23% of our EV) in Dubailand near
Mohammed Bin Zayed Road (E311). It has already launched
over 80% of the project and pre-sold around 65% of the
total planned BUA. Given that the mid-income segment
(mainly end-user driven) continues to see stronger demand
than the overall Dubai housing market (see Figures 1 and
2), we do not currently expect the general slowdown in the
Dubai market to have a drastic impact on Mazaya’s project.
Our pricing assumption for the unsold BUA is around
AED 600 per sqft, which is much lower than the current
selling price of AED 700-750 per sqft, which therefore
provides a substantial cushion to our forecasts.
• Key catalysts: 1) Sustained delivery at Queue Point
continuing to boost Mazaya’s financial performance; 2) our
expectation of KD 0.06 DPS for FY2015, similar to last year,
providing an attractive 5.8% yield at the current share price;
and 3) a 4% YTD depreciation of the KD against the AED
providing incremental benefits to the income generated in
AED at the consolidated level.
**Please refer to page 6 for recommendations and risk ratings.
BUY Fair Value: KD 0.165
Upside: +59%
Risk Level: 3**
Ashish Jain
T. +971 4365 2822
E.
Samah Ragab
T. +971 4365 2811
E. samah.ragab@nbkcapital.com