Elma to invest in major projects in Cyprus

— Profits break 1999-level for first time

 

Elma Group, one of the largest investment groups in Cyprus, plans to enhance its prospects by using its cash reserves and leverage to invest in major projects in partnership with other major allies.

Group Chairman Michalakis Joannides told the Financial Mirror that cash balances were recently strengthened following the sale of the stake in Aristo Developers, which raised CYP 30 mln (EUR 51 mln).

“With no debt, record profits and favourable market conditions, we are only considering investments in large projects in the financial, property and investments sectors,” he said, adding that most of the negotiations may be wrapped up before the year-end.

The Elma Group also plans to set up a fund in Greece with a CYP 10-15 mln participation to invest in Greek listed stocks, which will be in addition to the existing total group investments of CYP 90 mln.

The Group is on track to report increased profitability compared to the CYP 22 mln reported in 2006, which by itself was a record and more than the CYP 15 mln booked by the Group in 1999 at the height of the CSE bull run.

Joannides said that in sharp contrast to 1999 when most of the profits could be described as “bubble” since most were not realized and were paper gains on investments that had gained without fundamental basis, this time the gains are solid, are backed by fundamentals and are from a diversified base.

“Only a third of our investments are held in CSE titles, 90% of which are held in bank shares. The others are in real estate and the remainder in deposits.”

 

— Capital increases

Joannides said the Group does not intend to dispose of any of its listed investment companies, insisting that it has plans for all of them. The Group includes the CSE listed Dodonis, Stario and Jupiter funds, as well as a majority stake in Lemeco-Silvex. The Aspis Holdings Group is interested in the LEM stake by meeting the minimum requirement of a cash bid for all the stake and at least at book value.

Joannides said the capital of Stario Investments has recently increased to CYP 4 mln, but there are plans to increase this to CYP 15 mln.

The objective is to have a strong asset management team to manage all the funds at minimal cost.

The Group also has a facility with Marfin Popular Bank to raise funds, but in view of the fact that it has very little debt, it has the ability to increase its gearing substantially, if and when the need may arise.

 

— Dividend reinvestment

Having several listed companies does have advantages, such as minimizing the cash outflow when dividends are declared. Joannides said the Group has approved some CYP 5 mln in dividends, but because of the dividend reinvestment plans and the majority stakes held by Elma, the cash outflow has been limited to a third of the amount.

“Many small shareholders have also decided to participate in the dividend reinvestment plan, which is another sign of confidence in our management and company prospects,” he said.

 

— Grossly undervalued

Joannides said all group companies have excellent prospects, are now cash-rich with record profits, but they are grossly undervalued since all are trading at substantial discounts compared to net asset values (NAV).

“Discount levels of 40-50% are not justified and I’m sure will be corrected in time,” he said, adding, “I believe that our shares offer the best investment opportunity in the market for those who want to invest for the long term and are not affected by the short term price distortions.”