Sudden shift of fortune for Egypt's troubled Palm Hill Developments

What's Up: Palm Hills is regaining a cautious but optimistic following as its top chairman is acquitted from any wrongdoing and the stock trades at a big discount.

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The outlook on Egypt's Palm Hills Developments has gone from dreadful to decent - in less than a week.

Things had been looking bleak for the company. Its shares were down 60 per cent since the beginning of February and its chairman, Yasseen Mansour, was on trial accused of corruption linked to state land sales.

But on Tuesday Mr Mansour was cleared of the charges, prompting the shares to surge as much as 10 per cent, and analysts said they were taking a fresh look at the stock.

Rehab Taha, a property analyst at Prime Securities in Cairo, said the company remained undervalued and trading at a discount to the rest of the property market. She said she maintained a "neutral" rating on the stock, with her enthusiasm tempered by the company's weak cash position and the high cancellation rate on its properties.

The cautious but favourable view on the developer was echoed elsewhere as analysts at HSBC increased their price target on the company to 2.5 Egyptian pounds, from 1.7 pounds. The analysts also retained a "neutral" rating.

Palm Hills yesterday pared off some of its earlier gains and declined 2.4 per cent to 2.45 pounds. Analysts said the fall was probably linked to a slump on the wider benchmark index, the EGX 30, which closed 2 per cent lower at 5,327.42 points.

Fears remain that Palm Hills is not out of the woods. The company is highly indebted and faces two court cases contesting the legality of two of its plots bought in 2007, and those cases could result in steep fines. Analysts say that is increasingly unlikely, however.

At the heart of the developer's legal wrangles are conflicting laws governing the sale of state land, which have ensnared a number of property companies.

Perceptions of crony capitalism that allowed top businessmen to build up massive fortunes from land sales played an integral part in the lead-up to the revolution.

Mr Mansour's acquittal alleviates concerns that executives and their companies would be punished indiscriminately.

According to local media reports yesterday, the public prosecutor plans to appeal against the chairman's acquittal.