Mecca land prices rise against trend

Mecca projects and properties prove to be company bedrock

Makkah Construction & Development Company (MCDC) is expected to be protected against the price declines experienced in other markets, as its land prices in the holy city of Mecca continue to rise.

"The properties are not only shielded from downturns but also benefit from development spending," said a research note by the Bahrain brokerage TAIB Securities.

Most of MCDC's properties and development projects are located in Mecca, and those projects are considered to be the bedrock of the company.

TAIB Securities has a target price of 35 riyals and an "overweight" rating on the stock. Shares in the company have risen 9.5 per cent since August but closed down 0.32 per cent at 31.2 riyals yesterday.

More than 10 million Muslim pilgrims from 140 countries visit Mecca and Medina annually for the haj and umrah, contributing 30 billion riyals a year.

Property investment in the two Saudi cities account for 40 per cent of the kingdom's total.

"MCDC is well placed to leverage these opportunities," the report said.

Asim Bukhtiar, an equities analyst at Riyad Capital, said: "I think [property in Mecca] is very attractive so they can charge a premium."

Mr Bukhtiar said the option for timeshare, which is available to even non-Saudi residents, made the company more attractive.

But he said prices were still attractive compared with the rest of the GCC.

In the next few years, the areas around the Grand Mosque in Mecca are expected to witness rapid development, including the construction of five-star hotels, 4,500 shops, a central transport station, prayer facilities for more than 200,000 worshippers and parking space for 12,000 vehicles.

TAIB is boosting its forecast for full-year net profit by 22.5 per cent to 303.8m riyals.