Open Investments (OPIN) has reported its operating results for 1H 2008. The statement says revenues jumped by more than 81% y-o-y, with robust growth attributed to rapidly growing sales of country houses, which soared by 88% y-o-y in dollar terms, and consolidation of panel housing sales by Viceroy Homes Limited, in which OPIN acquired more than 61% in February 2008. However, due to growing prices for construction materials, the company's construction costs were rising faster than its sales, eating into its profit margins.
Table. Open Investments: basic financials for 1h 2008, USD mn
| Indicator | 1H2007 | 1H2008 | 1H2008/1H2007 |
|---|
| Revenue | 83.5 | 151.2 | 81.2% |
| Cost of production | 54.3 | 99.8 | 83.9% |
| Gross profit | 29.2 | 51.4 | 76.3% |
| Gross margin | 34.9% | 34.0% | |
| Commercial and general expenses | 13.82 | 29.27 | 111.8% |
| Net profit | 37.8 | 90.4 | 138.9% |
| Net margin | 45.3% | 59.8% | |
Source: company data, Finam estimates
Despite an upswing in the basic financial indicators, we should note that growth in the company's profit margins has occurred only thanks to a re-evaluation of the cost of its real estate investments, which nearly quadrupled in the year to USD 83.3 million.
We are generally neutral about the 1H 2008 financials reported by the company and do not believe they will have any tangible effects on its stock valuations in the short term. However, a substantial increase in the company's land reserves for development projects, which has expanded by more than 6,400 hectares, may send a positive message to investors in the long run.
Our estimates put the fair price of Open Investments shares at USD 241 per share.
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