Solidere gets 'Over Weight'

Fair value per share $22, longer-term prospects more attractive: FFA report

FFA Private Bank gave Solidere shares an ‘Over Weight’ recommendation in its Equity Research report. It estimated the fair value of the company’s stock at $22 per share, an increase of around 10 percent from its current value. The price of Solidere A closed at $15.01 and Solidere B at $14.97 on Monday (October 3).

The report favored Solidere’s longer term outlook. It expected higher earnings along with an improvement in the company’s operating performance. “Greater macroeconomic and real estate sector visibility would drive Solidere’s earnings higher as the shares would benefit from an improvement in market sentiment,” the report said.

The report said that Solidere’s management is working to diversify its revenues sources to counterbalance the depletion of its land bank. It said that the company is decreasing its reliance on land sales (88 percent of revenues in 2010) by securing new revenue streams through property rentals, property management and services, and contribution from Solidere International.

Solidere has already sold or developed 2.1 million sqm buildup area (BUA), however it still holds 1.9 million sqm split between the reclaimed area (1.5 million sqm) and the traditional area (0.4 million sqm). The report expected Solidere’s land bank to deplete over the next 15 years. It estimated the weighted average price of land sales at $3900 per sqm BUA.

The report said that Solidere plans to invest around $500 million, of which $200 million to complete the infrastructure mainly those related to the Waterfront District, and $300 million to develop its real estate portfolio of 105,000 sqm BUA.
The report said that Solidere improved its financial performance in 2010, posting $382 million in revenues, with the bulk being generated from land sales. It generated a net income of $196 million in the same year. Solidere signed two land sales this year valued at $50 million each and expects to close few more by year-end.