Dolphin tender offer: should investors take the bait?

Since 2005, Mediterranean resort developer Dolphin has raised €884m (£807m) in equity, but its development exposure and the means its market capitalisation is now just £224m.

The company is progressing 13 large resort developments in Greece, Cyprus, Croatia and Turkey, and has latterly expanded into the Dominican Republic and Panama. Only four of its projects are at the construction stage with the rest in various stages of planning. It also controls 60 much smaller holiday home developments through Cypriot developer Aristo, in which it acquired a majority stake at the top of the market in 2007.

Announced in tandem with Dolphin's half-year results, Hallmark's tender offer range of 34p to 44p reflects the current share price. But analysts point out that this is well below current net asset value (NAV), which has already plunged by nearly one third in the last six months due to poor market conditions and an adverse currency movement.

Dolphin's strategy of realising cash by selling development assets has also had limited success. In March, Dolphin announced it was temporarily suspending all development work, and took the unusual step of offering its shareholders a "shares for assets" swap, whereby shares could be exchanged for certain assets, at a 50 per cent discount to their year-end valuation. By July, €8.8m of assets - 35 homes, three land plots and one site - had been exchanged for 9.3m shares. Meanwhile, a negative valuation movement of €103m in the period resulted in a hefty pre-tax loss.

Broker Panmure Gordon has revised its year-end NAV forecast to 200p (down from 246p), and retains its target share price of 100p.

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