Lebanon is in the midst of a property boom. At a time when many property markets are picking up the pieces after their bubbles burst, Lebanon keeps right on chugging. For investors, the logical way to play the boom is through the regional heavyweight Solidere. The company, which redeveloped Beirut's central business district after the civil war, owns an array of luxury residential projects and retail markets, most in Beirut.
Beirut-based Blominvest Bank initiated coverage yesterday with a buy recommendation and a fair value of US$31 a share. "This presents a 36 per cent potential upside from its closing price of $22.88 per share on May 17," the investment bank said in a summary report sent to Reuters. The bank noted that Solidere had not incurred a loss for nine years and that its profit margins are among the largest in the industry. Almost 90 per cent of its revenue is generated through land and property sales.
Property transactions in Lebanon jumped by 41 per cent in the first quarter to 22,059, compared with the same period last year, Banque Audi Sal-Audi Saradar Group said in a recent report. In addition, the value of property sales increased by 110.3 per cent from the same period last year, reaching a record high of 3.188 trillion Lebanese liras. "Lebanon's property sector flourished in the first quarter of 2010, benefiting from strong economic growth, continued large remittances from Lebanese working abroad, large inflows of foreign capital, population growth and robust tourism," the bank said in its report.
Is this just another bubble forming? Banque Audi says that because most of the demand is coming from Lebanese expatriates, it is underpinned by end users and not speculators. Foreigners accounted for only 19 per cent of sales transactions, with most of those coming from Arabs in the Gulf purchasing holiday homes in Lebanon. Blominvest also said that Solidere enjoyed a strong financial position that provided some protection from the political instability in Lebanon, with high liquidity and low debt levels.
* with Reuters