Bulgarian Property Development

HOLD

09/01/2008

Bulgarian Property Developments (BPD) maintains it is worth a good deal more than the 64p takeover price offered by heavyweight speculator Joe Lewis’s Windsorville Investments, and proposes a cash return to win over investors.

Ducking and weaving at around 64p for much of the past 12 months, BPD has recently had its portfolio independently weighed at an net asset value (NAV) per share of between 75p and 90p. The higher valuation is determinant on the company getting the planning permission upgraded at a central Sofia site.

The company currently has £26m of cash in the bank that it had planned to spend on improving current properties and acquiring others. But chief executive Ivo Hesmondhalgh says if the offer is successfully thwarted he aims to gauge the opinion of shareholders and possibly return £20m to them, at 19p per share.

Then, if the planning on the Sofia property is granted, BPD intends to sell it and return the profit to investors at an estimated 13p per share. This would leave shareholders with 32p a share in cash, and BPD with an NAV of 49p and a cash pile of around £24m.

So, although Hesmondhalgh says he is pleased to have the man he calls ‘one of the most intelligent investors on the planet’ on board, he doesn’t want to sell up at this stage to deny original backers – of which there are 250 or so smaller investors as well as 12 larger institutions – the potential upside in the business that both he and Lewis seem to see.

Stephen Mischler from BPD’s adviser Matrix says the company’s broker Fairfax has spoken about the offer to all major shareholders, who are ‘supportive’. Growth Company Investor recommended the shares at 58.5p in October 2006 and now advises rejecting the offer.

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