Bank Audi says Solidere’s shares are undervalued

Natalia Nasser

Regional Press Network

BEIRUT: Lebanon’s Bank Audi has initiated coverage on The Lebanese Company for the Development and Reconstruction of Beirut Central District or Solidere, with a buy recommendation and price target of $35.09, implying an upside potential of 37 percent to the current market price of $24.58. The three analysts that currently cover Solidere hold a “buy” or a “strong buy” recommendation for the company’s share with a consensus on price target of $32.46.

In its report, Audi highlighted the importance of Soldere’s strong financial position and robust liquidity condition, which will allow the real-estate developer to take good advantage of the downturn in the region’s real-estate sector and tap into profitable projects in the coming years.

Solidere’s cash position is also expected to solidify at a time when regional real-estate developers suffer from liquidity squeeze.

According to Audi, the company is expected to generate significant revenues over the next five years mainly due to the opening of the anticipated Souks project, a modern shopping district project which will lie on an area of 50,334 square meters in the heart of Downtown Beirut and is expected to open by the end of 2009.

Solidere will offer all of the project’s 200 retail shops, movie theaters and department stores for lease which will boost its rental revenues by over $25 million in the first year of operation.

Over the next five years, Solidere’s rental revenues are expected to reach $100 million maintaining a robust position for the company and continuous cash flows, Audi says.

Solidere’s land bank which is valued at $62.70 per share is trading at a 61.15 percent discount given the fact that the company’s owned lands are situated in the most prestigious parts of Lebanon.

Solidere’s land bank is estimated at 1.9 million square meters of built-up-area, of which 1.5 million square meters are located at the sea front of Beirut city, and are the only remaining undeveloped plots in that area, according to Audi.

Several factors will drive growth in Solidere’s investment portfolio in coming years, according to Audi’s brief. The company still has a great room for untapped opportunities mainly due to the relatively strong demand for residential properties and spaces combined with limited supply. The undervalued real-estate prices in Lebanon which are still considered low when compared to that of the region will also play a role in fuelling growth in the company’s investments in coming years, says Audi.

However, other depressing factors could still impede future development of the company, such as the unstable political situation, in addition to the continuous threat of a repetition of any Israeli attacks on Lebanon, says the report.





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