The Tel Aviv Stock Exchange (TASE) posted new records in share offerings last week. But even the greatest optimists did not guess that after such a short recuperation period, Solel Boneh’s offering would enjoy such astounding success as it did last Wednesday.
In the offering, Solel Boneh and its parent company Housing and Development offered shares, convertible bonds and options, with a minimum value of NIS 76 million. Since early 1997 share offerings can also limit the maximum POP (public offering price). The issue’s managers decided to do that but the market reaction was unexpected: orders for the issue amounted to NIS 37 billion, 45 times the original flotation’s value. The offering closed, of course, at the maximum price. Subscribers were limited to 2% of the amount requested.
Most of the over-subscription stemmed from assessments and rumors of over-subscription floating around the market on the issue day. The way these rumors reinforced themselves was similar to the heady days of 1993. This time investors again over-subscribed simply to gain access to a reasonable block of shares.
In 1987 Solel Boneh was de-listed from the TASE because of financial difficulties. Now, after ten years of restoration orchestrated by chairman Uzi Verdizer and general manger Shaul Amit, Solel Boneh is returning to public trading with a company value of NIS 470 million.
Solel Boneh operates in several areas. Construction is the main activity with revenues comprising 64%-67% of all company revenues. Road and infrastructure is second with 17-19.5%. Industrial operations, including production of construction and paving materials, comprise 14% of revenues in each of the previous two years. The last and smallest sector is transportation services which comprise 2.4% of yearly revenues.
Solel Boneh is, in fact, the largest contractor in the country and it has participated in a respectable number of the largest projects executed in the past few years. Among the largest are the Kessem interchange on the Cross-Israel Highway which includes 8 bridges; construction of the Club Hotel in Eilat, now nearing completion; and construction the Hyatt Hotel at the Dead Sea. Each of these projects amounted to more than NIS 100 million.
At the end of March the company backlog amounted to approximately NIS 2 billion. Solel Boneh’s management hope to continue winning large projects. Among the projects being discussed are the new airport, the Carmel tunnel, the Trans-Israel Highway and Tel Aviv’s subway. Assessments are that even if Solel Boneh does now win these tenders on its own, it will act as sub-contractor for substantial parts of these projects for the winning contractor.
Revenues at Solel Boneh have increased steadily in the past years and in 1996 amounted to NIS 1.8 billion, as compared to NIS 1.7 billion in 1995. Even though profitability fell last year, the numbers are impressive: in 1996 net profits were NIS 57.7 million as compared to NIS 72.2 million in 1995.