Housing and construction in the rights issue of 330 m s; Perhaps this is the reason for the decline in recent days

The real estate company


Housing and Construction
-2.51%




Base:1,277

opening:1,250

High:1,293

low:1,228

change:17,172,170

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It fell by 5% yesterday and in general it is showing weakness in the last few days. Is the reason the announcement last night about the rights issue? The whole sector is in decline, but the rights issue does not add to the stock. Issuing rights often means that the shareholders prefer to exercise part of the holding and purchase through the rights that are allegedly given at a better price. In practice, this situation causes a decrease in the share price.

The company managed by Tamir Cohen will raise NIS 330 million from its shareholders, with about half of the amount already guaranteed by the controlling owners (the Seydoff family). This is the second time in the last six months that Shikun and Binui has gone through a process of issuing rights. This means that the company is trying to recover its capital, which is actually the basis for taking foreign capital (debts). This may actually indicate a concern on the part of the company’s managers, about large leverage, about uncertainty about the future when the markets are stuttering – both the real estate and infrastructure markets as well as the financial markets.

The company recently published relatively weak reports for the third quarter that caused a 5% drop in the stock. The company recorded a 22% decrease in operating profit, the net profit amounted to NIS 13 million compared to NIS 130 million in the quarter last year. (To read the reports, click here)

Shikun and Binui, which is an infrastructure and real estate giant with extensive operations in Israel and abroad, did increase its revenue in the third quarter to NIS 1.93 billion, compared to NIS 1.51 billion – a 28% increase compared to the corresponding quarter last year, but this does not permeate the operating line and the bottom line. In practice, the cost of sales soared and ‘swallowed’ the entire increase in income – with the reason being the increase in the price of raw materials in the infrastructure and construction sector abroad (outside the US), which led to a decrease of 40 million shekels in the gross profit to 222 million shekels compared to 268 million last year . The gross profit rate fell to only 11.5%, compared to 17.7% in the corresponding quarter last year.

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The main reason for the jump in revenues is an increase of 343 million shekels in the infrastructure and construction contracting sector in Israel and an increase of approximately 104 million shekels in the franchising sector, while on the other hand a loss of 140 million shekels was recorded due to an increase in the cancellation of revenues on the ICT project in the Negev. It is also interesting to note the slowdown in the real estate sector in Israel: the company sold only 149 apartments, compared to 268 in the corresponding quarter last year.

At the same time, administrative and general expenses also jumped to NIS 102 million compared to approximately NIS 80 million in the corresponding quarter – an increase of 28% (according to the company due to the expansion of operations in the USA). As a result, the operating profit also eroded to NIS 199 million, compared to NIS 253 million shekels in the corresponding quarter last year.

Financing costs soared by 85% – Housing and construction was also hurt as a result of inflation: financing costs jumped to NIS 157 million compared to NIS 85 million in the corresponding quarter last year. The company explains that every 1% increase in the index hurts and leads to an increase in financing costs by NIS 50-60 million.

Housing and construction has a huge backlog – NIS 19.8 billion, of which about NIS 7.4 billion is abroad, the backlog is unchanged compared to last year, but to maintain and maintain it, of course, you need capital, which is the reason for the upcoming fundraising.

Comments to the article(2):

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  • 2.

    Issuing rights is not taking debt, it is diluting the shareholders! (L.T.)

    tilapia

    08/12/2022
    09:03

    0

    0

  • 1.

    Just less than a year ago you published a recommendation on housing and construction

    Then

    08/12/2022
    07:53

    0

    0

    And what about all the tenders she won and the sale of the toll road in the US?

    closed

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