UPDATE 2-Orco plans share issue, Warsaw/Budapest listings

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By Jan Lopatka

Czech real estate developer Orco Property Group said on Thursday it planned to raise around 100 million euros ($129.8 million) in new capital to fund expansion of its portfolio in central and eastern Europe.

The company plans to place new shares with institutional investors in the second quarter and at the same time list in Warsaw and Budapest in addition to Prague and Paris, where the shares trade now.

Orco shares were down 4.77 percent at 3,377 crowns ($155.3) at 1217 GMT, underperforming a 0.85 percent decline of the Prague PX index.

Arnaud Bricout, vice-president for corporate finance, said the company looked to Poland to raise most of the new funds.

"It will be linked to demand. We will try to allocate the biggest part to Polish institutional investors," he told a news conference on Warsaw.

Orco added in a statement that the transaction would probably include an international institutional offering.

The company has 8.43 million shares in circulation, putting its market capitalisation at about 1.01 billion euros, so the new shares would dilute the stock by about 10 percent.

Orco said that, based on its anticipated market capitalisation, it could be eligible for inclusion in the BUX and WIG market indexes in Budapest and Warsaw.

"Orco will remain listed in Paris and Prague and, assuming completion of the transaction, will be the only company to be listed on three of the main central European stock exchanges (Prague, Warsaw and Budapest), the markets in which Orco's property portfolio is heavily invested," the developer said.

Citigroup and Wood & Company were appointed advisers on the deal.

TEMPORARY DROP

The stock had risen nearly 30 percent this year to a record high of 3,576 crowns earlier on Thursday on Orco's rise in net asset value (NAV), expansion plans and a general market rise.

Analyst Patrick Vyroubal of Atlantik FT said the news was slightly positive due to the widening of the investor base.

"But these facts will only show in the future, and at the moment they are outweighed by raising the number of shares and thus a dilution of the share price or NAV," he said.

"We believe this influence is only temporary, because the company will invest the raised funds into real estate in the central and eastern European region and thus will further raise the value of its portfolio."

He added he would see a further drop in the shares to 3,100-3,200 crowns as a buying opportunity. Atlantik has a 'buy' recommendation on the stock with target price of 3,632 crowns.

Orco develops real estate properties around the region, runs a real estate fund and manages assets worth 1.3 billion euros.

Last month, the developer said its net asset value per share had risen to 92 euros at end-2006 from 49.7 euros at end-2005 but slashed its 2007 sales forecast to 223 million euros from 320 million.

Bricout said the lower forecast was caused by small delays in the completion of some projects, mainly in Poland. He added Orco was looking at paying a dividend of 1 euro per share this year, up from 0.8 euros last year. (Additional reporting by Piotr Skolimowski in Warsaw)

[PRAGUE/Reuters/Finance.cz]