Credit Rating

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Credit Rating Announcement
Capital Intelligence Ratings Ltd. Oasis Complex, Block E, Gladstone Street, P.O. Box 53585, 3303 Limassol, Cyprus
Telephone: +357 25 342300 Facsimile: +357 25 817750 E-mail: Web site:
Ref: KW07615PRS00-3 22nd November 2016
Al Mazaya Holding Company K.S.C.P. –
Initial Corporate Ratings Assigned
Capital Intelligence Ratings (CI Ratings or CI), the international credit rating agency, today
announced that it has assigned initial Corporate Ratings of ‘BBB-’ Long-Term and ‘A3’ Short-Term to Al
Mazaya Holding Company K.S.C.P. The Outlook on the ratings is ‘Stable’. The ratings are supported by
the Group’s well diversified business model, by its good liquidity which is supported by current high cash
balances and a significant level of committed but undrawn lines, and by its sound profitability. Also
supporting the ratings are the long-term nature of its funding structure and the sound EBIT finance charge
coverage ratio. The main constraints on the rating at present are the high leverage and the growing
proportion of the asset base that is encumbered. Other constraining factors are the small size of the asset
base and the volatility in operational cash flow. The latter stems from the build-to-sell part of the business
model but as the proportion of rental activities in the overall earnings mix grows, this volatility should
reduce.
The small size of the balance sheet of the Company is mitigated by the diversification that has been
achieved within both the asset base and in revenue streams. While revenue streams are real estate-
related, they are diversified by geography and between develop-for-sale and rental properties. Even within
the rental properties portfolio, there is further diversification by type of property/occupier.
Leverage was on the high side at end Q1, although it has been trending downwards. More important than
the level of leverage, however, is the fairly comfortable debt to equity ratio and the fact that this debt has a
largely medium-to-long maturity profile. While short-term debt is full covered by cash at present, the
restricted nature of some cash balances mean that the importance of the committed but unused financing
facilities is increased.
In terms of non-financial factors, the Group has a well developed strategic plan and a very detailed multi-
year business plan that is subject to quarterly review and which is then updated if required. There are
clear policies and targets in place. These include raising the proportion of income coming from rental
activities, further diversifying both by geography and in terms of types or real estate and establishing a
family of Al Mazaya Group brands.
Looking ahead, the current year should be a good one for the Group in terms of both net profit and cash
generation – both are growing significantly, especially the cash balance from sales of completed units.
Moreover, leverage should continue to fall – and is expected to drop below the 1.0 times level by year-
end – and remain below this level going forward. Next year will see rising rental income but this will be
offset by a probable fall in net income from the build-to-sell side of the business. Despite this, the
expectation is for net profit attributable to shareholders to be maintained in 2017 with overall net profit to
rise in 2018.
Al Mazaya Holding Company K.S.C.P. (Al Mazaya) was established in November 1998. The Company
was listed on the Kuwait Stock Exchange (KSE) in 2005 and on the Dubai Financial Market (DFM) in
2006. The only shareholder with a stake in excess of 5% is Gimbal Holding Company with 23.97%. Al
Mazaya is real estate developer that both builds to sell, as well as building and retaining rental properties.
Developments have included residential units and commercial/office space, as well as a logistics centre in
Bahrain. It operates in its home market Kuwait but in terms of developments for sale, the Company has
been more active in recent years in the UAE market (principally in Dubai). There are also rather smaller
operations in KSA (rental only), in Qatar and in three other MENA markets. The rental properties are
spread between three markets, Kuwait (three properties), KSA (two properties) and the UAE (three
properties) plus the Bahrain logistics centre. More recently, Al Mazaya entered into a project in Turkey
(Ritim) for a mixed use development in Istanbul and is at an early stage on a development in Oman. The
company operates on a Sharia’a compliant basis and all financing is now on an Islamic basis.