Real estate company Jerusalem Economy Ltd. (TASE:ECJM) (JEC), managed by CEO David Svida, today reported strong results for the second quarter and first half of 2016. The company reported NIS 51.4 million profit, compared with heavy NIS 116.7 million losses in the corresponding quarter last year.
Jerusalem Economy's results are published one day after brothers Naty and Ofer Saidoff, former Israelis dealing with real estate in the US, made an unexpected proposal to acquire 29% of the company shares. The brothers, who are not known on the local real estate market, offered to buy the stake for NIS 533 million, at a share price of NIS 7.25, 12% lower than the market price. The acquisition would be made via a company named Shayma Investments, which was incorporated a month and a half ago in the British Virgin Islands (BVI). The proposal is contingent on full consent of shareholders to sell the requested stake.
At the present, the main party at interest in Jerusalem Economy is Zohar Levy's Summit Real Estate Holdings Ltd. (TASE: SMT), controlling a 19.4% stake. David Fuhrer controls a 12% stake, The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) controls 10.3% and Altshuler Shaham controls 9.6%. Former controlling shareholder Eliezer Fishman owns 9.3% of the shares and former Bezeq International chairman Moshe Haba controls 5%.
Jerusalem Economy is a holding company with a 78.3% stake in Industrial Building Corporation Ltd. (TASE:IBLD) and 100% control of Darban Investments Ltd. (TASE:DRBN) Investments, which focuses on real estate operations in Israel, Europe and Canada; about 78% of Mirland Development Corporation plc (AIM:MLD; TASE: MRLD.B1), operating in Russia (subject to a debt arrangement); it also operates in Ukraine and Belarus via Svitland Ltd..
Jerusalem Economy reported a 24.6% drop in revenue due to the continuing sale of properties aimed at reducing the volume of its liabilities, which totaled NIS 336.3 million. The quarterly gross profit dropped accordingly, 13% to NIS 218.5 million. On the other hand, operating profits skyrocketed 359% to NIS 165.7 million due to a sharp decrease in the revaluation of the company's negative assets, which totaled only NIS 10 million in the quarter, compared with a depreciation of NIS 330 million in the corresponding quarter.
In the first half of 2016, Jerusalem Economy reported NIS 667.1 revenue, a 29.3% drop from the corresponding period last year. Gross profit was NIS 427 million, a 15% drop from the corresponding period in 2015, while operating profit rose 7.9% to NIS 291.5 million. Mirland operations in Russia resulted in NIS 59.0 million losses during this period compared with NIS 180.0 million last year, while Svitland's operations in Ukraine and Belarus led to NIS 23 million losses, compared with NIS 80 million losses last year. Jerusalem Economy reported a NIS 82 million net profit in the first half of 2016, compared with NIS 231 million losses in the corresponding period last year.
In the overall statement, the net operating income from incoming-producing properties dropped 11% in the first half of 2016 to NIS 440 million after the sale of assets in Germany, France and Canada. At the end of the second quarter of 2016, the company maintained real estate investments totaling NIS 12.5 billion.
Capital raising rounds led by Zvida in the past year, which enhanced the company's cash by more than NIS 1 billion, alongside an improvement in the company's operations, increased Jerusalem Economy's equity to NIS 2.7 billion at the end of the second quarter, compared with NIS 1.8 billion at the end of 2015. The company's market cap is NIS 2.1 billion, after a 50% hike in the company's shares in the past six months.
In the next six months, the company would have to pay NIS 981 million liabilities to bondholders, banks and non-bank entities. In the year after that, the value of payables decreases even less, to NIS 651 million.
Zvida said, "In 2016, until the date of the current statement, we sold assets totaling NIS 1.1 billion, in addition to similar sales carried out in the past few years. We intend to continue realizing real estate properties abroad, since these sales directly affect the improvement of the group's financial strength and focus. In addition, we continue developing and promoting further properties in Israel, while utilizing the group's existing strengths in project planning and realization."
Eliezer Fishman is the controlling shareholder in “Globes”.
Published by Globes [online], Israel business news - www.globes-online.com - on August 29, 2016
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