Riyadh: Tassnief has maintained long-term national scale entity rating of “(BBB+)’’ (Triple B Plus) and a short-term entity rating of “T-3” of Safa Investment Company (‘‘Safa’’ or ‘‘the Company’’). The assigned ratings reflect adequate creditworthiness, thus low credit risk. The Company’s risk profile may exhibit moderately high variation with changes in economic and sector conditions.

Rating Rationale: The assigned ratings take into account Safa’s established track record and market position, real estate development model focused on efficient capital utilization, sizeable pipeline of projects, satisfactory operational diversity with multiple streams of revenue, and a seasoned management team. Geographic and segment concentration continues to remain high. The ratings also incorporate sustained revenue growth, maintenance of satisfactory profit margins, and adherence to a conservative financial policy with an emphasis on efficient capital deployment. The capital structure remains low-leveraged despite a sizable project pipeline, as funding arrangements are primarily secured through the fund partnership model. However, the ratings are constrained by inherent risks in the real estate sector, characterized by high cyclicality, competitive intensity, and elevated execution and selling risks.

Safa has strengthened its market positioning through a real estate development model focused on efficient capital deployment while pursuing a sustained revenue growth strategy by capitalizing on demand-supply gaps in the market. The Company has successfully expanded its project pipeline through strategic partnerships with real estate funds, a model that enables diversification of revenue streams while reducing equity exposure and working capital intensity.

The financial risk profile reflects continued revenue growth and gradual improvement in net margins over the past three years. Sustaining healthy net profitability over the assessment horizon will remain important to support internal capital generation and fund ongoing expansion. While the debt-to-FFO ratio has weakened due to a decline in funds from operations (FFO), debt levels have remained broadly stable. Some reassurance is gained from the alignment of debt repayment schedules with project-specific cash flow generation, which helps reduce refinancing and liquidity risks. No dividends have been distributed to date, reflecting a retained earnings strategy aimed at supporting business expansion and strengthening the equity base.

Rating Triggers: The ratings also remain dependent on further increase in scale of operations and cash flow generation, improving geographic and segment diversity, and sustaining financial risk profile. Any significant increase in leverage indicators and resultant weakness in cash flow coverage may exert pressure on ratings.

About the Company: Safa is a Limited Liability Company registered in the Kingdom of Saudi Arabia under the commercial registration number 1010464838 dated October 1, 2018. The Company is engaged in buying and selling land and real estate, off-plan sales, managing and renting owned or rented properties (residential), managing and ranting owned or rented non-residential properties, and real estate management activities in exchange for commission.

For further information on this rating announcement, please contact Mr. Talha Iqbal - email at RS@Tassnief.com.

RELATED CRITERIA AND METHODOLOGY
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