COGS capped by limited deliveries
Despite the 96.0% y/y and 72.5% q/q drop in 4Q19 deliveries to 11 units, revenue rose 5.4% y/y and 117.4% q/q to EGP761.6 million due to the 57.1% y/y and 157.9% q/q increase in 4Q19 sales to EGP2.8 billion (a portion of sales is recognized as revenue in the same period).
The virtual lack of deliveries in 4Q19 also implies lower COGS due to limited construction which is why GPM jumped to 74.6% in 4Q19 from 56.2% in 4Q18 and 59.2% in 3Q19.
The Board of Directors preliminarily approved the distribution of EGP0.45/share cash dividends, implying an attractive dividend yield of 9.5% compared to almost no dividends distributed by real estate companies.
We expect lower 2020 sales
Madinet Nasr for Housing and Development (MNHD) achieved 2019 sales of EGP6.3 billion, up 18.7% y/y and 10.0% lower than its EGP7.0 billion target. MNHD is yet to announce its 2020 sales target; however, we expect 2020 sales to be around 20.0% lower y/y.
We maintain our Overweight recommendation of MNHD based on our FV of EGP8.00/share, which is mainly supported by the company’s residual Taj City and SARAI land, which constitutes 71.6% of our total valuation.