TUP tops up
It aims to raise over zł.110 million for seven major investment projects on Poland's lucrative real-estate market
TUP has been listed on the WSE since its debut in 1999 as Trans Universal Poland. Following the acquisition of a 67-percent stake in 2005 by UK-based Eagle International Trading, it shifted its focus from the logistics sector to become more of an opportunity fund across a range of sectors. Later this month, the company will float 5.5 million new shares.
Restructure and resell
"In practice, TUP buys companies that own interesting real estate and the majority of the value it obtains comes from developing the potential of the real estate," says Kacper Żak, an analyst with BRE Bank Securities. "As for the operational part of the company, it is restructured and sold off separately."
The sale of two such projects - logistics firm CJ International and the Modena Park residential project developed on the site of the defunct textile manufacturing company Modena - has brought TUP zł.87.3 million in pre-tax profits since 2006. Ryszard Czerwiński, vice president of DM BZ WBK, the brokerage house handling the issue, expressed confidence that the company's visionary strategy "could soon translate into substantial returns for its shareholders."
"We approach each project individually, we know how to find its - often hidden - potential and apply the right solutions to make it an attractive, modern and profitable investment," explained CEO Robert Jacek Moritz. "Modena is a fine example of the process - the company had fallen into disrepair, burdened by legal troubles. We managed to come together with city authorities and the city conservator to create a project that would revitalize the property and build quality homes on a landmark site, along with revitalizing the manufacturing activities of the Modena and Roda brands"
The sale of Modena's operational entities is currently under negotiation. Its option on sales of the Modena Park residential development (sold to the Meydan Group) will give it a 35-percent margin for every sqm sold over the base price of zł.7,000.
Plot development
TUP owns a large plot in the Bażantów area outside of Katowice which it intends to develop as a residential complex. Another project - its largest - is the creation of a residential "eco-village" on a 122-ha plot in rural Siewierz outside of Katowice. Once the zoning and development plans for the investments are in place, TUP will begin selling off plots to other developers within two or three years. It intends to retain at least a nominal stake in both projects over the next decade or two, however, in line with its "long-haul" investment strategy.
The measure of the company's profitability varies from the standard revenue model. "Our financial results are typically based on individual transactions involving projects developed over several years, yet value growth is consistent throughout the investment period," said Moritz. The company anticipates zł.28 million in net profit at the end of this year (more than twice last year's result) and continued growth is expected - some 10 percent annually on average.
Commercial interests
The company has also compiled a portfolio of a dozen commercial properties for lease throughout Poland through its Project Concorde transactions. These are expected to provide both a steady source of annual income and substantial collateral for securing loans. In addition, a 33-ha plot along the Katowice-Poznań roadway will be redeveloped to create a modern logistics complex for lease. TUP holds an interest in several other companies, including building firm Euroconstruction, telecommunications operator PAGI, real-estate developer PHC and a 95-percent stake in roadway construction company MPRD.
Of all TUP's in-the-pipeline projects, BRE Bank Securities' Żak considers the logistics-center project the most promising. "TUP, as a former logistics operator, can assess the market needs better than anyone else. The populous Silesia region requires an improved network of logistics centers."
After concluding share subscription for individual investors on October 8, BZ WBK brokerage house will offer subscription to institutional investors from October 10-11. The shares are offered at zł.20-24 apiece, based on a valuation of zł.25, and TUP expects to raise some zł.110 million from the issue.
