Riyadh: Simah Rating (Tassnief) has maintained long-term entity rating of “BBB+” (Triple B Plus) and short-term entity rating of “T-4” to Ladun Investment Company. Outlook on the rating is “Stable”.
Rating Rationale: The assigned ratings reflect sizeable scale of operations, extensive experience from seasoned sponsors, proven track record spanning over fifty years, integrated operations across the entire real estate value chain and robust governance standards. The business risk assessment underscores a diverse range of offerings, broad geographic coverage, and projected revenue growth, primarily driven by key contributions from the construction segment. Further reassurance is provided by substantial land bank as evidenced on the balance sheet. However, mitigating risks related to project and client concentration could enhance the overall risk profile. The effectiveness of the marketing and sales strategy is also commendable.
The ratings are backed by a robust governance framework, which includes a seven-member board with three independent directors, supported by board-level committees, in addition to an experienced management team. It also benefits from extensive project management, effective performance monitoring, and internal controls, all reinforced by ISO certifications, detailed policies, and an internal audit function that reports directly to the audit committee.
The assessment of financial risk profile takes into account the robust double-digit revenue growth and improved gross margins, which contribute to an overall improvement in profitability. Nonetheless, the conversion of profitability into positive cash flows from operations has been constrained due to significant working capital needs. The substantial working capital requirements have led to increased debt financing. Although the equity base has grown, recent loans have notably raised leverage ratios, which remain within the internal policy limits. All long-term debt, tied to specific projects, will be repaid from proceeds generated by those projects.
Rating Triggers: Ratings are contingent on achieving the projected revenue growth, with improvements in leverage metrics and cash flow generation being crucial. Any deterioration in the earnings profile or key risk metrics will lead to a downward pressure on the ratings.
About the Company: Ladun Investment Company, referred to as ‘Ladun’, based in Riyadh, operates as a public joint stock entity with four subsidiaries in diverse sectors. It has been in operation since 1968, formally incorporated in 2005, and holds a CR No. 1010467355, issued in January 2017. Ladun specializes in property development, construction, and off-plan residential sales, alongside generating revenue from construction materials, maintenance, rentals, and HR services. Shares of Ladun are publicly traded on Nomu exchange, and a transition to TASI market planned for the future.
For further information on this rating announcement, please contact Mr. Nabil Kadasa (Ext. 8791) at +966-112502030 or email at RS@Tassnief.com. The rating announcement can also be viewed through the below link
RELATED CRITERIA AND METHODOLOGY
Rating Methodology for Corporate (v.2. 2019) can be found on the website:
www.tassnief.com
