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FFA: Solidere results to show profit tripled

File - Office buildings are seen in Downtown Beirut, Tuesday, Feb. 25, 2014. (The Daily Star/Mahmoud Kheir)

BEIRUT: Real estate developer Solidere will report that its net profits in 2013 jumped to $55 million compared to $18 million in 2012, FFA Private Bank said.

“For 2013, we estimate Solidere approximately tripled 2012’s net profits to an estimated $55 million and Earnings Per Share of $ 0.34 on total revenues of $175 million,” FFA said.

The company is yet to release its final results for 2013.

Solidere’s profits plunged 10 percent to $18 million in 2012 due to low real estate sales and rents.

“Solidere should see improved financial results in 2013 vs. 2012 as the company may have seen the bottom in profits in 2012 when net profits dropped to $18 million or about 10 percent of the previous year’s results,” FFA said.

It said Solidere saw a slight improvement in land sales in 2013, and this could reflect positively on the company’s results.

“Solidere revenues from land sales bottomed in 2012 to one land sale in the waterfront and should see improvement to three transactions in 2013. Revenues from recurring income [rental income and rendered services/hospitality] should remain roughly flat,” FFA said.

Solidere officials told The Daily Star earlier that the economic slowdown and drop in real estate transactions in Lebanon had naturally hit the firm’s operations.

FFA stressed that Solidere planned to draw more investments into its department stores which were opened three years ago.

“The next focus is on the department store and the annex which will primarily house restaurants as well as continued infrastructure on the waterfront, namely roads and underground utilities. The eastern marina, the park and other properties are pushed to a later delivery as part of the strategy to defer some investments,” it said.

FFA argues that despite the difficult years the firm witnessed, Solidere was still seen as sound investment.

“We still recognize favorable upside for patient investors, despite remaining cautious for the short to medium term. We value Solidere’s position as the prime land owner and master developer in the BCD, its track record, attractive margins, and its ongoing revenue diversification to offset the depletion of its land bank. However, we remain cautious as the uncertain economic and political backdrop has materialized into Solidere’s operations through slower land sales,” it said.

FFA reiterated that Solidere shares were undervalued and did not reflect the true value of the company.

“We reiterate our target price on Solidere shares at $17 with an Overweight recommendation recognizing value for long-term investors. Our fair value estimate is maintained at $17 per share using a sum of the parts approach.”

Solidere A and B shares stood at $12.92 and $12.97 respectively Friday, but FFA believes that the election of a new president and political settlement in Syria would improve the price of Solidere shares.

“We accordingly maintain an Overweight recommendation given that the current price is at a discount of more than 10 percent to our fair value estimate, recognizing value for long-term investors despite remaining cautious in the shorter term against an uncertain political and economic backdrop impacting the property market and investor sentiment. Upside risks include a smooth presidential elections process and favorable outcome to Syrian crisis,” the report said.

 
A version of this article appeared in the print edition of The Daily Star on April 26, 2014, on page 4.

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