Bulgarian Property Developments

Trading at a significant discount to net assets and poised to pay out a 19p exceptional dividend, Bulgarian Property Developments (BPD) looks decidedly undervalued.

BPD has promised to pay the dividend as part of its rejection of a takeover by speculator Joe Lewis. Joint chief executive Ivo Hesmondhalgh says the payment has now ‘got court approval’ and will be paid by early July.

Net assets, valued independently by Colliers, stood at 75p per share in December (at a rate of £1 to €1.36) and could rise to 90p if planning permission is granted on a site in central Sofia. Hesmondhalgh aims to increase 'density' at the site from the currently approved 135,000 sq m to 250,000 sq m, and says permission should be granted ‘by the end of the year’.

As part of the defence against the Lewis bid – which cost the company £680,000 and meant it reported a loss of £594,000 for the six months to December – a second dividend of 13p was promised, from asset realisation. Hesmondhalgh says this won’t necessarily be from a sale of the Sofia site, ‘as we might enter into a joint venture for it’.

Elsewhere within the portfolio, there were ‘minor disappointments’ at two sites, but all in all, things are progressing well and Hesmondhalgh says, ‘Bulgaria is not that affected by the credit crunch; there weren’t many mortgages or credit cards. All three of our banks will lend to us, although at slightly higher rates.’

Taking the 19p dividend into account, investors buying at the current 55.5p will effectively be paying only 36.5p once the dividend is subtracted.

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