Earnings Report /
Egypt

Orascom Development Egypt: Hotel revenues surge from hard-hit 2Q20 Level

  • Sales reached EGP1.9 billion, up 43.1% y/y and down 9.2% q/q.

  • Hotel revenue surged 1153.9% from exceptionally low 2Q20 level.

  • Net profit reached EGP277.3 million, up 230.5% y/y and down 32.2% q/q.

Al Ahly Pharos Securities Brokerage
16 August 2021

Real estate sales rise and hotel revenue surges from low 2Q20 level

  • ORHD reported solid 2Q21 results, with sales reaching EGP1.9 billion, up 43.1% y/y and down 9.2% q/q, bringing 1H21 sales to EGP4.0 billion, up 39.8% y/y. The y/y growth in 2Q21 sales was supported by the 90.8% y/y increase in number of units sold to 292 units and the 12.8% y/y increase in average selling price in El Gouna to EGP61,032/sqm, the 69.6% y/y increase in average selling price in Makadi Heights to EGP28,311/sqm, and the 22.3% y/y increase in average selling price in O West to EGP28,025/sqm. Sales in El Gouna in 2Q21 increased 32.3% y/y to EGP1.0 billion. Sales in Makadi Heights in 2Q21 increased 953.9% y/y to EGP269.8 million. Sales in O West in 2Q21 increased 14.6% y/y to EGP610.9 million.

  • Hotel revenue in 2Q21 surged 1153.9% y/y to EGP160.5 million due to the exceptionally low hotel revenue in 2Q20 that had resulted from the closure of hotels from 19 March 2020 to 15 May 2020, at which point hotels were allowed to reopen at a 25.0% cap that was later raised to 50.0% on 1 June 2020. The 68.6% q/q increase in 2Q21 hotel revenue is indicative of the gradual recovery in tourism. Hotel occupancy rate in El Gouna increased from 26.0% in 1Q21 to 33.0% in 2Q21, and TRevPAR in El Gouna increased from EGP407 in 1Q21 to EGP690 in 2Q21. Hotel occupancy was subject to the 50.0% cap during 2Q21 which increased to 70.0% starting 4 July 2021.

  • Real estate revenue surged 81.0% y/y to EGP1.1 billion in 2Q21, and town management revenue increased 62.6% y/y to EGP226.6 million in 2Q21, bringing total revenue to EGP1.5 billion in 2Q21, up 50.7% y/y and 5.0% q/q.

  • Gross profit in 2Q21 reached EGP538.0 million, up 51.2% y/y and down 6.4% q/q, giving way to a GPM of 35.1%, compared to 2Q20 GPM of 35.0% and 1Q21 GPM of 39.4%.

  • Net profit in 2Q21 surged 230.5% y/y to EGP277.3 million, but fell 32.2% q/q from an exceptionally strong 1Q21. NPM recorded 18.1% in 2Q21, compared to 8.2% in 2Q20 and 28.0% in 1Q21.

  • Real estate receivables increased from EGP12.8 billion at the end of 1Q21 to EGP14.2 billion at the end of 2Q21.

  • Real estate cash collections increased 63.0% y/y to EGP2.1 billion in 1H21.

  • Net debt decreased from EGP1.0 billion at the end of 1Q21 to EGP866.7 million at the end of 2Q21.

Maintain Overweight

ORHD is having a solid year of real estate performance and is positioned to benefit from the gradual return of tourists, an example of which is the return of Russian tourists to Hurghada and Sharm El Sheikh that started this month which should have a spillover effect on El Gouna and a positive impact on Taba Heights. 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.