|Solidere shares up 45 percent anticipating announcement of high earnings in 2003 (Daily Star)
|Profits are expected to reach $45 million on rentals and sales
The price of the company's A shares hit $6.76 at the end of last month, up from $4.56 a month earlier; B shares hit $6.74
The shares of the giant real estate company Solidere have risen dramatically in the past three weeks amid indications that the firm is expected to post a significant profit at the end of financial year 2003 (March 2004).
Solidere A closed at $6.76 during the last of day trading on Friday compared with $4.66 at the end of March of 2004, an increase of 45.1 percent in one month.
With capital of $1.5 billion, Solidere was set up by Prime Minister Rafik Hariri to rebuild the devastated Beirut Central District (BCD).
The project has attracted investors from Lebanon and the Middle East as property prices surged due to high demand.
Solidere stock is the largest capitalization on the Beirut Stock Exchange (BSE). The stock was listed on the BSE in 1994. The price of a Solidere share was $14 when it was first listed but the value has fallen sharply since 1994. Brokers said at that time that the investment climate in Lebanon and the region was not encouraging.
But this picture is changing these days.
In the first three months of this year over $8.5 million worth of Solidere shares were traded on the Beirut Stock Exchange.
Solidere B shares also performed well, with prices closing at $6.74 on April 30.
Brokers in general gave an upbeat picture of Solidere, noting that the company benefited from the fallout of Sept. 11, 2001 in the United States and to some extent from the sporadic terrorist bombings in Saudi Arabia.
The other factor which prompted some investors to shift to Solidere shares was the fall in interest rates on dollar and Lebanese pound deposits.
Interest rates on treasury bills and deposits fell by more than 6 percent after the government secured soft loans worth $2.5 billion from a total of $4.4 billion pledged at the "Paris II" donor conference to help Lebanon reduce debt servicing.
According to a February report by the Arab Finance Corporation (AFC), Solidere's profits at the end of 2003 are expected to reach $45 million, based on the increase in rental sales and the sale of some $140 million worth of properties.
But first half results in 2003 showed a loss of $5 million.
Solidere officials said that most of the property sale contracts had been finalized after June 2003.
"Once the sale contracts are signed, the company is expected to make a handsome profit in 2003," Solidere said earlier.
Jean Riachi, the chairman of Financial Funds Advisors (FFA), told The Daily Star that he was not surprised by the rise in the price of Solidere shares.
"Interest rates have fallen and Arab gulf investors are buying more properties in the BCD. All of these factors helped Solidere shares go higher," Riachi said.
He said he did not expect prices to drop back to their normal levels of a few months ago.
"The prices may not rise by 20 percent each month, but this does not mean that the value of Solidere shares won't hold if they don't jump."
Riachi said that Arab investors saw Lebanon as a safe haven following security incidents in different parts of the Middle East.
"The price of the land in the BCD rose by 20 percent in 2003 compared to 2002."
Riachi said that his company had built two projects in the BCD, and added that investors bought most of the space even before the project was completed.
The Daily Star