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Orascom Development Egypt: A great start to the year

  • Sales reached EGP2.1 billion, up 37.1% y/y and 13.8% q/q and higher than our expectation of EGP1.7 billion.
  • Total revenue reached EGP1.5 billion, up 61.5% y/y, down 15.2% q/q, and higher than our expectation of EGP1.1 billion.
  • Net profit jumped 321.1% y/y and 117.0% q/q to EGP408.9 million.

A fantastic quarter supported by real estate

  • ORHD achieved 1Q21 sales of EGP2.1 billion, up 37.1% y/y and 13.8% q/q and higher than our expectation of EGP1.7 billion. The growth in 1Q21 sales was both volume and price-driven, given the 47.9% y/y and 23.3% q/q increase in sold units to 355 units and the 12.5% y/y increase in average selling price in El Gouna to EGP60,856/sqm, the 69.6% y/y increase in average selling price in Makadi Heights to EGP28,311/sqm, and the 24.8% y/y increase in average selling price in O West to EGP28,589/sqm.

  • Hotel revenue expectedly declined 64.1% y/y (1Q20 was mostly pre-pandemic) and 21.3% q/q to EGP95.2 million. Hotel occupancy rate in El Gouna reached 26.0% in 1Q21, compared to 64.0% in 1Q20 and 25.0% in 4Q20.

  • Real estate revenue in 1Q21 reached EGP1.2 billion, up 156.2% y/y and down 15.3% q/q, and town management revenue in 1Q21 reached EGP183.5 million, up 3.2% y/y and down 11.0% q/q, bringing total revenue to EGP1.5 billion, up 61.5% y/y, down 15.2% q/q, and higher than our expectation of EGP1.1 billion. 

  • Gross profit in 1Q21 impressively grew 152.9% y/y and 25.0% q/q to EGP574.9 million, giving way to an impressive GPM of 39.4%, higher than 1Q20 GPM of 25.1% and 4Q20 GPM of 26.7%. Net profit in 1Q21 jumped 321.1% y/y and 117.0% q/q to EGP408.9 million, resulting from healthy operations and supported by an investment income increase and FX gains.

  • Real estate receivables increased from EGP11.7 billion at the end of 4Q20 to EGP12.8 billion at the end of 1Q21.

  • Net debt decreased from EGP1.5 billion at the end of 4Q20 to EGP1.0 billion at the end of 1Q21.

Maintain Overweight

In addition to its solid real estate segment, ORHD is positioned well as positive developments in tourism occur, and we expect hotel revenue to increase in FY21 compared to FY20 but remain below FY19 levels. We maintain our Overweight recommendation of ORHD based on our FV of EGP8.45/share which is mainly supported by the 20.0 million sqm residual land in El Gouna.


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