The battle over the sole ticket to the Tel Aviv 35 Index, the Tel Aviv Stock Exchange’s flagship index, is at its height. Until yesterday, insurance group Menora Mivtahim was the leading candidate to join the index, but recent moves by YH Dimri Construction and Development (TASE: DIMRI), Israel’s largest residential real estate developer, have thrown everything up in the air, and it now leads the race, according to figures from SmartBull, which predicts changes in the composition of indices in real time.
In the past few days, YH Dimri has announced a number of moves that have boosted its market cap, including a substantial equity offering. Tel Aviv investors have certainly lent their support to the company: YH Dimri’s share price has risen 63% in the past year, almost double the rise in the Tel Aviv Construction Index, and approaching three times the rise in the Tel Aviv 35 Index (23%). The rise in its share price gives YH Dimri a market cap of NIS 6.6 billion, the highest among construction companies listed in Tel Aviv, and has strengthened the standing of controlling shareholder Yigal Dimri himself as the wealthiest contractor in Israel. His 59% stake in the company is worth over NIS 3.8 billion.
In the Tel Aviv Construction Index, the company with the second highest market cap after YH Dimri is Ashtrom Group (TASE: ASHG), but it is mainly active in infrastructure rather than residential real estate. In third place is Aura Investments (TASE: AURA), controlled by Yaakov Atrakchi, with a market cap of NIS 4.8 billion. Aura’s share price has shot up by 1,500% since the crisis that engulfed the company at the beginning of the Covid pandemic, thanks to its extensive activity in the hot field of urban renewal.
The most significant step by YH Dimri recently came in July, when it agreed the purchase of a plot of land held by collapsed developer Hanan Mor on the site of the vacated Sde Dov Airport in north Tel Aviv. The land is slated for the construction of 448 housing units. Hanan Mor bought it in the summer of 2021 from the Israel Land Authority for NIS 1.5 billion, taking a loan of NIS 1.3 billion to do so. When interest rates rose, the deal became too much for Hanan Mor to handle and led to the company’s collapse. YH Dimri bought the land, 7,600 square meters in area, from Hanan Mor’s creditors for NIS 1.1 billion.
Last week, YH Dimri carried out two transactions to enable it to complete that purchase. The main one was a private placement of shares to a number of financial institutions for NIS 350 million. Among the investors are Altshuler Shaham (through its Altshuler Shaham Netz hedge fund); Harel Insurance Investments and Financial Services; Yelin Lapidot Provident Funds Management; and hedge funds Noked Capital, VAR Optimum, Hazavim, Total Opportunity, Brosh, and others.
At the same time YH Dimri announced the sale of 7.9 dunams of land in Hadera, slated for the construction of 318 housing units, to a privately held developer, for NIS 181 million plus VAT, payable in installments. YH Dimri will post a pre-tax gain of NIS 150 million on the sale in the first quarter of 2025.
The results for the first half of 2024 give an indication of how far YH Dimri has become a leader in the local construction industry. In January-June, the company sold 248 housing units, versus 171 in the corresponding period of 2023. In second place after it for sales volume was Shikun & Binui, with 164 sales in the first half of this year. YH Dimri’s first half revenue rose 27% to NIS 865 million, thanks to the rise in sales of apartments in its projects and its rate of progress in construction. Net profit more than doubled (up 118%) to NIS 267 million, which compares with NIS 248 million for the whole of 2023.
Despite all this, Yigal Dimri, who serves as CEO of the company, has expressed concern at the decline in the amount of construction because of the shortage of workers since the start of the war. Speaking on a panel of managers of listed real estate companies in May this year, Dimri said, "The volume of construction is declining, and meanwhile we are hearing stories about importing workers, but we’re in distress. There will be fewer building starts and more demand. As time goes on, the distress will grow."
Next Tuesday, the identity of the company that will replace Electra, which is expected to be demoted from the Tel Aviv 35 Index in the semi-annual revision of the index on November 7, will be determined. The first criterion for accession to the Index is the public’s holding in the company, which has to be over 30%. The determining date for this criterion is the end of last month.
The next important criterion is the company’s average market cap in the nine trading sessions between October 1 and October 15. YH Dimri’s average market cap has risen thanks to its placement of shares, despite a 3.5% drop in its share price since the beginning of September. The third criterion is the liquidity of the stock, which will determine the weighting it receives in the index.
YH Dimri is in a good position for entry into the index. Its average market cap in the determining period stands at NIS 6.7 billion, with Menora Mivtachim close behind, at NIS 6.63 billion. The third candidate in the race, income producing real estate company Alony Hetz (TASE: ALHE) is further back, with an average market cap of NIS 6.35 billion.
Last week, Alony Hetz announced that Aaron Frenkel had become a partner in the company through an allocation of shares, which sent its share price higher at the time, but it has since fallen back. The deal is considered unusual for controlling shareholder Nathan Hetz, who is known as someone who does not like sharing control. Alony Hetz’s chances of entering the Tel Aviv 35 Index appear to have receded, even through the deal with Frenkel is due to inject NIS 685 million into the company.
Published by Globes, Israel business news - en.globes.co.il - on October 15, 2024.
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