Is Morocco Headed for a Real Estate Stock Bubble


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By Hicham BennaniRabat – Are we witnessing a new positive run for Addoha, Résidences Dar Saada and Alliances?Just few months ago, Addoha was trading at MAD 23/share, Dar Saada at MAD 130/share, and Alliances at MAD 35/share. Today, Addoha is Hovering around MAD 40 (73% increase), Dar Saada at MAD 180 (38% increase), and Alliances at MAD 66 (88% increase). Many people are concerned now, should they be buying real estate stocks? Should they surf on the wave?If you are bitten by a snake, you will be afraid of the rope. As a matter of fact, many individuals, Institutions and funds lost tons of money in the latest Casablanca stock market crash, after the speculative bubble burst leaving them stranded.Why the prices of all the listed real estate companies rocketed? Have the market fundamentals improved?There seems to be no plausible reason for the hike for the three companies. Market fundamentals are the same, and the economic situation of Morocco is not improving at a pace that can explain the boom in the prices of these stocks.Moreover, theses companies have not announced any mega projects with lucrative returns that can boost their future earnings, at thus increase their valuations.The PE ratio for the three companies might look within the acceptable range (10 to 15 times) compared to the benchmark in other developing stock markets.However, one should keep in mind that the real estate in Morocco is in deep crisis, characterized by a high level of Leverage. In fact, the debt-to-equity ratio for the listed real estate companies is high, which makes these companies vulnerable to downturns in the business cycle.I recommend selling the three listed stocks because the outlook is not clear, and because they outperformed the MASI and MADEX indices for no valid or logical reason.

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