Earnings Report

Rapco Investment

9M 26

1. Company Overview & Earnings Context

RAPCO Investment P.J.S.C. is a public shareholding company incorporated in Ras Al Khaimah, UAE, which commenced operations in 1978.

Its principal activities are investment in commercial and institutional enterprises and related management activities.

RAPCO operates primarily as an investment holding company, generating income from:

Investments in bonds and bond funds.
Listed and unlisted equity securities.
Investment properties.
Other investment-related activities.

For the nine months ended September 2026, RAPCO reported a decline in profitability compared with the corresponding period in 2025. The main factors were lower total investment income, particularly reduced gains and other income from investment property disposals, and higher finance costs.

2. Financial Performance Snapshot

Key financial results:

Total income: AED 19.22 million, compared with AED 25.80 million, down approximately 25.5% YoY.
Income from bonds and bond funds: AED 9.00 million, compared with AED 3.55 million, up approximately 153.1%.
Income from investments in securities: AED 9.04 million, compared with AED 11.88 million, down approximately 23.9%.
Rental income from investment properties: AED 38,819, compared with AED 922,884.
Other income: AED 1.14 million, compared with AED 9.44 million, down approximately 87.9%.
Administrative expenses: AED 2.42 million, compared with AED 2.79 million, down approximately 13.3%.
Profit from operating activities: AED 16.80 million, compared with AED 23.01 million, down approximately 27.0%.
Finance cost: AED 1.90 million, compared with AED 1.03 million, up approximately 84.3%.
Profit before tax: AED 14.90 million, compared with AED 21.98 million, down approximately 32.2%.
Tax expense: AED 353,284, compared with AED 1.01 million.
Net profit: AED 14.55 million, compared with AED 20.97 million, down approximately 30.6%.
Basic EPS: AED 0.153, compared with AED 0.221, down approximately 30.8%.

Underlying performance:

RAPCO's bond and bond fund income increased significantly, providing an important source of recurring investment income. However, this improvement was insufficient to offset weaker securities income and the substantial reduction in other income.

A key reason for the decline was the lower gain from investment property disposals. The company recognised AED 882,490 in such gains during 9M 2026, compared with AED 9.18 million in 9M 2025.

Consequently, the decline in net profit reflects both lower investment-related income and the previous period's comparatively high contribution from property disposal gains.

3. Operational Highlights & Key Metrics

A. Investment portfolio

RAPCO's investment portfolio remains the main source of its financial performance.

Major holdings and investments include:

FVTOCI investments: AED 155.63 million.

Quoted shares: AED 107.11 million.
Unquoted shares: AED 48.52 million.

Investments at FVTPL: AED 145.12 million.

Quoted investments: AED 29.85 million.
Unquoted investments: AED 115.27 million.

Financial investments at amortised cost: AED 234.57 million, comprising AED 223.20 million non-current and AED 11.37 million current investments.

The quoted FVTOCI portfolio includes holdings in:

Commercial Bank International.
National Bank of Ras Al-Khaimah.
RAK Ceramics.

The unquoted FVTOCI portfolio primarily includes an equity holding in Majan Printing & Packaging Co. LLC.

The unquoted FVTPL portfolio includes an investment in AMI-Movenpick Hotel, UAE.

B. Bond and bond fund investments

Bond and bond fund income reached AED 9.00 million, compared with AED 3.55 million in the previous period.

This included:

Interest income on bonds: AED 7.44 million.
Interest income on bond funds: AED 1.49 million.
Gain on disposal of bonds and bond funds: AED 68,659.

The increase in bond-related income was a positive contributor to performance.

C. Investment property portfolio

Investment properties declined substantially during the period.

Investment property value at December 2025: AED 7.16 million.
Investment property value at September 2026: AED 767,350.

The company disposed of investment property with a carrying value of AED 6.40 million during the period.

D. Digital asset

RAPCO held Bitcoin as a digital asset at the end of 2025, valued at AED 377,577. The asset was disposed of during 2026, and no digital asset balance remained at September 2026.

4. Key Performance Drivers

Positive factors

Bond and bond fund income increased by approximately 153%, supporting overall investment income.
Administrative expenses decreased by approximately 13.3%.
The company generated a positive net profit of AED 14.55 million.
Fair value gains on FVTOCI investments contributed AED 544,636 to other comprehensive income.
Cash and cash equivalents increased from AED 607,252 at December 2025 to AED 2.64 million at September 2026.

Negative factors

Total income declined by approximately 25.5%.
Income from securities declined from AED 11.88 million to AED 9.04 million.
Other income declined significantly from AED 9.44 million to AED 1.14 million.
Gains from investment property disposals fell from AED 9.18 million to AED 882,490.
Finance costs increased from AED 1.03 million to AED 1.90 million.
Net profit declined by approximately 30.6%.

Important earnings-quality observation

The previous year's results benefited from a substantial investment property disposal gain. Therefore, the comparison with 2025 is affected by a non-recurring contribution.

At the same time, the increase in bond income is encouraging because it demonstrates a stronger contribution from the company's bond investment portfolio. However, the sustainability of total earnings will depend on investment yields, securities performance and financing costs.

5. Outlook & Forward Guidance

The directors stated that the company continuously monitors its liquid funds and investments in equity and fixed-income securities to maximise yields. Management also highlighted its monitoring of financial market risks.

The report does not provide specific numerical earnings guidance or a detailed investment outlook.

Balance sheet position at 30 September 2026:

Total assets: AED 539.30 million, compared with AED 454.99 million at December 2025.
Total shareholders' equity: AED 436.67 million, compared with AED 421.58 million.
Total liabilities: AED 102.63 million, compared with AED 33.41 million.
Borrowings: AED 100.00 million, compared with AED 30.00 million.
Cash and cash equivalents: AED 2.64 million, compared with AED 607,252.
FVTOCI investments: AED 155.63 million.
FVTPL investments: AED 145.12 million.
Financial investments at amortised cost: AED 234.57 million.
Investment properties: AED 767,350.

Borrowings and liquidity

Borrowings increased considerably during the period:

Overdraft: AED 70.27 million.
Term loan: AED 29.73 million.
Total borrowings: AED 100.00 million.

The term loan carries interest based on three-month EIBOR plus 1.25% per annum.

RAPCO also pledged quoted shares valued at approximately AED 39.18 million as security for banking facilities.

The increase in borrowing is an important monitoring point because the company has relatively low cash balances compared with its outstanding borrowings. Higher interest expenses may continue to affect profitability if borrowing levels remain elevated.

Cash flow performance – 9M 2026

Net cash generated from operating activities: AED 6.21 million, compared with AED 9.49 million.
Net cash used in investing activities: AED 72.27 million, compared with AED 4.88 million.
Net cash generated from financing activities: AED 68.09 million, compared with cash used of AED 1.03 million.
Net increase in cash: AED 2.03 million.
Closing cash balance: AED 2.64 million.

The large investing outflow was mainly associated with purchases of financial investments at amortised cost, partly offset by proceeds from investment disposals and redemptions.

Financing cash inflow was supported by an increase in overdraft facilities.

Forward-looking considerations

Key factors to monitor include:

Whether higher bond income can be maintained.
Performance and valuation movements in listed and unlisted securities.
The impact of higher borrowing costs.
Management's ability to maintain liquidity while expanding its investment portfolio.
The effect of regional geopolitical developments on financial markets and investment valuations.

Management stated that it had not identified a material adverse impact from the ongoing Middle East geopolitical situation as at the date of approval. However, the future financial effects could not be reliably estimated.

6. Investor Takeaway

RAPCO Investment reported a weaker financial performance in 9M 2026, with net profit declining approximately 30.6% YoY to AED 14.55 million.

The principal positive development was the strong increase in income from bonds and bond funds, which helped support investment earnings. Administrative expenses also declined.

However, lower securities income and a sharp reduction in property disposal gains affected total income. In addition, finance costs increased considerably, while borrowings rose from AED 30 million to approximately AED 100 million.

The company's balance sheet continues to be supported by a sizeable financial investment portfolio and shareholders' equity of AED 436.67 million. Nevertheless, the increase in overdraft borrowing and relatively low cash balance deserve attention.

Overall assessment: RAPCO remains an investment-focused company with meaningful exposure to bonds, listed securities and unquoted investments. Its earnings performance will depend heavily on investment income, portfolio valuations and the cost of financing. Investors should focus on the sustainability of bond income, the performance of the securities portfolio and the company's ability to manage its increased borrowing.