Trading below their nominal values, the shares of Addoha, Alliances and Résidences Dar Es Saada still fail to convince, despite the positive developments recorded by the two former majors of Alami Lazraq and, in a to a lesser extent, by the Sefrioui group. Update on shares that were once stars of the Stock Exchange, which have now become securities for small traders.
Addoha, Alliances and Residences Dar Es Saada continue to give cold sweats to the market. On the eve of the publication of their annual results, some analysts are once again expecting a big break. Expectations that are not quite right if we are to believe the management of the three real estate groups who try to reassure in their financial communication. But the perception of the market is such that no one, especially at the level of institutional players, trusts what is said or communicated.
“The three real estate companies are not in the same boat. RDS is sinking, it’s true. He vowed is doing a little better than before, and Alliances is clearly on the road to recovery. But the three groups are penalized by the poor perception of the market. Confidence with institutional investors is completely broken, hence the negative opinions that are conveyed on the market…”, confides a portfolio manager to us.
The proof, according to him, is the value of these securities which are traded at “bankrupt company prices”.
Addoha is quoted, for example, at the time these lines are written, at 6.60 dirhams, while its nominal value is 10 DH. Ditto for ADI, which is worth 56 dirhams on the stock market for a nominal value of 100 DH. Or even RDS which is only worth 12.92 DH for a nominal of 100 DH.
According to several market sources, if such a valuation is justified for RDSwhich is perceived as a bankrupt company, it is completely unfair for Addoha, and more so for Alliances.
RDS, all signals in the red
“RDS achieved a negative net result last year. Its 2021 turnover was generated thanks to destocking. And in 2022, the situation should not be better. Presales in 2022 are down 18%, which gives an idea of the trend of future revenues. Its turnover in 2022 is down 29%. And the company is having great difficulty in financing itself. The renewal of its commercial paper lines stalls at each times, which shows that the market does not trust him,” said a market analyst. He cites an indicator showing the seriousness of the company’s situation: the price to book (P/B), this ratio which compares market capitalization to the level of equity.
RDS indeed processes at a P/B of 0.2 to 0.3 maximum. “It simply means that its value is worth five times less than its equity,” comments our analyst.
“Things are simple. RDS is capitalized on the stock market at 335 MDH for a debt of 2.3 billion dirhams, excluding overdraft facility. It is normal for the market to see it as a company in bankruptcy. And its results do not allow the market to see the end of the tunnel. With the deficits it displays, which reduce equity, and the absence of a project on the way, the only thing that can be said is that the company is sinking,” he adds.
This perception of the market is very well reflected in the stock market trend. Listing at 12.92 DH, the value has lost 28.22% since the start of the year. Since 2022, the losses incurred by the value amount to 53%. And the stock’s value has halved since 2018. And there is nothing, according to our market sources, to indicate that the situation will improve in the future.
Addoha, half fig, half grape…
This is not the case of Addoha, which according to a market analyst, is not in the situation of RDS, but has not managed to come out of it either as Alliances.
Still trading below face value, Addoha is now worth 6.60 DH. The title has gained 5.10% since the beginning of January, but still cannot absorb the considerable losses incurred since 2018 (- 80%). Even less regain its post-IPO valuation levels.
“You have to forget the valuation levels at the time of the IPO. Adohha of 2007 and 2008 is not the firm of 2023. Today, the ambition is to achieve at least a net profit of 500 million dirhams in 2024 and a target price of 7 dirhams. Which remains far from the nominal value of the title”, lists one of our sources.
The real estate group of Sefrioui has indeed reduced its wings in recent years. Exit the results in billions, and the projects in hundreds of thousands of hectares almost everywhere in Morocco; its production level has dropped to between 2,000 and 3,000 units per year at most.
In 2022, according to the results of the fourth quarter, the group produced 2,300 units. Which in itself is a good performance, since this production, with the sales made, generated a turnover of 1.4 billion, up 17% compared to 2021.
According to the group, current production, which will be delivered in the coming years, is 17,000 units, of which 32% in West Africa. A strategy of territorial diversification which allows Addoha to circumvent the bad economic situation in Morocco, but which does not really convince the market.
“Africa certainly represents 32% of Addoha’s activity, but this is not due to a strong expansion south of the Sahara, but because activity in Morocco is declining. In Morocco, they went between 2021 and 2022 from 5,312 to 4,776 units sold. It is therefore normal that the weight of sub-Saharan Africa, where Addoha sold 3,555 units in 2022, increases”, comments a manager, for whom Addoha has not yet left the red zone.
“There is an important indicator that gives an idea of the future of a promoter, it is the presales. In the case of Addoha, the presales in 2022 increased by 2%, which is a stagnation compared to the last year. This shows that the stream of future revenues will also be stagnant. And even if the turnover increased by 17% in 2022, it should not be forgotten that the group’s indebtedness is also on the rise. is increased by 200 million dirhams in 2022, when Alliances is getting out of debt and RDS remains on a stable debt in spite of itself, because no one wants to lend to it”, underlines our manager.
At a price of 6.6 dirhams, the value, for him, remains poorly perceived. And will not be able to go very far given the current fundamentals and the pace of production. “At best, it will rise to 7 or 7.5 dirhams, even if we are not sure that its net result will be positive this year, given its cost structure which is still heavy,” he adds.
The finding for the real estate group of Sefrioui is according to our alarming source: “Addoha deals with a capitalization of 2.6 billion for a debt of 4.6 billion. All is said.”
The value has, according to him, been overtaken for the first time in its history by Alliances, which is a real inflection point in the market.
The exception Alliances Real Estate Development
Alliances, precisely, is the only one of the three values to have the favors of the market. Its evolution, its fundamentals and its prospects are almost unanimous.
“With presales up 19% in 2022 and 4,800 units received, up 51% compared to 2021, Alliances is clearly on the right track in terms of activity”, testifies an analyst.
The group’s activity, which has refocused on housing estates, which require less capital and cash, has paid off. And above all the new territorial network: the group has left the turbulent zone of the Casablanca-Rabat axis to invest in urban areas with high potential, such as Kenitra, Beni Mellal, Tangier, Fnideq, Mdiq…
“ADI went where there is activity, new industrial zones, hospitals or universities being created. And it invests little capital in housing estates for a quick return on investment. It’s a smart strategy,” commented an analyst.
All accompanied by a restructuring of the balance sheet, which reduced the group’s debt from more than 9 billion in 2016 to less than 2 billion at the end of 2022.
Result: the Alami Lazraq group generated in 2022 a turnover of 1.6 billion dirhams, exceeding for the first time the Addoha group (1.4 billion turnover in 2022). Ditto at the level of net profit expectations where ADI will, according to our sources, make more profits than the Sefrioui group.
However, the market continues to misvalue the stock. “With these results stronger than those of Addoha, and clearer prospects, Alliances is valued by the market at 1.2 billion dirhams against 2.6 billion for Addoha. This is unfair. This error must be corrected by the market,” said a manager.
For him, the title must at least regain its nominal value of 100 dirhams, ie a great potential for growth on the stock market.
Lack of visibility continues to penalize the sector
On the market, the title seems to be recovering, with cumulative gains since the beginning of the year of 8.65%. But this is insufficient, according to our sources, who tell us that we are still very far from the normal recovery scenario that must be done to readjust the value of the title to its fundamentals.
The reason ? The mistrust of the market and the disinterest of institutional investors who still refuse to bet on the sector.
“Alliances like Addoha or RDS have lost the confidence of institutional investors. It has become the actions of stockbrokers, of individuals. The only thing that can push them is a renewed interest from institutional investors, which is not not won, given the economic situation and the lack of visibility on the real estate sector in general.”
This lack of visibility, everyone within the place points out, despite the promise of a new incentive mechanism prepared by the government to boost demand.
For an expert in the sector and the financial market, this program is good, but it is currently having the opposite effect on the sector and on the market.
“This incentive program is still a project on paper. We haven’t seen anything yet. This creates a wait-and-see attitude within the market. Both for future buyers who are waiting for its effective deployment to take action. or within the Stock Exchange, where investors are also waiting to see its results to get an idea of the sector. Instead of creating an acceleration of the market, this program is slowing down the whole machine”, denounces our source.