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JD8.8 million of idle funds flowing back to Al-Mehanya shareholders

By Samir Ghawi - Aug 30,2015 - Last updated at Aug 30,2015

Al-Mehanya’s Riyadh Al Muhandiseen housing project in Tabarbour (Photo by Amjad Ghsoun)

AMMAN — Al-Mehanya for Real Estate Investments and Housing Co. is returning JD8.8 million in cash to shareholders after obtaining the required regulatory approvals. 

The company announced this month in the local Arabic dailies that investors who owned Al-Mehanya shares on July 2, 2015 should contact branches of Jordan Dubai Islamic Bank until the end of this year to collect their share of the cash refund.

The cash refund, authorised by the 3rd extraordinary general assembly meeting of shareholders in April 2015, was decided to reduce the company's capital by 20 per cent to JD35.2 million from JD44 million.

The announcement also told the shareholders who did not receive cash refunds when the capital was reduced in 2012 from JD55 million to JD44 million that they can collect both amounts in a single payment this year.

Before voting on the capital reduction during the extraordinary general assembly meeting, some shareholders mentioned other proposals.

A shareholder suggested liquidating the company and distributing the money among the shareholders because its expenses are high and it invests in corporations that do not yield profits in the stock exchange.

Another recommended constructing a building on the plot of land in Tlaa Al Ali/Gardens Street. She said the building can consist of halls and chambers for holding meetings and festive events as well as recreational areas and playgrounds or it can be used as offices for the company or even a five-star hotel.

Others commended the reduction describing the proposal as the best that would enable the company to better manage the capital.

"The company was established during difficult circumstances and the market cannot absorb the large capital," on of the shareholders said.

Another said the company possessed high liquidity noting that utilsing JD35 million is more apt  than working with JD44 million and describing the firm's situation now as better.

"If I had my portion of the shares with me, I would have invested it in a better way than Al-Mehanya," came a response from a stakeholder. "I propose investing in corporations at the stock exchange that distribute dividends."

Further reactions called for a capital reduction greater than 20 per cent because that would be in the interest of the company and the shareholders.

"Reducing the capital is a reasonable decision because un-invested liquidity is financially not viable," added another. "The reduction carries benefits and there will be a higher rate of dividends next year."

Al-Mehanya Chairman Majed Al Tabbaa assured the general assembly that the board of directors was extremely vigilant regarding shareholders money and unwilling to take chances in light of prevailing conditions.

Tabbaa said the company can afford to set up new projects from the proceeds of the current readily available ones when they are sold.

The chairman defended the decision not to distribute dividends indicating that the company's profit last year represented 3 per cent of the capital which was a modest rate that the board of directors opted to retain in order to hand out a higher rate to shareholders in the coming year.

The outlook for 2015 may not match elevated expectations and could even be dismal because the mid-year performance was discouraging.

The interim income statement as of June 30, 2015 showed a sharp fall in earnings and in profit.

Earnings from land and real estate sales plunged from JD5.8 million at the end of June 2014 to JD1 million on June 30, 2015 and the JD0.6 million profit became a loss of JD0.2 million.

Impairment loss, as a result of an appraisal of financial assets at fair value, contributed to the mid-year drawback. The financial assets at fair value at the end of June 2015 amounted to JD3 million, down from JD3.5 million at the end of June 2014.

The 2015 mid-year balance sheet showed the company's total assets at JD49.2 million, of which JD19.9 million were land available for sale and JD12.8 million of real estate also ready for sale.

Time deposits at an Islamic bank totaled JD5.2 million besides JD4.2 million of cash and quasi cash.

Al-Mehanya's operational activities were detailed in the 7th annual report which described the performance in 2014 as a qualitative leap.

"In 2014, the company began reaping the fruits of the real estate investments it embarked on in the previous years," the chairman said in a foreword, indicating that the company's pretax profit reached about JD1.3 million, JD1.1 million or 387 per cent higher than the amount posted in 2013.

The financial statement as of December 31, 2014 incorporated the results of nine subsidiaries which are mostly engaged in housing, land development and construction activities. 

Tabbaa said Al-Mehanya was able to capture an acceptable market share as a result of selling various apartments, villas and land, highlighting in particular Rawabi Al Israa, Riyadh Al Muhandiseen and Hanina/Madaba as primary and successful projects.

According to the annual report, income from land and apartment sales reached JD10.8 million last year, 250 per cent higher than the JD3.1 million achieved in 2013. 

Noting that real estate prices rose by 8 per cent last year, he mentioned land purchases in Al Salahiyeh/Al Jiza and Al Thuheybeh Al Gharbiyeh as additional investments to the company's portfolio besides obtaining approval to develop a plot of land in Rawabi Al Bsheri/Al Salt's sarou vicinity.  

In summary, the company estimated its capital investment at JD49.6 million of which JD13..2 million were  in real estate ready for sale, JD19.6 million in land for sale, and JD0.5 million in  investments in affiliates.

The report included a statement from a sharia consultancy control group, contracted by Al-Mehanya to provide it with Islamic advisory services, confirming that the company adhered to sharia discipline in the contracts and dealings that were reviewed in 2014.

The sharia consultancy control group recommended that Al-Mehanya continue its actual real estate operations as predetermined and dispose of investments in shares of un-Islamic and weak companies.

"Share speculation should definitely be avoided," it said. "If shares of large and successful corporations are kept, that should only be for obtaining dividends and not for trading and speculation."

It emphasised the importance of utilising unused funds in various feasible projects and not be contended with depositing them in Islamic banks.

 

Al-Mehanya  employed 20 workers at the end of last year and those which owned more than 5 per cent of the equity at the time were: Pension fund of members of Jordan Engineers Association (11.7 per cent), Arab East Financial  Investment Company (7.4 per cent), and Muzon Real Estate Company (6.7 per cent).

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