Dolphin Capital Investors

HOLD

03/01/2008

Even with negative sentiment clouding the real estate sector, Dolphin Capital, the south-east Mediterranean property investor, still looks undervalued at a marked discount to net asset value (NAV).

Latest reported NAV per share stood at 185p at the end of September, having risen by more than two-thirds during the course of 2007. However, Dolphin Capital’s shares, recommended by Growth Company Investor at 133p last March and having traded as high as 184.75p since, have been tarred by the credit crunch brush.

Focused on residential and leisure developments, the company is managed by Dolphin Capital Partners, whose owners Miltos Kambourides and Pierre Charalambides cut their teeth with George Soros’s property funds. Their presence and success so far has proved an alluring prospect for institutional investors, with Dolphin having raised £576m in three fundraisings since arriving on AIM in December 2005 at 68p, with last June’s tertiary placing priced at 170p.

So far, £330m has been invested in a variety of projects in Greece, Cyprus, Croatia and Turkey. To this list can now be added the Dominican Republic, following a 70% investment in a $57m (£29m) joint venture. In collaboration with one of its existing partners, Dolphin has acquired the 790-hectare seaside site where a residential and leisure development is at an advanced stage of planning.

The third and fourth quarters have seen progress across the portfolio, with burgeoning sales from its development arm. Further acquisitions are intended and it’s worth noting that NAV does not yet include revaluations of Dolphin’s existing investments, value increases from future permits or any of its expected cash flows or sales.

Management is bullish about prospects and a good indication of this is the £9m of shares bought by Kambourides in December at prices ranging from 128p to 132p. A move to the full list has been mooted for the current quarter, which should help the shares too. Hold.

Growth Company Investor subscribers have full access to all our AIM and small-cap share recommendations. To subscribe today with a half-price offer, and gain immediate access to all the recommendations, click here.