Impressive growth in real estate sales and hotel revenue
ORHD reported stellar 4Q21 sales of EGP3.0 billion, up 61.4% y/y and up 34.0% q/q, bringing FY21 sales to EGP9.2 billion, up 48.8% y/y. Out of FY21 sales of EGP9.2 billion, El Gouna contributed EGP4.0 billion, O West contributed EGP4.0 billion, and Makadi Heights and Byoum contributed EGP1.2 billion. Sales growth was supported by an increase in the number of units sold and an increase in the average selling price in all destinations. The number of units sold in 4Q21 increased 65.3% y/y and 43.4% q/q to 476 units, bringing the number of units sold in FY21 to 1,455 units, up 53.5% y/y. The average selling price in 4Q21 increased 6.0% y/y to EGP63,413/sqm in El Gouna, 14.3% y/y to EGP31,461/sqm in Makadi Heights and Byoum, and 12.5% y/y to EGP31,679/sqm in O West.
Hotel revenue in 4Q21 increased 181.1% y/y and 26.0% q/q to EGP340.1 million, supported by an increase in occupancy rate in El Gouna from 25.0% in 4Q20 to 69.0% in 4Q21 and in Taba Heights from 6.0% in 4Q20 to 13.0% in 4Q21, bringing FY21 hotel revenue up 73.5% y/y to EGP865.7 million, supported by an increase in occupancy rate and ARR. FY21 ARR increased 15.8% y/y to EGP1,477 in El Gouna and increased 17.2% y/y to EGP532 in Taba Heights. Foreign tourists represented around 57.0% of occupancy in El Gouna in 4Q21 and 42.0% in FY21. ORHD’s FY21 hotel revenue of EGP865.7 million is higher than our FY21 hotel revenue expectation of EGP825.0 million. We forecast FY22 hotel revenue of EGP1.2 billion in our EGP10.77/share valuation.
Real estate revenue in 4Q21 increased 5.7% y/y to EGP1.5 billion in 4Q21, and town management revenue increased 63.9% y/y to EGP338.0 million in 4Q21, bringing 4Q21 total revenue up 25.0% y/y and 12.9% q/q to EGP2.2 billion and FY21 total revenue up 41.4% y/y to EGP7.1 billion, also supported by an increase in revenue in all three segments.
Gross profit in 4Q21 reached EGP610.2 million, up 32.7% y/y and down 9.1% q/q, bringing FY21 gross profit up 69.3% y/y to EGP2.4 billion and FY21 GPM up to 33.9%.
Net profit in 4Q21 decreased 53.3% y/y and 79.8% q/q to EGP87.9 million due to an increase in provisions, bringing FY21 net profit to EGP1.2 billion, up 127.1% y/y, and FY21 NPM up to 17.1%.
Real estate cash collections increased 46.4% y/y to EGP4.5 billion in FY21, with delinquency rate at 3.0%, compared to 4.0% in FY20.
Real estate receivables increased from EGP14.8 billion at the end of 3Q21 to EGP18.5 billion at the end of 4Q21.
Net debt decreased from EGP581.3 million at the end of 3Q21 to EGP322.9 million at the end of 4Q21.
According to ORHD, there are no signs of material impact on its operations due to the Russian-Ukrainian conflict, with Egyptians representing more than 50.0% of hotel occupancy and foreign tourists mainly coming from Western European countries. In FY21, Russian and Ukrainian tourists represented only 3.0% of ORHD’s foreign occupancy. ORHD plans to renovate some hotels in FY22 to attract higher ARR clients. ORHD also plans to continue expediting construction of real estate units to mitigate any potential inflationary effect on costs. We maintain our Overweight recommendation based on our FV of EGP10.77/share given strong sales performance and solid recurring income.